Recently, the central government of China has implemented relatively substantial tax reductions, tax refunds, and other relief policies to save businesses to stabilize the economy affected by the epidemic, leading to a decrease in local budget revenues. The Chinese regime, therefore, has no choice but to adjust spending to protect people’s livelihoods.
According to China.com.cn, as of June 25, the size of the tax reductions across China has reached $385 billion.
According to Yicai, tax and fee reductions this year to July 4 amounted to $390 billion, reaching the highest value in history.
While the large-scale tax reductions allow companies to breathe a little easier, it directly impacts local authority’s finances. This year, the financial income of many localities has decreased. In the context of reduced revenues and non-decreasing essential spending, local authorities face economic pressure and must adjust.
The city of Chongqing recently released a report on its budget adjustment plan. It mentioned that non-urgent and non-essential expenditures would be cut down to deal with the decrease in revenue. As a result, it will cut total budget spending by about $745 million.
According to the Chongqing Municipal Finance Bureau, in the first five months of this year, Chongqing’s overall public budget revenue decreased by 14.92% compared to the same period last year. However, the outside world thinks the CCP’s statistics are always “diluted.”
According to Yicai, besides Chongqing, the city of Suzhou, also affected by the epidemic this year, has issued a draft budget adjustment plan. Key measures include cutting official reception fees, conference and training fees, and overseas business travel expenses. At the same time, it will eliminate the various project progress funds affected by the epidemic. Instead, the savings from the abolished funds will be used for necessary purposes such as anti-epidemic and relief.
Yicai said that the Finance Department of Kunming City recently issued a written request to adjust the budget prepared at the beginning of the year. It will spend only on urgent and necessary expenses such as the essential maintenance of people’s livelihood, salaries of staff, and minimum management costs.
The report quoted Luo Zhiheng, a Yuekai Securities (Guangzhou-based) economist, saying that the epidemic’s impact exceeded expectations and decreased rental land and sales income. As a result, local authority revenue decreased while anti-epidemic relief spending increased. As a result, the financial situation is tense, the gap between revenues and expenditures will widen significantly, and “in the future, the adjustment of balance of payments by local authorities is expected to gradually increase.”
This year, the budget revenue of many localities has decreased, but many so-called “essential expenditures” cannot be cut down.
Yicai’s report does not mention the overall regression of the Chinese economy and the large-scale shutdown of small and medium-sized enterprises. Nor does it mention the CCP’s insistence on the so-called “Zero-Covid,” which has damaged Shanghai’s economy and even the entire nation’s economy.