China’s Economy Won’t Overtake the U.S., Some Now Predict

[Mista]

Thanks for your valuable input. But it isn't just the lockdown that has dampened confidence. For the longest time real estate was considered the safest bet for investments by the average Chinese absent a mature well governed stock market. But that confidence has been shaken recently with unfinished "rotten tail" buildings and shrinking demand. home prices continue to fall for eleven straight months. An event without precedence in China. How does one recover that lost confidence? Lowering interest rates and relaxing down payments requirement has so far not had the desired effect. Will the CPC allow the real estate market to continue to slowly deflate making housing more affordable to the masses? But then who takes the hit? the lien holder? the builder? the home owner? Or, all of the above? Is it even realistic to allow so many institutions and individuals to loose so much of their investment? The NPL market is one option but it exposes the bank and the debtor to losses. Considering over 70% of Chinese household investment is tied into real estate is this strategy realistic? The magnitude of the loss is proportional to the rate of deflation of the real estate market but someone will take a hit

The lost of confidence in the short term is inevitable, but that's how you deflate a bubble right?

They have hundreds of cities so it's hard to generalize. Their first-tier cities will still hold strong while their third-tier cities and below will see downward price pressure. What they want is to keep the prices stable across the board without large rises or falls, and slowly wean off their dependence on the real estate as the rest of the economy grows. But it requires a lot of political will because of the vested interests of many parties are involved. The local governments derive large part of their revenue from land sales and they will push back. I read Chinese commentaries talking about implementing property tax to replace land sales revenue, but after so many years except for a few cities they are still unable to successfully implement a property tax.

In the longer term they need to think of building up a functioning stock market where investors can invest in the long term and not for speculation, and where capital can be allocated efficiently. But I don't think it's easy for them because of their political and legal system. If capital is allocated on the basis of efficiency, a large chunk of their SOEs will be eliminated. Access of information? Can reporters report the performance of SOEs in an unbias manner, or investors access to foreign news reporting on the companies they are investing? Rule of law and separation of powers? Court making their judgements without any favor or pressure from the authorities? Etc etc.

 

[MH.Yang]

The lost of confidence in the short term is inevitable, but that's how you deflate a bubble right?

They have hundreds of cities so it's hard to generalize. Their first-tier cities will still hold strong while their third-tier cities and below will see downward price pressure. What they want is to keep the prices stable across the board without large rises or falls, and slowly wean off their dependence on the real estate as the rest of the economy grows. But it requires a lot of political will because of the vested interests of many parties are involved. The local governments derive large part of their revenue from land sales and they will push back. I read Chinese commentaries talking about implementing property tax to replace land sales revenue, but after so many years except for a few cities they are still unable to successfully implement a property tax.

In the longer term they need to think of building up a functioning stock market where investors can invest in the long term and not for speculation, and where capital can be allocated efficiently. But I don't think it's easy for them because of their political and legal system. If capital is allocated on the basis of efficiency, a large chunk of their SOEs will be eliminated. Access of information? Can reporters report the performance of SOEs in an unbias manner, or investors access to foreign news reporting on the companies they are investing? Rule of law and separation of powers? Court making their judgements without any favor or pressure from the authorities? Etc etc.

The most important reason why the Chinese govt can maintain high welfare and excellent infrastructure through low tax burden is that a large part of its fiscal revenue comes from the profits of state-owned enterprises.

If the stock market reform touches the status and interests of state-owned enterprises, it will shake the stability of the whole system.

The investment channel is not only the property market and the stock market. There are also funds, bonds, bank financing and so on.

 

[dbc]

The most important reason why the Chinese govt can maintain high welfare and excellent infrastructure through low tax burden is that a large part of its fiscal revenue comes from the profits of state-owned enterprises.

No it doesn't the largest contribution to state revenue is from VAT, followed by income tax and then stamp tax. how often must I correct factual inaccuracies in your post about your own country?

The country's fiscal revenue amounted to 6.2 trillion yuan (about $968.81 billion) during the period, according to data from the Ministry of Finance. Tax revenue came in at 5.25 trillion yuan in the January-March period, up 7.7 percent year-on-year. Revenue from value-added tax, the largest source of fiscal revenue in the country, increased 3.6 percent from a year earlier to 1.92 trillion yuan, while that of individual income tax amounted to 464.5 billion yuan in the first three months, an increase of 16.5 percent. Stamp tax revenue jumped 20.6 percent year-on-year to 156.9 billion yuan. Specifically, stock-trading stamp tax revenue registered a yearly rise of 21.3 percent. China's fiscal revenue up 8.6% in Q1 China's fiscal revenue logged a year-on-year increase of 8.6 percent in the first quarter of this year, official data showed on April 20. english.www.gov.cn

 

[MH.Yang]

No it doesn't the largest contribution to state revenue is from VAT, followed by income tax and then stamp tax. how often must I correct factual inaccuracies in your post about your own country?

