China’s budget deficit has reached a record high so far this year, reflecting that controversial zero-COVID has hurt the country’s economy and government finances.   

Based on Bloomberg calculations from China’s Ministry of Finance data, the country’s fiscal deficit was 7.75 trillion yuan ($1.1 trillion) for the period from  January to November. That figure was over two times the same period last year and more than the 2020’s level when the initial COVID outbreak hit the country’s economy with the slowest growth in decades.

Data shows that government spending is up while revenue is down. 

China’s total government spending in the first 11 months was 22.7 trillion yuan, up 6.2% from a year ago. 

A key revenue component of local governments is land sales, which have declined by double digits almost every month this year.

In November, land sales from provincial governments across China were 715 billion yuan, down about 13% from a year ago. 

Revenue from deed taxes also fell 23.8% in the first 11 months from a year earlier.

The zero-COVID policy was also expensive for local governments to maintain as they had to cover the costs of testing and quarantining residents. Meanwhile, their revenue from land sales and taxes plunged amid the real estate crisis.

China’s overall fiscal revenue is the sum of the general public budget and the fund revenue.

This year, the general public budget revenue and the regime’s fund income have declined significantly due to the COVID pandemic’s impacts, tax rebates and tax reductions, and a crisis in the property market.

The regime’s funds, the second largest source of fiscal revenue after tax, refer to the monetary funds with particular purposes raised from citizens, legal persons, and other organizations. CCP authorities at all levels collect them, mainly for infrastructure and public utilities.

The CCP increased the issuance of local special bonds to fill the budget gap. As a result, the scale of new special bond issuance exceeded $560 billion for the first time this year.

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