Fiscal incomes feel slowdown pinch

By Xin Zhiming (China Daily)
Updated: 2008-12-12 07:57

China's fiscal revenues fell by 3.1 percent year-on-year in November due to the slowing economy, the Ministry of Finance said yesterday, continuing the downward trend that has been apparent since September.

Total fiscal revenues in the January-November period amounted to 5.8 trillion yuan, up by 20.5 percent year-on-year.

The country's fiscal revenues reached 379.2 billion yuan in November, the ministry said in a statement. Tax cuts and the domestic economic slowdown are the main factors behind the fall, it said.

The national economy registered a 9 percent growth in the third quarter against 11.9 percent for the whole of last year. The latest statistics show that exports, foreign direct investment, producer prices and consumer prices were all falling in November.

"The economic slowdown has affected industrial profits and led to decreasing tax revenues," said Dong Xian'an, economist with China Southwest Securities.

China's tax revenues generally account for more than 90 percent of its fiscal income.

Although many worry that fiscal income in the coming months may continue to drop, analysts said the decrease is not a big problem for China as the country still enjoys very low fiscal deficit/GDP ratio.

The ratio will be only 0.6 percent for 2008, according to China's budget for this year. The budget deficit is 180 billion yuan this year. Even next year as the deficit will reportedly rise to 280 billion yuan, the ratio could be less than 0.7 percent, about 0.2 percentage points lower than in 2007.

The Chinese economy is expected to start to bottom out from middle of next year, many economists said. If that proves to be the case, China's fiscal income would pick up gradually from the second half of next year, Dong said. "China faces very low risk of unaffordable fiscal burden."

The easing momentum of the country's fiscal revenue growth started in September, when the year-on-year growth rate fell to 3.1 percent from 16.5 percent in July. In October, it dropped by 0.3 percent, the first monthly fall in 12 years.

The country has raised the level of export tax rebates to bolster exports, cut interest on savings and stamp duty of stock trading, as well as reducing taxes on house purchases to support the real estate market this year.

In November, China's fiscal expenditures reached 525.4 billion yuan, up by 16.5 percent year-on-year.