Export and consumer crisis
Economic slowdown squeezes Chinese tax revenues
07/19/2023 11:47 am
In China, youth unemployment is at a record high, a troubled real estate market and declining consumption are causing additional problems for the second largest economy. This is now having an impact on the country’s tax revenues.
China is also struggling with the global economic slowdown. This has even had a negative impact on the country’s tax revenues. In June, these grew by only 5.6 percent compared to the same month last year, according to data recently published by the Chinese Ministry of Finance.
In May there was still an increase of 32.7 percent. In the first half of the year, tax revenue increased 13.3 percent to 11.9 trillion yuan. That’s the equivalent of 1.47 trillion euros. At the same time, government spending grew 3.9 percent to 13.4 trillion yuan.
The world’s second-largest economy after the USA is struggling with poor exports, flagging consumption and the troubled real estate market. The gross domestic product therefore only grew by 0.8 percent from April to June compared to the previous quarter. This clearly missed the result of the first quarter of 2.2 percent. “China’s post-Corona boom is clearly over,” said economist Carol Kong of the Commonwealth Bank of Australia.
Revenue from land sales – a major source of income for local authorities – fell 24.26 percent in June, almost twice as much as in May. This development indicates that property developers are still reluctant to buy land. For years, the real estate sector was an important economic engine, but the industry has been struggling with a severe debt crisis for two years.
Given the weak economy and record high youth unemployment, economists assume that the state will spend more money to boost growth. Measures are expected to finance large infrastructure projects, more support for consumers and private companies and a relaxation of real estate policies.
The government is aiming for five percent growth in gross domestic product this year. According to economists, this will be difficult to achieve without new support from the government and central bank.