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Chinese Premier Asks Coastal Provinces to Complete Net Payment Transfer to Center
Chen Yikan
DATE:  Aug 17 2022
/ SOURCE:  Yicai
Chinese Premier Asks Coastal Provinces to Complete Net Payment Transfer to Center Chinese Premier Asks Coastal Provinces to Complete Net Payment Transfer to Center

(Yicai Global) Aug. 17 -- China’s four economically developed coastal provinces should complete the task of turning over revenue share to the central government, Premier Li Keqiang proposed yesterday.

Analysts believe the premier was emphasizing that financially powerful provinces should play a role in safeguarding the country’s major financial resources, which is related to the current national economic and financial situation.

Li was speaking at a symposium in Shenzhen, where government officials, including governors, from Guangdong, Jiangsu, Zhejiang and Shandong, four economically strong coastal provinces, participated. Provincial governors of Henan in central China and Sichuan in southwest China, two provinces that receive the most transfer payments, also attended the meeting.

He did not disclose the specific amount the four coastal provinces need to turn over.

Shi Zhengwen, a professor at China University of Political Science and Law, said that the figure may maintain certain growth based on the net contributions of provinces last year.

China currently adopts a revenue-sharing system between the central government and local governments. The economically prosperous provinces have significant revenue, yielding correspondingly high revenue for the central government.

In the primary distribution, the central government can obtain nearly half of the national fiscal revenue.

Only six provinces and three cities in China contributed net revenue to the central government in 2019, with Guangdong, Shanghai and Beijing the top three, with CNY830.7 billion (USD122.6 billion), CNY820.2 billion and CNY731 billion, respectively, Luo Zhiheng, chief macroeconomic analyst at Yuekai Securities, told Yicai Global, citing official data.

Jiangsu, Zhejiang, Shandong, Tianjin, Fujian and Liaoning also made net contributions to the central government, with CNY409.1 billion, CNY327.4 billion, CNY215.2 billion, CNY213.6 billion, CNY42.7 billion and CNY6.7 billion (USD988.9 million), respectively.

In the first half of the year, the national general public budget revenue totaled about CNY10.5 trillion (USD1.5 trillion), down 10.2 percent from a year earlier, according to Ministry of Finance data. The incomes of some resource-based provinces, including Shanxi, surged, but most provinces recorded sharp declines in revenue. The economically developed provinces and cities in eastern China were greatly affected by the Covid-19 pandemic.

Meanwhile, the central government has increased transfer payments to local governments this year to support enterprises and ensure people’s livelihood.

According to data from the Ministry of Finance, the transfer payment from the central government to local governments is expected to reach a record high of nearly CNY9.8 trillion this year, up about CNY1.5 trillion from the previous year. But completing this huge transfer payment depends largely on the net contributions of provinces.

China’s economic and financial situation is severe this year, due to the impact of Covid-19, Shi told Yicai Global.

Major economically strong provinces should take the lead and adopt multiple measures to complete the task of net transfer to the central government, he noted. This is very important in supporting the country’s finances and helping the central government carry out transfer payments to the central and western regions.

Not only provinces with net contributions should make efforts to complete their tasks, other provinces that rely on central government’s transfer payments should also take measures to balance revenue and expenditure, experts believe.

Editor: Peter Thomas

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Keywords:   Central Government Finance,Local Government Finance,Transfer Payment