With the prolonged property slump, China's local governments are expected to tighten their belts further this year. Reports say that more than half of China's 31 provincial-level governments have lowered this year's revenue growth targets compared with last year.

According to the Chinese financial outlet Caixin on the 26th, among 31 provincial-level governments on the Chinese mainland, including provinces, municipalities, and autonomous regions, 18 lowered their targets for growth in general public budget revenue this year from a year earlier. Three saw no change, and only 10 raised their targets, indicating they expect better revenue conditions than last year.

Twenty-one regions, including Guangdong, Jiangsu, and Shanghai, China's economic hubs, projected government revenue to grow by about 2~3% this year. Some inland areas such as Hunan and the Inner Mongolia Autonomous Region expected increases of only 0.5~1.5%, reflecting even lower expectations. Only six regions, including Beijing, forecast government revenue growth of 4% or more.

Since the COVID-19 pandemic, China's prolonged property downturn has led to an overall decline in land-sale income, and even selling state-owned assets no longer raises funds as it once did.

Some regions have also seen weak outcomes from local industrial activity. In Henan, tax revenues from traditional sectors such as energy and chemicals have been sluggish, and emerging industries have yet to make up the shortfall. Shanxi and others reported reduced income due to falling coal prices.

Meanwhile, spending pressures have increased. In addition to interest on existing debt, non-discretionary spending has risen, including social welfare outlays and expenditures tied to the central government's policy priorities. Sichuan Province warned that local fiscal capacity is shrinking, and Hunan also said some cities and counties are operating in straitened fiscal conditions. Public finances are caught in a dilemma. Even last year, some local governments experienced delays in paying civil servant allowances, among other issues.

Caixin reported concerns in some areas that, with many demands on spending but fewer revenue sources, certain local governments may try to offset shortfalls through fines, fees, and the like.

The property slump is continuing this year. Shanghai recently eased restrictions that had strictly limited purchases of downtown property by non-locals. On January 1, the Chinese Communist Party's theoretical journal <Qiushi> carried an article stating that while housing markets in some cities are showing signs of stabilization, investment in property development continues to decline and regulators need to roll out effective measures.

Attention is on whether the fiscal difficulties of China's local governments will be reflected in this year's growth target. China will announce this year's growth target at the opening of the National People's Congress on the 5th of next month. In January~February, 20 of 30 local governments lowered their growth targets from last year, with an average of 5.1%.

The International Monetary Fund (IMF) recently maintained its existing forecast for China's economic growth this year at 4.5%. The IMF cited the global economic slowdown, weak demand, and the property slump as major downside factors for China's economy.