Mainland's finances face hard year, says minister
The mainland's financial position will be difficult in the year ahead as revenues fall and spending surges, Minister of Finance Xie Xuren warned yesterday.
Painting the most sombre picture of the government's finances in years, Mr Xie said that shrinking corporate profits caused by rapidly slowing economic growth, as well as tax cuts, would lead to a drop in revenue, while government measures to boost growth would add to spending.
'[It] will be a very difficult year,' Mr Xie told an annual national meeting on fiscal affairs in Beijing. 'The problem of unbalanced income and expenditure will be prominent in 2009.'
His warning came as an official revealed that the mainland's giant state-owned enterprises had reported a rare decline in profits last year. 'Profits of state-owned enterprises directly under the central government fell about 30 per cent year on year in 2008 to 700 billion yuan [HK$800 billion],' said Huang Shuhe , vice-chairman of the State-owned Assets Supervision and Administration Commission. There are 159 giant firms under the commission, dominating pillar industries such as transport, telecommunications, energy and infrastructure.
The mainland's fiscal revenue probably exceeded 6 trillion yuan last year, up about 19 per cent from 2007, Mr Xie said. This followed a 32.4 per cent jump in revenue to 5.13 trillion yuan in 2007. Spending in 2007 rose 23.2 per cent to 4.98 trillion yuan, leaving a comfortable surplus.
But fiscal revenue, which includes tax receipts and other income flowing to the provinces and the central government, contracted for the first time in 12 years in October as policy-related tax cuts and slower economic growth began to be felt. Revenue fell 3.1 per cent in November from a year earlier to 379.24 billion yuan, after falling 0.3 per cent in October.
Economists expect the mainland will have a budget shortfall this year, with the deficit between 500 billion and 800 billion yuan.
Ha Jiming , chief economist at China International Capital Corp, said the weakening financial position would cast doubt on the government's much-vaunted economic stimulus package. The measures, including the 4 trillion yuan stimulus package and tax cuts, are to stem a rapid slowdown in economic growth, by boosting public spending and private consumption.