In its bid to bolster the economy, China intends to expand the areas where special purpose bonds are invested this year, while spending on education and in support of people’s livelihoods will remain strong.
An economic recovery, particularly in China’s eastern powerhouse region that includes Shanghai, may not be sufficiently buoyed by taxes and land sales, according to analysts.
Several local governments in China have recently revised down their revenue targets for the year, citing the country’s property market slump, tumbling tax takes and Covid-19 disruptions as key reasons.
Budget deficits for local governments in China have been growing as a result of rising spending and a slump in land sales and tax revenues, with some turning to land purchases via local government financing vehicles (LGFVs).
Deteriorating local government finances, weak banks and inadequate regulation are among the main risks facing China’s economy, according to outgoing senior officials and regulators.