BEIJING, March 17 (Reuters) – China’s tax revenue fell 1.2% in the first two months of 2023 from a year earlier, the finance ministry said on Friday, despite signs that economic activity was starting to recover after the lifting of the tough COVID measures.
Data this week showed the world’s second-largest economy is gradually recovering since pandemic brakes were lifted abruptly in December, but the recovery has been uneven. The central bank said on Friday it would cut the amount of cash banks must hold as reserves to support growth momentum.
Tax revenues totaled 4.56 trillion yuan ($662.13 billion) in January-February year-on-year, while spending reached 4.09 trillion yuan, up 7%, the ministry said in a statement.
Revenue increased by 0.6% in 2022.
Revenue from government land sales fell further in the first two months, suggesting property developers remain cautious even after authorities increased support to help them weather a severe funding crisis.
Revenue from the sale of land, the biggest source of funds raised directly by local authorities, fell 29% in the first two months of the year, ministry data showed.
Finance Minister Liu Kun said earlier this month that fiscal conditions for China’s local governments are likely to improve as the economy recovers, although debt risks for some governments are high as they face repayment pressures.
As debt obligations mount, some local governments are pushing banks to extend maturities and lower interest rates, Reuters reported earlier, citing sources.
With a complicated and changing external environment, the recovery in both external and domestic demand faces some limits, Vice Industry Minister Xin Guobin said during a recent meeting with major manufacturing provinces, according to a ministry statement on Friday.
“Companies’ production and operations still face many difficulties,” the statement read. It pointed to uncertainty in tax revenue after small businesses were particularly hard hit by anti-virus measures last year.
($1 = 6.8869 Chinese Yuan Renminbi)
Reporting by Ellen Zhang and Kevin Yao; Editing by Toby Chopra and Kim Coghill
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