An assertive Beijing confident in the strength of its economic triumphs is more willing to flex its muscles than ever, splurging hundreds of billons of yuan on a military buildup and overseas acquisitions.
Yet the exact size of Beijing’s coffers is something of a mystery, and many are skeptical about the sustainability of its spending spree.
One way to gauge Beijing’s fiscal standing is the yearly statistics of the revenues of local governments, available at the website of the National Statistics Bureau, when all provincial authorities have to set aside a big chunk of their revenues as annual tributes to the central government in the form of state taxes.
Data show that of China’s 31 provinces, autonomous regions and directly controlled municipalities, only six recorded a positive cash flow in 2016 with surpluses that could be handed over to the central government, after deducting their own expenses.
The southern industrial powerhouse of Guangdong, China’s largest provincial economy with gross domestic product on a par with those of South Korea and Russia, turned over more than 1.21 trillion yuan (US$187.8 billion) in 2016, followed by Shanghai’s 775 billion yuan, Beijing municipal government’s 640 billion, Zhejiang’s 544 billion, Jiangsu’s 518 billion and Fujian’s 64 billion.
In total those six coastal governments contributed some 3 trillion yuan in revenue to the central authorities, plus some 500 billion from state-owned enterprises, to subsidize Beijing’s expenses for national defense, international aid, transfer payments to subsidize poorer provinces, and all the rest.
- Sources: China National Statistics Bureau and provincial statistics departments
Roughly, Beijing had around 3.5 trillion yuan at its disposal in 2016, but it had to carve up the revenue pie carefully for rising outlays on almost all fronts.
For instance, China’s defense budget for 2017 rose 7% to 1.02 trillion yuan, while its expenditure on internal security stood at some 950 billion yuan in 2016, according to data crunched by the Hong Kong-based Ming Pao daily.
The central province of Henan recorded the highest deficit, totaling 260 billion, in the first half of 2017, followed by Hunan, Yunnan, Xinjiang, Guizhou, Hebei and Heilongjiang, all with deficits of more than 120 billion yuan each.
Yet the worrisome trend is that all of the remaining poorer provinces and municipalities are also sinking deeper into insolvency.
In 2014 the 25 poorer provinces booked a combined 3.2 trillion yuan in red on their balance sheets, but that figure had snowballed to 4.8 trillion by 2016 and is expected (conservatively) to hit the 5 trillion mark in 2017, yet the amount Beijing collects annually from the six well-off provinces has peaked at around 3 trillion yuan over the years.
Beijing issued state bonds totaling 2 trillion yuan in 2016 and the corresponding figure for the first half of 2017 was 1.37 trillion yuan.