In September, national tax revenue increased by 8.7% year-on-year, marking a new high for the year. The stable performance of the Chinese economy has led to a resurgence in fiscal revenue this year. Furthermore, proactive fiscal policies have been employed to support economic operations within a reasonable range. According to the latest data disclosed by the Ministry of Finance, in the first three quarters of this year, broad fiscal revenue (comprising the national general public budget and government fund revenues) reached 19.4593 trillion yuan, reflecting a year-on-year growth of approximately 0.4%. This marks the first positive cumulative growth rate for broad fiscal revenue this year. In the same period, broad fiscal expenditure amounted to 28.2988 trillion yuan, which represents a year-on-year increase of 7.9%, exceeding the economic growth rate of 5.2% for the first three quarters.
Tang Longsheng, deputy director of the Treasury Payment Center at the Ministry of Finance, stated at a recent press conference on fiscal revenues and expenditures that fiscal policies have become more proactive this year, focusing on stabilizing employment, businesses, markets, and expectations, while maintaining necessary expenditure intensity. There has been an increase in funding for basic public welfare and key sectors, leading to overall steady and orderly fiscal operations.
The recovery in fiscal revenue has primarily been driven by an improvement in tax revenue. According to the Ministry of Finance, the general public budget revenue for the first three quarters was 16.3876 trillion yuan, showing a year-on-year growth of 0.5%. Among this, the core national tax revenue totaled 13.2664 trillion yuan, reflecting a growth of 0.7%. Month-on-month, this year has seen a shift from negative to positive growth in tax revenue, with September's national tax revenue recording a year-on-year growth of 8.7%, an increase of 5.3 percentage points compared to August.
The steady growth of the economy in China this year has laid a solid foundation for tax revenue growth. For instance, improvements in business operations have resulted in stable tax revenue growth across key sectors. The capital market has been active, sustaining rapid growth in related tax revenues. In August, the total market value of A-shares first surpassed 100 trillion yuan, with the Shanghai Composite Index reaching a ten-year high in September. Daily trading volumes in August and September averaged 2.3 trillion yuan and 2.4 trillion yuan, respectively. Data from the State Taxation Administration indicate that over the past year, the growth of taxation in the capital market service sector rose by 56.8%, with securities transaction stamp duty increasing by 110.5%. Tax revenues from industries related to the capital market have also seen significant growth, with insurance sector taxes up by 13.3% year-on-year.
This year, the tax revenue growth rate has lagged behind the economic growth rate, primarily due to the difference between constant price economic growth calculations and current price tax revenue calculations. The Producer Price Index (PPI) has had a significant impact on tax revenues. In recent years, the continuously low PPI has dampened tax revenue growth. However, the narrowing decline in PPI over the past two months has contributed to tax revenue increases. Additionally, a lower income base during the same period last year and strengthened tax collection efforts have also played a role in the surge in tax revenue in recent months.
The director of the Taxation Science Research Institute of the State Taxation Administration, Huang Lixin, recently stated that due to a high base in the fourth quarter of last year, a decline in tax revenue growth is expected in the fourth quarter of this year. While tax revenue in the general public budget has turned positive, non-tax revenue has experienced a negative shift. Data from the Ministry of Finance reveal that the non-tax revenue in the national general public budget for the first three quarters amounted to 312.12 billion yuan, a year-on-year decline of 0.4%, significantly lower than the 13.5% growth recorded in the same period last year. Experts analyzing this decline attribute the drop in non-tax revenue to several years of growth leading to a high base.
Another contributing factor is that local governments, after maximizing the value of existing assets and resources, face shrinking revenues. This year, stricter regulations on penalty and confiscation income have been implemented, leading to a decline in related revenues. Within the non-tax revenue, the compensated usage income from state-owned resources grew by 4%, while penalty income dropped by 7%.
