From January to October 2021, the general public budget revenue increased by 14.5% year-on-year; The cumulative tax revenue increased by 15.9% year-on-year; Non tax revenue increased by 6.5% year-on-year; The cumulative income from the transfer of state-owned land use right increased by 6.1% year-on-year; General public budget expenditure increased by 2.4% year-on-year.
1、 Public finance and land transfer revenue: the growth rate continues to fall
From January to October, the two-year compound annual growth rate of national general public budget revenue was 4.0%, down 0.3pct month on month. Affected by the increasing downward pressure on the economy, the growth rate has fallen continuously since August.
From January to October, the two-year compound annual growth rate of tax revenue was 5.2%, down 0.1pct month on month. Among the main taxes, the compound annual growth rate of value-added tax in the two years was 1.0%, and continued to rise by 0.2pct month on month; Corporate income tax increased by 6.0% on a compound annual basis in the two years, with a month on month decrease of 0.3pct; The consumption tax increased at a compound annual growth rate of 2.5% in the two years, with a month on month decrease of 0.8pct, which is mutually confirmed by the weak recovery pattern of consumption; The personal income tax increased at a compound annual growth rate of 14.8% in the two years, and continued to rise by 0.6pct month on month, reflecting the continuous improvement of residents’ income. Non tax revenue has weakened in July. From January to October, non tax revenue grew at a compound annual growth rate of – 2.3% for two years, with a continuous decline of 1.4pct month on month. From January to October, the income from state-owned land transfer increased by 6.1% year-on-year, and the two-year compound annual growth rate was 8.1%, which continued to fall by 1.4pct month on month. With the gradual fermentation of real estate risks, real estate enterprises tend to be cautious in land acquisition, and the land market has cooled significantly. It is expected that the downward trend of land transfer income will continue.
2、 Public expenditure: moderate acceleration
From January to October, the national public financial expenditure increased by 2.4% year-on-year, and the two-year compound annual growth rate increased by 0.7pct to 0.9% month on month, indicating that the financial expenditure increased slightly in October, but it is still weak. In terms of expenditure progress, the national general public budget expenditure has completed 77.5% from January to October, slightly higher than 77.1% in 2020, but lower than 79.8% in 2019. Financial funds mainly flow to key areas such as “Three Guarantees”.
The growth rate of debt interest payment expenditure continued to “lead” various expenditures, but the marginal debt repayment pressure eased slightly. The two-year average annual compound growth rate continued to fall by 0.5pct to 9.8% month on month. In October, the epidemic situation in China was repeated, and the two-year compound annual growth rate of health expenditure increased by 1.1pct to 4.3%; Marginal expenditure in the field of people’s livelihood improved. The two-year compound annual growth rate of expenditure on education, social security, employment and science and technology increased by 0.7pct, 1.0pct and 3.0pct to 2.3%, 6.6% and 0.5% respectively.
The growth rate of expenditure in the field of infrastructure has improved slightly, but it is still depressed, and the trend of each sub item continues to differentiate.
The two-year compound annual growth rate of infrastructure was – 7.3%, up 0.9pct month on month. Among them, the two-year compound annual growth rates of expenditure on urban and rural community affairs, energy conservation and environmental protection were – 15.0% and – 10.8% respectively, rising 2.7pct and 1.0pct respectively month on month; The two-year compound annual growth rates of expenditures in the fields of transportation, agriculture, forestry and water were – 3.7% and 1.1% respectively, down 0.3pct and 1.4pct respectively month on month.
3、 Market impact: bond market sentiment has improved
In terms of liquidity impact, the central bank invested heavily to hedge the financial disturbance to inter-bank liquidity, and the capital side continued to operate smoothly. October is the big month of fiscal tax payment, and the issuance of government bonds remains at a high scale. The total net return of base currency from tax payment and government bond issuance exceeds trillion. In October, the issuance of government bonds was 633.2 billion yuan, and the net financing was 150.4 billion yuan. The pace of local government bond issuance was further accelerated. In October, the issuance of local government bonds was 868.9 billion yuan, and the overall net financing reached 689.3 billion yuan. In order to hedge the liquidity gap, since late October, the central bank has maintained 100 billion open market operations every day, with a total operation of 1.39 trillion yuan in the whole month, and the open market balance reached an annual high of 1 trillion yuan at the end of the month. Therefore, the central interest rates of dr001 and dr007 did not rise but fell in the whole month, which were 1.94% and 2.17% respectively.
In terms of the impact of bond yields, the limited intensity of fiscal expenditure has further improved the sentiment of the bond market. The weak general public budget revenue and the significant decline in government fund revenue have led to the backward expected time point and weaker expected strength of the market for the economy underpinned by subsequent fiscal expenditure. Therefore, the overall interest rate center is easy to fall and difficult to rise in the short term. From the performance of the bond market, since mid October, the yield of 10-year Treasury bonds has returned to the shock range of 2.9% – 2.94% from the high of 3.04%, and the yield to maturity of local government bonds has also decreased simultaneously. The yields of 10-year and 30-year local government bonds and treasury bonds with the same period have remained at the levels of 30-40bp and 15-20bp respectively.
4、 Conclusion: “risk prevention” impacts the financial revenue side
Overall, the weakening of economic recovery momentum and the drag of real estate “risk prevention” on the fiscal revenue side gradually appeared, and the fiscal expenditure increased moderately again in October. The growth of fiscal revenue continued to slow down, especially the growth rate of land transfer revenue decreased significantly; After a slight increase in the growth rate of fiscal expenditure, it is still at a low level, and the expenditure progress is still lower than that in the same period in 2019; Structurally, financial funds still mainly flow to key areas such as “Three Guarantees”, and the positive factor is that the support for infrastructure has increased slightly.
Looking forward, the rising pressure of “steady growth” requires fiscal policy to maintain a positive attitude, but the tightening of fiscal revenue will restrict the space of fiscal policy. The “positive” of fiscal policy during the year and next year will be reflected in the rhythm, that is, the front force next year will be connected with the rear force this year. Financial support for infrastructure is expected to gradually increase, and the pace of fiscal expenditure is expected to accelerate
