Source: Bloomberg
China's central government's leverage will help resolve local debt risks and reduce local financial pressure. However, the other side of the coin is: With the further improvement of the central government's central government's dominance, the local government "shrinks hands and shrinks" under the "shrinking hands"., Putty may gradually be suppressed.
China added trillion national debt in the fourth quarter of this year, all of which were arranged by transfer payment arrangements.The move was regarded as the beginning of the reform of the intergovernmental debt structure: the local government's leverage has expanded sharply in the past eight years.Urban investment debts depending on the hidden debt of local governments, according to the IMF estimates of approximately 66 trillion yuan, the momentum of future local debt growth will slow down.
The weak economic recovery of China's economy, and the central government still has room for further enhancement. This is expected to reduce the burden on local debt, but at the same time, it will also make local governments more and more rely on the central government's transfer payment revenue.In the long run, the enthusiasm and creativity of local government officials may be hit, and public services provided by local governments will also lose their flexibility and cannot be adjusted according to different local needs.
"(currently the central leverage) is a relatively easy path to promote the central government." Xia Le, an economist in the Spanish foreign bank in Hong Kong, said in an interview with Bloomberg that he would "stifle the local governmentInnovation of the institutional innovation of local economic and social development will not help economic development and prosperity.
Xia Le believes that local economic development and social affairs are the most understanding, and it is still necessary to give full play to local subjective initiative to prevent lazy administration.
The government of making less mistakes is also vigilant.Previously, according to media reports, last year, Jingning County, Lishui City, Zhejiang, selected three units and townships as "lying" as "lying" to criticize their inaction, inadequate, and poor performance.
Last year, the Prime Minister Li Keqiang warned that economic growth faced the risk of slipping a reasonable range. He then presided over a symposium on the seminar of the principals of the main leaders of the five provinces and cities in the southeast coastal provinces and cities.
Central Earth Relations
The struggle for the financial power of China Central Land has continued for decades.The taxation system in 1994 helped the central government out of its financial difficulties.However, according to the World Bank's data, after the reform of the tax system, the local government bears about 80%of the expenses, but can only get 40%of tax revenue.In recent years, discussions that have intensified local fiscal difficulties in recent years are endless.
After the financial crisis in 2008, the Chinese local government financing platform exploded and expanded to support local economic growth through the local government's off -balance -sheet financing.Fast expansion.However, since 2020, under the double blow of the outbreak of the epidemic and the downturn in the real estate market, the fiscal revenue and debt capacity of local governments have decreased significantly, and the local debt -lifting model has been unsustainable.
The concept of reforming the reform of the local government has been brewing in the past few years to increase the reform of the main tax.The downturn in the real estate market continued to deepen the real estate tax reform across the country, and the reform of consumption tax was not promoted.
"The construction of a local tax system is a slow variable, and the relevant supporting reform tasks are completed for a long time." Jia Kang, director of the Institute of Finance of the former Financial Science Research Institute of the Ministry of Finance, said in an interview with Bloomberg that it was unlikely to rely on the local tax system.When it is given a source of stable income from local governments to solve local problems, the central government uses its highest level of credit to raise funds, and then arranges transfer payment to support the local area. It has its rationality. It is an immediate way.
A new round of reform
At the Central Economic Work Conference held last week, Chinese senior leaders said that "a new round of reform of the fiscal and taxation system" said, but it did not give further explanations.Analysts expect that China may be considering further adjustment of central and local fiscal relations.
"I think there may be a large aspect of the new round of fiscal and taxation system reforms that the central government assumes greater deficit responsibilities and greater expenditure responsibilities," said Jacqueline Rong, the chief Chinese economist in Paris, France.
In recent years, the dependence of local transfer payment has increased year by year.Bloomberg calculated that in 2023, the central transfer payment accounted for more than 90 % of the local public budget.Ding Shuang, the chief economist of Standard Chartered Bank of China and North Asia, believes that increasing the central government's transfer payment on the local area is that the advantage is that the central government can determine where to transfer to and play a role in adjusting.
"It is expected that not only will the central income of 100%be transferred to the place after the Ming Dynasty, but also the funds of the central debt issuance will be transferred to the place." Ding Shuang said, "In the future, the fiscal deficit rate rate of fiscal deficit in the future can exceed 3%. "
From the perspective of Michael Pettis, a professor at Peking University, although the local government is facing huge cash flow pressure, the assets they hold are as high as 20%-30%of China's GDP, and part of them are transferred to residents, such as using land for useIn the construction of a guarantee housing, rather than selling it into commercial housing at a high price, it will be the "most painful" way to boost consumption and realize the economic balance.
"In the next few years, we may see who will be contradictory who will bear the cost of the central government and local governments." Pettis said.
