Debt-heavy local governments in China need new ways to raise money under a central regime keen on reducing financial risks.
have cut into local government revenue, although it's unclear exactly to what extent.
A budget category called local government funds saw revenue from land sales drop by 23.3% to 6.69 trillion yuan — a loss of about $288 billion. S&P and other analysts estimate land sales account for about a quarter of local governments' total revenue. Property-related revenue will likely remain under stress as homebuyer sentiment has yet to fully recover, said Sherry Zhao, director of international public finance, Fitch Ratings.Taxes — reduce the level of tax cuts announced during the pandemicTransfers — draw more on central government funds
"Transfers to local governments accounted for about 60% of the increase in the central government deficit," S&P analysts said in a separate report last week.
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