The country's fiscal revenue amounted to 6.2 trillion yuan (about $968.81 billion) during the period, according to data from the Ministry of Finance. Tax revenue came in at 5.25 trillion yuan in the January-March period, up 7.7 percent year-on-year. Revenue from value-added tax, the largest source of fiscal revenue in the country, increased 3.6 percent from a year earlier to 1.92 trillion yuan, while that of individual income tax amounted to 464.5 billion yuan in the first three months, an increase of 16.5 percent. Stamp tax revenue jumped 20.6 percent year-on-year to 156.9 billion yuan. Specifically, stock-trading stamp tax revenue registered a yearly rise of 21.3 percent. China's fiscal revenue up 8.6% in Q1 China's fiscal revenue logged a year-on-year increase of 8.6 percent in the first quarter of this year, official data showed on April 20. english.www.gov.cn

In 2021, the US govt's fiscal revenue was US $7.3 trillion.

In 2021, the fiscal revenue of the Chinese govt was 20253.9 billion CNY (US $3.1 trillion). Among them, 17273.1 billion CNY (US $2.6 trillion) came from taxes, and 2980.8 billion CNY (US $0.5 trillion) came from dividends of state-owned enterprises.

In 2021, China's GDP of US $17.6 trillion contributed US $2.6 trillion in tax revenue. USA $23 trillion GDP contributed US $7.3 trillion in taxes (the US govt has no income from state-owned enterprises).

China's effective negative tax rate is 14%, and the USA' effective negative tax rate is 32%.

This is why I said that China's negative tax rate is low, and a large part of the govt's fiscal revenue depends on the profits of state-owned enterprises.

If China wants to maintain this relatively low tax, high welfare, and enough money to maintain first-class infrastructure, then state-owned enterprises are essential.

 

[Mista]

In 2021, the fiscal revenue of the Chinese govt was 20253.9 billion CNY (US $3.1 trillion). Among them, 17273.1 billion CNY (US $2.6 trillion) came from taxes, and 2980.8 billion CNY (US $0.5 trillion) came from dividends of state-owned enterprises.

Have to correct you here. 2980bil CNY is referring to the non-tax revenue, which includes not only dividends contributed by SOEs but also fines, licenses etc.

The SOEs' contribution should be 518bil CNY instead.

2021年，全国一般公共预算收入202539亿元，同比增长10.7%。其中，中央一般公共预算收入91462亿元，同比增长10.5%；地方一般公共预算本级收入111077亿元，同比增长10.9%。全国税收收入172731亿元，同比增长11.9%；非税收入29808亿元，同比增长4.2%。

三、全国国有资本经营预算收支情况

（一）国有资本经营预算收入情况。

2021年，全国国有资本经营预算收入5180亿元，同比增长8.5%。分中央和地方看，中央国有资本经营预算收入2007亿元，同比增长12.4%；地方国有资本经营预算本级收入3173亿元，同比增长6.1%。

（二）国有资本经营预算支出情况。

2021年，全国国有资本经营预算支出2625亿元，同比增长2.7%。分中央和地方看，中央国有资本经营预算本级支出937亿元，同比增长7.2%；地方国有资本经营预算支出1688亿元，同比增长0.3%。

2021年财政收支情况_部门政务_中国政府网

全国一般公共预算收支情况,2022-01-29-10:01:00

www.gov.cn

一般公共预算非税收入涵盖众多，主要包括：专项收入、行政事业性收费收入、罚没收入、国有资本经营收入等。

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www.sohu.com

 

[letsrock]

In 2021, the US govt's fiscal revenue was US $7.3 trillion.

In 2021, the fiscal revenue of the Chinese govt was 20253.9 billion CNY (US $3.1 trillion). Among them, 17273.1 billion CNY (US $2.6 trillion) came from taxes, and 2980.8 billion CNY (US $0.5 trillion) came from dividends of state-owned enterprises.

In 2021, China's GDP of US $17.6 trillion contributed US $2.6 trillion in tax revenue. USA $23 trillion GDP contributed US $7.3 trillion in taxes (the US govt has no income from state-owned enterprises).

China's effective negative tax rate is 14%, and the USA' effective negative tax rate is 32%.

This is why I said that China's negative tax rate is low, and a large part of the govt's fiscal revenue depends on the profits of state-owned enterprises.

If China wants to maintain this relatively low tax, high welfare, and enough money to maintain first-class infrastructure, then state-owned enterprises are essential.

what is the revenue of all chinese govts together - federal and provinces ?

 

[MH.Yang]

what is the revenue of all chinese govts together - federal and provinces ?

US $3.1 trillion

 

[Mista]

@MH.Yang