China’s real estate market continues to slump. Official data shows that land transfer revenue plummeted from January to May this year. According to foreign media calculations based on official data, land transfer revenue in May dropped to its lowest level in a decade, further widening the government deficit.
Bloomberg calculated, based on data recently released by the Chinese Ministry of Finance, that in May, land transfer revenue fell by 14.6% year-on-year to 194.1 billion yuan, the lowest level since May 2015. This led to a decrease in government total revenue to 11.2 trillion yuan.
Meanwhile, due to economic downturn and weak consumption, the government rapidly increased spending at the fastest pace in three years to stimulate economic growth, with total expenditures reaching 14.5 trillion yuan, resulting in a budget deficit of 3.3 trillion yuan.
Reports indicate that the decline in land sales highlights the continued weakness in the real estate market, which is a major drag on the Chinese economy. Currently, China’s economy also faces pressure from the United States raising export tariffs. This has put pressure on local government finances and limits their ability to expand investments to boost growth.
Goldman Sachs economist Wang Lisheng wrote in a report following the release of the aforementioned data, “We maintain our forecast that government land sales revenue for this year may further decline by 5% to 10%, and we continue to believe that the real estate construction and investment sectors have not yet bottomed out.”
On June 20, the Chinese Ministry of Finance released the fiscal revenue and expenditure situation, showing “dual declines.”
From January to May, general public budget revenue fell by 0.3% year-on-year. In May, general fiscal revenue was 1.6 trillion yuan, down by 0.13% year-on-year (compared to 1.89% in April). From January to May, general fiscal expenditure accumulated to 11.3 trillion yuan, an increase of 4.2% year-on-year (compared to a 4.6% increase from January to April); in May, general fiscal expenditure was 1.94 trillion yuan, up by 2.6% year-on-year (compared to a 5.8% increase in April).
The Ministry of Finance data also shows that from January to May, local government-level income from separate budgets fell by 8.3% year-on-year, with state-owned land use rights transfer revenue at 1.1281 trillion yuan, down by 11.9% year-on-year.