Fiscal policy to maintain stable growth

Ministry of Finance releases nation's revenue, spending report for 2022

Fiscal policy is expected to work more actively to underpin growth this year with an optimized fiscal spending structure and intensified fiscal spending, experts said.

Their comments came after the Ministry of Finance announced on Monday fiscal revenue figures for last year. China's fiscal revenue grew by 9.1 percent year-on-year in 2022 to 20.37 trillion yuan ($3.02 trillion), after excluding the impact of value-added-tax (VAT) credit rebates, according to the ministry.

The country's fiscal expenditure rose 6.1 percent last year, according to the ministry. Total VAT revenue for 2022 came in at 4.87 trillion yuan, up 4.5 percent after excluding the impact of VAT credit rebates. Consumption tax revenue came in at 1.67 trillion yuan, up 20.3 percent from a year earlier.

Specifically, in December alone, fiscal revenue grew 61.1 percent, while fiscal expenditure rose 3 percent.

Total income from the general public and government fund budgets came in at 28.2 trillion yuan in 2022, down 6.3 percent from a year earlier.

The MOF said in a statement on its website that this year, fiscal policy will work more actively to support growth. Fiscal spending will be further intensified, while more efforts will be put in place to catalyze the role of special local government bonds to drive growth. The structure of fiscal spending will also be optimized to catalyze social investment and boost consumption.

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

Xiong Yuan, chief macro analyst at Guosheng Securities, said on Tuesday that he expects that this year, efforts on the fiscal policy front will be intensified with improved efficiency. He particularly expects more leveraging on the fiscal policy front, estimating that the deficit to GDP ratio will exceed 3 percent and the total amount of special local government bonds will be close to 4 trillion yuan.

"We believe that keeping economic growth stable will continue to be the top priority for fiscal policy this year. Going forward, if economic recovery continues to gain momentum, tax revenue will gradually pick up and improve. Pressure on fiscal spending will be gradually removed and the policy of VAT credit refunds might exit," Xiong said in a note on Tuesday.

He said that fiscal revenue in December has shown notable improvement with tax and non-tax income both increasing. Land and property taxes have turned positive from negative, yet still remaining at the low level, showing that the real estate sector is still in a gradual recovery. However, the growth pace of fiscal spending slowed in December, with infrastructure and livelihood-related fiscal expenditure slowing. Fiscal spending on health and medical care remained high against the backdrop of the COVID-19 pandemic and infection peak in December.

The State Taxation Administration said on Tuesday that the country's newly increased tax refunds as well as tax and fee cuts and deferrals had exceeded 4.2 trillion yuan in 2022. Total tax and fee income in 2022 stood at 31.7 trillion yuan.

Gao Ruidong, chief macroeconomist at Everbright Securities, said in a note on Tuesday that this year, the government's stance of keeping debt risks under control means that the government will not rely heavily on debt and is likely to turn toward policy finance for infrastructure funds.