On Thursday, Finance Minister Liu Kun announced that while China’s fiscal revenue is expected to increase this year, it is likely to be tepid. Liu noted that the expected economic rebound this year and the low base of fiscal revenue in 2022 have both laid the foundation for this year’s increase in fiscal revenue. However, the foundation for economic recovery is not yet solid and there is still great uncertainty surrounding fiscal revenue.
Experts predict that economic recovery and the rebound in fiscal revenue will reinforce each other and lay a good foundation for growth this year. Fiscal incentives for businesses are likely to continue to ensure support for the economy remains stable and consistent.
Liu’s article, published on the ministry’s website on Thursday, reiterated that the intensity of fiscal spending will increase in key areas related to technological breakthroughs, rural vitalization, and ecological and environmental protection. The Finance Minister stressed that expenditure on weak links like education, elder care, medical care, and education will be ensured.
Although there is an expectation of a mild and healthy increase in fiscal revenue due to the country’s economic recovery, Shi Yinghua, a professor at the Chinese Academy of Fiscal Sciences, believes the rise won’t be sharp. This is because most of the tax and fee cut incentives that had been rolled out in recent years to tide businesses over hard times are likely to continue.
The policy to support recovery will likely target small and micro-sized enterprises and self-run businesses, a group hit hardest by the COVID-19 pandemic, and help businesses upgrade their innovation capacity. This will become more important as the country moves to strengthen its technological base and increase its capacity to produce higher-value goods.
The Central Economic Work Conference in December emphasized the need to step up and make more efficient fiscal policy. The Finance Ministry has said that it will appropriately expand fiscal spending, with an optimized mix of fiscal deficit, local government special bonds, and fiscal subsidies for interest expenses.
It’s essential to ensure the stability and consistency of the economy to tackle the economic impact of the COVID-19 pandemic. Shi Yinghua, a professor at the Chinese Academy of Fiscal Sciences, highlights that it is imperative to refine the tax and fee cut policy incentives and substantially lessen the financial burdens on enterprises.
The outlook for China’s fiscal revenue in 2022 is uncertain, and the imbalance between fiscal revenue and spending remains acute. Liu emphasized that China’s fiscal capacity has been enhanced in recent years, with the country’s fiscal revenue growing from 17.3 trillion yuan ($2.52 trillion) in 2017 to 20.4 trillion yuan in 2022.
In conclusion, China’s fiscal revenue is expected to grow, but the increase is likely to be slow. Experts predict that the government will continue to offer fiscal incentives to businesses to ensure that the economy remains stable and consistent. The policy to support recovery is likely to become more targeted towards small and micro-sized enterprises and self-run businesses. The Finance Ministry is committed to optimizing the mix of fiscal deficit, local government special bonds, and fiscal subsidies for interest expenses to enhance fiscal capacity. It is crucial to refine the tax and fee cut policy incentives to lessen financial burdens on enterprises, laying the foundation for sustainable growth.