One of the more unusual features of the current China bust is that its stimulus efforts are hampered not just by a classic debt-deflation cycle inhibiting monetary policy but by a blockage in the transmission of fiscal easing. Why? Falling land sales are gutting fiscal revenues. This is set to get much worse in the months ahead with recent sales volumes in the -60-70% range. Goldman has more.
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1.On the budget, fiscal revenue growth slowed sharply to +3.4% yoy in March from+10.5% in January-February, weighed down by weakening tax revenue, growth ofwhich plunged to -0.2% yoy in March from +10.1% in January-February, in line withtheMarch slump in major activity datadue mainly to the rapid deterioration of thedomestic Covid situation and escalated restrictive measures. By comparison,non-tax revenue growth rose to +14.9% yoy in March from +13.7% in January-February, thanks mainly to the transfer from other fiscal accounts (e.g.,the PBOC’s profit transfer).
