The Chinese Ministry of Finance released the financial data for the month of July and the first half of the year on the 9th, revealing the national local fiscal situation. Out of the 31 provincial-level administrative regions, 30 have shown fiscal deficits. The total deficit amounts to a staggering 5.7 trillion yuan. Sichuan province recorded the highest deficit of over 413 billion yuan, while Guangdong, the largest economic province, also faced a deficit of 212.9 billion. Mainland Chinese citizens find these figures daunting.
In the past, the Chinese Ministry of Finance regularly published the previous month’s financial situation. However, they suspended the release of June’s financial data without explanation, raising concerns among various sectors. Suddenly, on September 9th, the ministry published the financial data for July and the first half of the year.
The data indicates that nearly all provinces experienced fiscal shortfalls in the first half of the year, with a total deficit of 5.7 trillion. Only Shanghai maintained a surplus of nearly 70 billion, highlighting the financial difficulties faced by various regions amidst slowing economic growth.
Among the provinces with fiscal deficits exceeding one trillion, 23 provinces were listed, including Beijing. Fifteen provinces had deficits exceeding two trillion, with Guangdong’s deficit reaching 212.9 billion. Four provinces had deficits exceeding three trillion, with Sichuan leading at 413 billion. The rest were Hebei, Henan, and Hunan. Overall, expenditure exceeded income.
The disclosure of the aforementioned data by the Chinese Ministry of Finance has shocked mainland Chinese citizens, leading to various interpretations.
A blogger from Liaoning, under the name “Xiwen Jindaotouxiang,” commented that looking at the official data from the Ministry of Finance, can anyone still believe China’s economy is thriving? It seems like there is insufficient income to cover expenses, making it difficult to make money. In the past, some people online said not to disparage the Chinese economy, and he had thought the issue was with himself not making enough money. Now, with the official data out, he realizes it’s not just him struggling to earn. This is the reason why consumption is declining.
He noted that with decreasing income and rising expenses, combined with declining profits in enterprises leading to more losses for investors, the situation is grim, especially for young job seekers. Overall, the economic situation seems to have entered a crisis unprecedented in the past two decades.
An article published by mainland media with the title “Not just talking about poverty but real poverty! National fiscal deficit for January to July at 5.7 trillion” was critical of the enormous expenditures of the Communist Party of China, where nearly 40% is spent on the salaries of 80 million civil servants. Under fiscal constraints, local governments have started selling state-owned assets and even extorting funds from enterprises outside their region, sparking discussions across various sectors before being taken down shortly after.
A media person from Hebei, Jingjing, mentioned that all 30 provincial-level administrative regions in the country have revenue shortfalls, a data point that is terrifying. Recently, the government has been printing a lot of money. Now, they have reintroduced tolls on national highways and are demanding contributions to housing old-age pensions, reaching into the pockets of ordinary people. Whatever happens next, no one should be surprised; they will even squeeze out the marrow from their own pigs.
According to the data released by the Chinese Ministry of Finance, as of the end of July 2024, local government debt nationwide reached 42.8 trillion, with urban investment bonds nearing 60 trillion. The total debt of interest-bearing borrowings on local government platforms reached 59.6 trillion.
From a national perspective, in the first half of 2024, local general public budget revenue increased by only 0.9% compared to the previous year, a 12.6 percentage point drop from the same period last year. Due to the lack of investment confidence in private enterprises and sluggish consumer spending, local tax revenues have been weak.
Moreover, local government revenues have long relied on land sales, but since 2022, the real estate market has continued to slump, making stimulus policies less effective and leading to a significant contraction in land revenue. Official data shows that in the first half of this year, income from land use rights transfer by state-owned land was 1.53 trillion yuan, down 18.3% from the previous year and 55.7% from 2021. With limited local revenue, governments can only resort to issuing bonds temporarily to alleviate immediate financial pressures.
According to estimates by the global investment bank Goldman Sachs in August last year, China’s local government debt reached as high as 94 trillion. A survey by the New York-based research firm Rongding Group last year revealed that in two-thirds of China’s local governments, the outstanding debt in 2022 exceeded their income by 120%; one-third of major cities even struggled to pay the interest on their debts.
Not only are private sector employees worried about job security, but even those within the system no longer have guaranteed positions. Instances of wage disputes have emerged across various regions in the medical and education sectors. In November 2023, a women and children’s hospital in Ruzhou City, Henan, was revealed to have withheld salaries for medical staff for over a year, along with non-payment of social insurance and housing provident fund contributions. Subsequently, a pulmonary hospital in Yantai, Shandong, was also reported to have owed six months’ worth of wages. In Suining, Sichuan, medical staff were seen sitting by windowsills, seemingly resorting to threatening to jump as a means of seeking unpaid wages. In Kaifeng City, Henan Province, a primary school experienced a situation in February this year where teachers refused to teach due to salary arrears.