Broad fiscal revenue includes government funds primarily derived from land sales, which are also significant sources of income. Data from the Ministry of Finance indicate that in the first three quarters, national government fund budget revenue totaled 30.717 trillion yuan, reflecting a year-on-year decrease of 0.5%. Among this, the income from the sale of state-owned land use rights for local government funds totaled 22.302 trillion yuan, down 4.2% year-on-year. Following various policies aimed at stabilizing the real estate market, the year-on-year decline in major cities has continued to narrow in September, which has alleviated the decline in land transfer income and real estate-related taxes this year.
In order to ensure some degree of fiscal expenditure resilience, this year the government has accelerated the issuance of government bonds to fund major projects and expand effective investment to stabilize the economy. According to data from the People's Bank of China, net financing from government bonds in the first three quarters reached 11.46 trillion yuan, an increase of 4.28 trillion yuan year-on-year. With support from fiscal and debt revenue, national fiscal spending has progressed quickly and maintained a certain level of expenditure focus this year, demonstrating a clear tilt toward the fields related to public welfare. Data released indicate that general public budget expenditure reached 20.8064 trillion yuan, up 3.1% year-on-year. Among these, expenditures related most closely to people's livelihoods, such as social security and employment, education, and health care, grew at rates of 10%, 5.4%, and 4.7%, respectively, all exceeding the average expenditure growth rate. This aligns with the greater investment in human capital in this year’s fiscal expenditures.
For example, China has introduced policies providing a monthly childcare subsidy of 300 yuan for children under three years old and has waived tuition fees for the final year of kindergarten. This year has also seen the accelerated issuance of special government bonds and local government bonds to support significant projects in the "Two New and Two Heavy" dimensions. This has resulted in quick growth in expenditures, despite a slight decline in government fund income this year. Data show that in the first three quarters, national government fund budget expenditures totaled 74.924 trillion yuan, reflecting a substantial year-on-year increase of 23.9%.
Tang Longsheng noted that this rapid expenditure is attributed to the continuous acceleration of bond fund utilization across various levels of government. A total of 4.21 trillion yuan (including carryover bond expenditures from previous years) has been spent from special local government bonds, ultra-long-term special bonds, and central financial institution liquidity bonds, enhancing economic development momentum and promoting sustainable recovery.
By mid-October, the issuance of ultra-long-term special bonds had been fully completed, and the issuance of new special bonds exceeded 80%, nearing completion, which raised market concerns regarding potential slowdowns in government bond issuance affecting broad expenditure growth rates. In fact, the growth of broad fiscal expenditure has shown signs of slowing in recent months. Infrastructure construction expenditure growth has notably softened. A series of incremental policies aimed at stabilizing the economy are being introduced and implemented.
To expand effective investment and stabilize the economy, at the end of September, the National Development and Reform Commission announced the introduction of 500 billion yuan in new policy financial instruments, all designated for supplementing project capital. The three main entities implementing these new policy financial instruments—the China Development Bank, the Agricultural Development Bank of China, and the Export-Import Bank of China—recently disclosed that over 330 billion yuan has already been allocated, which is projected to stimulate total project investments of 4.8 trillion yuan.
Li Dawei, first-level inspector of the Ministry of Finance's Budget Division and director of the Government Debt Research and Evaluation Center, stated that the central government has recently allocated 500 billion yuan from the limits of local government debt reserves to support local governments in addressing accumulated debts from government investment projects and settling overdue payments to enterprises. This allocation also targets projects in economically significant provinces, aiming to specifically support the expansion of effective investment and enhance the critical role these provinces play. "The utilization of this debt limit will help solidify the ongoing positive trend in economic recovery and robustly support local governments in achieving their economic and social development objectives for the year." Zhao Wei, chief economist at Shenwan Hongyuan Securities, believes that in response to the pressure of weakening fiscal expenditures in the fourth quarter, two categories of incremental funds have been deployed, and future close monitoring of fund disbursement progress and physical work output is essential.