Wang Tao: China’s Fiscal Challenge and Local Government Debt Risk

China’s fiscal condition faced significant challenges in the first half of 2023. Although headline general fiscal revenue picked up notably by 14.9% from January to May, the “underlying” growth is only 0.4% year-on-year after adjusting for the low base from the sizable value-added tax rebate in the first half of 2022. Meanwhile, local land sales revenue continued to decline sharply by -20% year-on-year. We estimate that the government revenue shortfall relative to budget plans reached over 720 billion yuan ($101 billion) from January to May.