As of the first half of 2024, the total amount of explicit and implicit debts of the Chinese Communist Party (CCP) at the local level has exceeded 100 trillion yuan. However, in the first half of this year, the national fiscal deficit exceeded 2 trillion yuan. Among the 31 provinces and cities in China, only Shanghai had a fiscal self-sufficiency rate of over 100% in the first half of the year.
On September 14th, the CCP Ministry of Finance issued a report, emphasizing the need to adhere to a strict financial policy by party and government agencies. The CCP Central Economic Work Conference in December last year called for party and government agencies to “tighten their belts,” and in March this year, the Ministry of Finance issued a notice urging all regions and departments to maintain a strict financial policy without relaxation.
Over the past two years, both at the CCP Central level and locally, there have been repeated calls to tighten financial constraints, indicating that the CCP’s finances are indeed facing significant challenges.
According to the mainland media “Finance Talks” revealed on September 17th, data released by the CCP Ministry of Finance showed that in the first half of this year, China’s fiscal deficit exceeded 2 trillion yuan, with income decreasing by 2.6% while expenditures continued to grow.
Among the 31 provinces and municipalities in China, only Shanghai achieved a fiscal self-sufficiency rate of over 100% in the first half of the year, realizing a surplus, while all others were operating at a deficit. A total of 17 provinces and cities had fiscal self-sufficiency rates below 50%, with the lowest being Tibet at only 10.2%. Even Henan and Sichuan, which receive the most transfer payments annually, only had fiscal self-sufficiency rates of 44.5% in the first half of the year.
Moreover, local CCP authorities have heavily relied on debt accumulation through large-scale urban investment companies for infrastructure development. However, borrowing money means it needs to be repaid, including both the principal and interest each year. With China’s economic downturn this year, combined with domestic issues and increasing international recognition of the CCP’s overproduction practices, leading to a decline in exports, the Chinese economy downturned directly resulting in a substantial reduction in fiscal revenue.
“Finance Talks” reported that as of the first half of this year, the total amount of explicit and implicit debts at the local level had exceeded 100 trillion yuan. Debt servicing expenditure has been rapidly rising, accounting for the proportion of fiscal expenditure, increasing from 3.0% in the first half of 2017 to 4.6% in the first half of 2024. In the first eight months of this year, local governments nationwide issued approximately 5.4 trillion yuan in bonds, with 2.3 trillion used for repaying old debts.
While debt servicing expenditures have significantly increased, tax revenue and land finance have been on the decline, leading to a gradual imbalance between revenue and expenditure. Therefore, many regions have resorted to non-tax revenue as the sole means of expanding independently. In 2023, nearly 80% of regional non-tax revenue in fiscal revenue had increased compared to before the pandemic, and non-tax revenue in the first half of 2024 grew by 11.7% compared to the previous year, far exceeding tax revenue. In Nanjing, a resident was fined for riding a bicycle without a license.
“Finance Talks” believes that if the CCP authorities do not reflect and make adjustments soon, the “enormous debt will be a time bomb.”
After the release of this information, more than 1,500 netizens participated in discussions on Tencent’s website.
User 4vdo5eg on Tencent suggested: “Streamline government agencies, crackdown on corruption, and strengthen the management of state-owned enterprises!”
User “Zhong Huiliang” commented: “Central fiscal revenues are declining, and local fiscal revenues continue to be tight, which is a prominent manifestation of economic contraction.”
User 4380469 on Tencent said: “Why not mention that the income of government institutions has increased from a few hundred yuan per month to one or two hundred thousand yuan per year? How many times over? There are various visible and invisible benefits. Isn’t it spending public funds?”
User “Scarecrow” expressed: “The economic downturn in various regions does not affect the financial resources of local officials.”