BEIJING (Reuters) – China’s tax revenue slowed in the first half of the year, finance ministry data showed on Wednesday, illustrating mounting economic pressures that have fueled hopes for further growth stimulus.

The world’s second-largest economy experienced fragile growth in the second quarter as demand weakened at home and abroad, while policymakers face several other challenges, including an erosion of private sector confidence and increasing local government debt.

Tax revenue rose 13.3% in the first six months of 2023 from a year earlier, a slower pace than the 14.9% recorded in the first five months, according to data from the Ministry of Foreign Affairs. finance.

In June alone, tax receipts rose 5.6% from a year earlier, a sharp slowdown from the 32.7% jump recorded in May, according to Reuters calculations based on the data. of the ministry.

Revenue from land sales, the main source of direct revenue collected by local governments, fell 24.26% year-on-year in June, compared with a 13% drop the previous month, according to Reuters calculations based on ministry data.

The data suggests cash-strapped developers are remaining cautious about buying land, highlighting weakness in the property sector, a traditional engine of economic growth but in serious trouble for the past two years.

Budget spending rose 3.9% between January and June, a slowdown from the 5.8% rise in the first five months.

Tax revenue totaled 11.9 trillion yuan (1.47 trillion euros) in the first six months, while expenditure totaled 13.4 trillion yuan, according to ministry data.

According to sources close to Chinese policymakers and economists, the government is likely to take other stimulus measures, such as fiscal spending to fund major infrastructure projects, increased support for consumers and private businesses, or measures to ease the real estate policy, which has been drastically tightened over the past two years.

China will accompany local governments to speed up the issuance of special bonds, Li Dawei, an official with the ministry, said at a press conference in Beijing on Wednesday, adding that local governments have issued 2.17 trillion yuan in special obligations during the period January-June.

The government plans to increase financing for infrastructure projects with 3.8 trillion yuan of local government special bonds this year, up from 3.65 trillion yuan last year.

(Report Kevin Yao, Ellen Zhang and Qiaoyi Li, Corentin Chapron, edited by Kate Entringer)

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