China's Ministry of Finance posted a 2.3 per cent decline in fiscal revenue for the first quarter of 2024 compared to the same period last year, despite exceeding expectations for overall economic growth, Reuters reported on Monday. While the recent gross domestic product (GDP) data indicated a stronger-than-anticipated expansion, the ministry attributed the lower revenue figures to temporary factors like past tax cuts and a high base for comparison. Excluding these factors, the ministry claims adjusted revenue grew by approximately 2.2 per cent. Analysts point to the ongoing property downturn as a major contributor to the strain on local government finances. This dampened domestic demand, hindering economic activity. On the spending side, China's fiscal expenditures rose 2.9 per cent year-on-year in the first quarter, albeit at a slower pace compared to the first two months of 2024, as per the statement. The Ministry explained that the slower issuance of local government bonds in the first quarter was due to a combination of project funding needs, seasonal construction limitations, and current bond market interest rates. The Ministry also confirmed that all funds allocated from last year's trillion-yuan sovereign bond issuance had been distributed to local governments by the end of February. Notably, spending on disaster prevention and emergency management surged by 53.4 per cent in the first quarter, likely reflecting recent flood events in southern China's Pearl River Delta region.
