[Preface]
In recent years, we have always been able to see that some local governments are facing fiscal deficits, and it is no longer an isolated case of fiscal constraints or even difficulties.
But we all know that the fiscal revenue of local governments includes not only corporate taxes, but also a large amount of land fiscal revenue, and even subsidy income from the central government.
So why is there still a situation where local finances are tight? Where is the money spent? How can this problem be solved?
Local finances are tight
In recent years, the problem of tight local finances has attracted widespread attention, and both first-tier cities and fourth- and fifth-tier small towns seem to be facing the problem of fiscal deficits.
As for finance, it naturally involves two aspects: income and expenditure, and fiscal tightness is naturally related to these two, first of all, income.
The first reason for the tight local finances is the sharp decline in land revenues, and one of the biggest revenues of local finances is land resources.
However, the local government's fiscal revenue does not rely on the sale of land, but on the collection of land transfer fees, because the land is owned by the state, and the local government has no right to sell it, but can only transfer the right to use the land, so as to charge a certain fee.
However, in recent years, as the real estate industry has become more and more sluggish, the fiscal revenue from land use rights has also become less and less.
Relevant data show that in 2021, there will be 8.7 trillion yuan in land transfer fees, but in 2022, there will only be 6.68 trillion left, a decrease of more than two percent.
Because of the implementation of the real estate regulation policy, to a certain extent, the real estate industry has been cold, which has led to a sharp decline in the income of land transfer fees.
This situation cannot be improved by just thinking of some methods, because the land market is not only limited by supply and demand, but the most important thing is that the central government and the higher authorities are very strict in supervising land-related policies.
Moreover, according to the results of economists' research on fiscal information in the past few years or even a decade, it can be seen that there is no place where the fiscal deficit can be significantly improved simply by the change in land transfer fees.
Nowadays, it is almost impossible to make the real estate industry recover in a short period of time, so the downturn in land transfer fees may not improve much for a long time in the future.
The second reason is that many local governments are not only short of revenue, but also financially strapped because they already have a serious debt crisis.
Some localities will borrow money to alleviate the short-term shortage of funds, and the financial burden will become more and more serious as the debt gradually accumulates.
This form of local government bonds is actually a type of bonds issued by public institutions, and local governments use this form to relieve financial pressure.
"Local government bonds" (full name: local public bonds) refer to bonds issued by local governments and local public institutions with fiscal revenues, which are debt certificates raised by local governments on the premise of assuming the responsibility of repaying principal and interest in accordance with the principle of credit.
It is issued as a form of local government fund-raising, and its revenue is included in the local government budget, which is arranged and dispatched by the local government.
However, borrowing a large amount of debt and failing to repay it for a long time is like drinking water to quench thirst, which can only continue to increase the financial burden.
There is also a certain risk that if fiscal revenues do not improve for a long time and the economy continues to decline, the safety of local government bonds will be affected.
However, fortunately, judging from the current situation, there is still no problem with the safety of some public bonds issued by local governments.
Where is the money spent?
In addition to the sharp decline in revenues, spending is also a major cause of the fiscal deficit, after all, if you earn less and spend less, it will not cause a serious financial burden.
The first aspect, and the most widely recognized, is that even non-professionals know that the pandemic has had a serious impact on economic development.
During the three-year epidemic, most local governments were in a situation where there was almost no income, and in the past few years, many cities have been pressed the pause button.
In order to prevent the spread of the virus, factories and schools were closed, and many companies and enterprises did not carry it, and the economy almost came to a standstill.
In such a situation, the government's revenue will naturally drop sharply, but in this case, it is the time when the government spends the most.
In order to enable more people to survive the epidemic, the state has invested a lot of manpower, material resources and funds to control the epidemic and find suitable solutions.
For the safety of the people, the country has spent a lot of money to develop vaccines, and the initial investment has been huge, and these vaccines have been injected free of charge to residents.
The research and development of vaccines alone costs the state hundreds of billions of dollars, not to mention the cost of building hospitals and isolation warehouses in a short period of time.
This was not enough, and when the residents were quarantined at home, they had no way to go out to buy daily necessities, so they had to have volunteers deliver them to their homes.
So where did these supplies come from? Could it be that the wind blew them? Of course, the state and local governments organized the distribution.
It is true that many of these materials come from donations from caring people from all walks of life, but a considerable part of them are procured and distributed by the government.
With almost no revenue, having such a large fiscal expenditure will naturally lead to fiscal deficits, tightness, and even borrowing.
