In October, national government expenditure in China dropped by 19%, marking the largest decline in the past four years. This has exacerbated the downturn in consumption and weak exports, further burdening the Chinese economy. Furthermore, the growth rate of fiscal revenue continues to decline. Additionally, due to the sharp drop in coal prices, fiscal revenue in major coal-producing regions such as Shanxi and Shaanxi in October also saw a significant decrease.
On Monday, the Ministry of Finance of the Communist Party of China announced the financial revenue and expenditure situation for the first ten months. According to calculations by Bloomberg, total general public budget expenditure and government fund budget expenditure in China in October decreased by 19% year-on-year, amounting to 2.37 trillion yuan. This marks the largest decline since comparable data was available starting from early 2021, with the expenditure amount hitting the lowest level since July 2023.
CNBC cited Goldman Sachs analysis indicating that China’s fixed asset investment in October dropped by 11.4%, marking the weakest performance since the early stages of the 2020 pandemic.
Bloomberg believes that the sharp decline in fiscal spending in October has exacerbated the weak consumption and sluggish exports, which are dragging down the Chinese economy.
Moreover, from January to October, the total general public budget revenue in China reached 18.649 trillion yuan, showing a year-on-year growth of 0.8%, lower than the 6.5% in 2023 and the 1.3% in 2024.
Professor Li Jianjun, Dean of the School of Finance and Taxation at Southwest University of Finance and Economics, told China Business News that in most provinces, fiscal revenue growth has been under pressure and showing differentiated trends. In the situation of low revenue growth, fiscal expenditures are also showing a slow growth trend, with Tianjin and Zhejiang experiencing negative growth. Tianjin’s fiscal expenditure was 229.2 billion yuan, a 9% decrease year-on-year, only slightly more than Tibet’s 225.8 billion yuan.
China Business News analysis revealed that as of November 17, except for Guangdong, Xinjiang, and Heilongjiang, the other 28 provinces have all released the local financial revenue and expenditure situation for the first three quarters of this year. In Shanxi, the local general public budget revenue for the first three quarters dropped by 8.9%, while Shaanxi saw a 7% decrease, Inner Mongolia a 1.3% decrease, and Qinghai a 2.1% decrease.
Data from the Finance Department of Shaanxi Province shows that in the first three quarters of this year, the four major tax categories (value-added tax, corporate income tax, resource tax, individual tax) all experienced declines locally. Among them, the resource tax directly related to coal prices saw a 13.4% decrease year-on-year, domestic value-added tax decreased by 4.5%, corporate income tax decreased by 6.8%, and personal income tax decreased by 5.9%. Among the 10 cities in Shaanxi Province, Yulin City, a coal resource-rich area, saw a high decline of 17.5%.
The power industry has been squeezed by the rise of new energy generation, leading to weak demand for thermal power and a decrease in coal demand. Additionally, industries such as real estate have been in a long-term slump, causing a drop in coal demand for steel and construction materials.
In the first half of this year, coal prices in China faced downward pressure. The price of 5500 kcal power coal at Qinhuangdao Port dropped to 618 yuan/ton in early June, down by around 262 yuan/ton from the beginning of the year, with spot prices at Bohai Rim ports also falling to around 620 yuan/ton, a 29.8% year-on-year decrease.
Shanxi, Shaanxi, and Inner Mongolia are the top three coal-producing provinces in China. The sharp drop in coal prices is inevitably reducing corporate profits and affecting provincial-level fiscal revenue.
Except for Guangdong, the largest financial province, which has not yet disclosed its data, the top four provinces in terms of revenue scale (Jiangsu, Zhejiang, Shanghai, Shandong) all saw fiscal revenue growth rates ranging from 1% to 2%.