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China’s 2022 fiscal revenue growth skids as COVID jolts economy

China’s fiscal revenue rose 0.6% in 2022 from a year earlier, slowing sharply from a 10.7% increase in 2021 due to huge tax rebates for businesses to support the COVID-ravaged economy, data from the finance ministry showed on Monday.

Fiscal revenues totalled 20.37 trillion yuan ($3.02 trillion) last year, while expenditures reached 26.06 trillion yuan, which grew 6.1%, the ministry said in a statement.

That resulted in a shortfall of 5.69 trillion yuan.

Revenues rose 9.1% in 2022 after adjusting for the impact of value-added-tax (VAT) credit rebates, the ministry said.

The world’s second-largest economy grew 3% in 2022 from a year earlier, badly missing the official target of around 5.5% and hitting one of its worst rates in nearly half a century. Growth is expected to rebound to nearly 5% in 2023, after Beijing ditched harsh COVID curbs in early December.

China will expand fiscal expenditures appropriately in 2023, set a reasonable amount of special local government bonds to boost investment, and improve tax and fee policy to support businesses facing difficulties, the ministry said.

China’s tax and fee cuts, tax refunds and deferred payments totalled 4.2 trillion yuan in 2022, including 2.4 trillion yuan in VAT tax rebates – the largest in recent years, the ministry said.

Amid a protracted property crisis, government land sales revenues slumped 23.3% in 2022.

China’s fiscal revenue jumped 61.1% in December from a year earlier, while fiscal spending rose 3.0%, according to Reuters calculations based on official data.

The ministry vowed to curb new government hidden debt and regulate local government financing vehicles (LGFVs) – typically investment companies that raise money and build infrastructure projects on behalf of local governments, to avoid systemic risks.
Source: Reuters (Reporting by Ellen Zhang and Kevin Yao, editing by Ed Osmond and Ben Dangerfield)

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