Second, in recent years, many cities have overinvested in "face-saving projects", which has put great pressure on local finances.
The vast majority of Chinese have the problem of good face, and even worse, they will slap their swollen faces and become fat, although love face is not a derogatory term, but sometimes it will cause some not very good results.
It is precisely because we can't pull down our faces and swallow this breath in many ways that we will work harder to develop, and we have today's China.
But sometimes the love of face can also cause some burdens, and some unnecessary but huge financial resources are built, which puts a lot of pressure on the government.
Take the subway as an example, many cities have already opened subways, but now the subways in some places have been demonized, as if the opening of the subway has become a test standard for whether a city is developed.
Therefore, many face-loving cities, although they do not have the corresponding conditions, or do not have high demand, will still choose to increase investment in the subway.
In addition, there are some landmark buildings, which are not necessary at all, but these cities have specially planned and built them, so that a lot of money and manpower have been invested.
When it comes to construction, we have to mention one of the most important aspects of fiscal expenditure, that is, infrastructure, although these infrastructure construction will also cause huge financial expenditures, but in order to be able to better develop the economy.
We have the title of "infrastructure madness" in the world, not only because we have undertaken a lot of foreign orders, but also because our domestic infrastructure strength is also very amazing.
And to be able to go from a country whose infrastructure is far behind the level of developed countries to now a world-renowned country, only we know the hardships.
Why is there more pressure on the urban population and fewer and fewer people are willing to stay in the countryside? In the final analysis, it is because of the huge disparity between urban and rural areas.
Nowadays, many people, regardless of their background, have already received higher education, and even if they have not attended a higher education institution, they have basically seen the world.
"I could have endured the darkness if I hadn't seen the sun. ”
People's choices all depend on cognition, and it is unrealistic for a person who has already seen the prosperity of the city to return to the countryside to serve one acre and three points of land.
The country is also trying to narrow the gap between urban and rural areas, which is why it will vigorously develop infrastructure, so that people living in rural areas can also see wide roads and tall bridges when they go out.
Vigorously develop infrastructure because only the improvement of infrastructure can attract more investors and allow more regions to adapt to local conditions, whether it is agriculture, tourism or other industries, can be promoted and developed.
The living standards of the residents have improved, the economy has developed, and the fiscal revenue has naturally increased, after all, if you want to get rich, you must first build roads.
However, this is not a short-term project, and the infrastructure investment is very large, the cycle is long, and the rate of return is relatively low, which is also one of the sources of local financial pressure.
In the long run, infrastructure is undoubtedly an option that can create a positive cycle, but in the short term, it is a financial hole that cannot be entered.
The construction of roads and bridges, as well as the construction of power grids and the planning of some facilities, have indeed brought convenience to people's lives, but they have also increased the burden of fiscal expenditure.
This year is another very critical year for the 14th Five-Year Plan, so the fiscal and economic work is even more significant, and every penny spent is crucial.
When answering reporters' questions this year, the Minister of Finance also hoped to be able to spend a small amount of money to do big things, and not spend a penny of money that should not be spent, and the director of the Shanxi Finance Department also expressed this position.
In the view of Chang Guohua, director of the Shanxi Provincial Department of Finance, "small money and stinginess" means that we must insist on not spending a penny of money that should not be spent, use limited funds on the cutting edge, break every penny into half and spend it, and give full play to the role of financial funds in "allocating thousands of pounds in four or two"; "big money and generous" means constantly optimizing and adjusting the expenditure structure, ensuring that financial resources are well planned (national) and ensuring that the people's livelihood expenditure needs are well met.
end
With regard to finances, whether it is revenue or expenditure, it is always right to strengthen management, especially in terms of expenditure, and it is necessary to strictly supervise it.
However, solving the problem of tight finances is not an overnight effort, and it is necessary to start from many aspects at the same time, open source and reduce expenditure, and explore more solutions to solve the tight finances.
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Resources
On January 5, 2024, China Times reported that "2024 fiscal expenditure is spent like this: "small money is stingy, big money is generous", and financial resources are concentrated to do big things".
Xinhua News Agency reported on April 16, 2020 that "Local Finance under the Impact of the Epidemic: Prominent Contradictions between Revenue and Expenditure, Many City and County Principal Leaders Sighed Repeatedly".
On June 5, 2023, Guangming.com reported on "Ministry of Finance: The central government's budget for transfer payments to local governments is being issued in accordance with regulations, and the mainland's financial situation is healthy and safe as a whole".