Fiscal revenue and expenditures grew quite rapidly



During the first half of 2017, fiscal revenue reached RMB 9,430.595 billion, up by 9.8 percent year on year on a comparable basis,[1]a year-on-year acceleration of 2.7 percentage points. Fiscal expenditures rose by 15.8 percent year on year on a comparable basis to RMB 10,348.334 billion, a year-on-year acceleration of 0.7 percentage point. The fiscal deficit registered RMB 917.74 billion, as compared to a deficit of RMB 365.12 billion in the first half of 2016.

 

Tax revenue increased rapidly, whereas non-tax revenue grew slowly. During the first half of 2017, tax revenue rose by 10.9 percent year on year to RMB 8.01 trillion, which was 2.3 percentage points higher than that in the first half of 2016. The increase in tax revenue accounted for 92.9 percent of the total increase in fiscal revenue. Non-tax revenue grew by 4.4 percent year on year to RMB 1.4232 trillion. Specifically, the domestic value-added tax and the domestic consumption tax increased by 2.2 percent and 7.1 percent respectively year on year; the corporate income tax and the personal income tax went up by 15.6 percent and 18.6 percent respectively year on year; the value-added tax and the consumption tax on imported goods jumped by 34.0 percent year on year. In terms of the expenditure structure, expenses on energy savings and environmental protection, social security and employment efforts, and science and technology recorded rapid growth at 39.8 percent, 24.6 percent, and 22.7 percent respectively year on year.

 

Employment was stable and edging up

According to statistical analyses by the China Human Resources Market Information Monitoring Center on data provided by public employment agencies in 95 cities, labor demand slightly exceeded supply in Q2 and the ratio of job vacancies to job seekers was 1.11, which was 0.05 higher year on year and 0.02 lower quarter on quarter. Compared with the same period of the last year, labor demand and supply increased 256,000 and 10,000 respectively. Compared with the previous quarter, labor demand and supply declined 276,000 and 213,000 respectively. Compared with the same period of the last year and the previous quarter, labor demand increased during Q2 2017 in industries such as the leasing and business services sector, the health/social security/social welfare industry, the informationtransmission/computer services/software industry, the construction industry, and the research/technical services/geological prospecting industry; labor demand decreased in industries such as the financial sector, the irrigation/environment/public facilities industry, the accommodations and catering industry, the power/gas/water production and supply industry, and the culture/sports/entertainment industry. Demand for labor with technical or professional skills exceeded supply. Demand for labor with technical skills above a senior level or professional skills above an intermediate level increased year on year and quarter on quarterduring Q2 of 2017.

 

The balance of payments registered surpluses in both the current account and the capital account

In the first half of 2017, the current account surplus reached USD 71.2 billion, or 1.3 percent of GDP, which was within the internationally acceptable reasonable range. The non-reserve financial account registered a surplus of USD 15.6 billion, compared with a deficit of USD 225.9 billion in the same period of the last year. At end-June, total foreign reserves stood at USD 3.0568 trillion.

 

The outstanding external debt continued to grow steadily. At end-March, the total outstanding external debt in both local and foreign currencies posted USD 1.4378 trillion, which was 1.2 percent more than that at the end of 2016. Among this, the outstanding short-term external debt registered USD 916.4 billion, accounting for 64 percent of the total external debt. 

 

Sectoral analysis

(1) The real-estate sector

During the first half of 2017, housing sales continued to grow rapidly, albeit at a slower pace. Real-estate investments rebounded, but their momentum weakened. Mortgage growth moderated.

 

More cities saw rising housing prices, but the year-on-year increase abated. In June, the prices of newly-built residential housing recorded month-on-month growth in 60 out of 70 large and medium-sized cities, 2 cities less than that in March, and the average growth was basically the same as that in March; the prices of newly-built residential housing rose year on year in 57 cities, 17 cities more than in March, and the average rise was 0.7 percentage point less than that in March. The prices of used residential housing increased month on month in 60 cities, 4 cities less than that in March; and the prices of used residential housing rose year on year in 66 cities, 20 more cities than in March.   

 

The volume of housing sales grew rapidly, though at a slower pace. In the first half of 2017, the total floor area of sold units posted 750 million square meters, up by 16.1 percent year on year, which was 3.4 percentage points lower than that in Q1. Housing sales reached RMB 5.9 trillion, increasing by 21.5 percent year on year, which was 3.6 percentage points lower than that in Q1. In particular, the amount of sold floor area and sales of residential housing accounted for 86.8 percent and 83.3 percent of total housing sales respectively.

 

Real-estate investments rebounded but their momentum weakened. During the first half of 2017, nationwide real-estate investments registered RMB 5.1 trillion, up by 8.5 percent year on year, which was 0.6 percentage point lower than that in Q1. Specifically, investments in residential housing, which accounted for 67.8 percent of total real-estate investments, posted RMB 3.4 trillion, up by 10.2 percent year on year, a deceleration of 1 percentage point from Q1. The floor area of newly started real-estate projects gained 10.6 percent year on year to reach 860 million square meters, which was 1 percentage point lower than that in Q1. The floor area of real-estate projects under construction grew 3.4 percent year on year to 6.92 billion square meters, 0.3 percentage point higher than that in Q1. The floor area of completed real-estate projects posted 420 million square meters, a year-on-year increase of 5 percent and a deceleration of 10.1 percentage points from Q1. 

 

The growth of real-estate loans slowed down. At end-June, outstanding real-estate lending by major financial institutions (including foreign financial institutions) stood at RMB 29.7 trillion, up by 24.2 percent year on year, which was 2.0 percentage points lower than that at end-March. Outstanding real-estate loans accounted for 25.9 percent of total lending, up by 0.3 percentage point from end-March. Among this, outstanding personal mortgages rose by 30.8 percent year on year to RMB 20.1 trillion, which was 4.8 percentage points lower than that at end-March; outstanding housing development loans grew by 20.2 percent to RMB 5 trillion, an acceleration of 0.5 percentage point from end-March; outstanding land development loans declined to RMB 1.4 trillion, a decline of 17.9 percent year on year, which was 3.6 percentage points narrower than that at end-March. During the first half of 2017, new real-estate loans grew by RMB 100 billion year on yearto RMB 3.0 trillion, accounting for 38.1 percent of all new loans, which was 2.2 percentage points lower than that in Q1.

 

Credit support for welfare housing remained strong. At end-March, outstanding loans for welfare housing development stood at RMB 3.0 trillion, up by 36.2 percent year on year, 11.5 percentage points lower than that at end-March. During the first half of 2017, loans for welfare housing development grew by RMB 451.47 billion, accounting for 60.4 percent of all new real-estate development loans,[2] 11.7 percentage points higher than that in Q1. In addition, the pilot lending program financed by housing provident funds to support the construction of welfare housing proceeded steadily. By the end of June, loans for 373 welfare housing projects in 85 cities had been approved, a total of RMB 87.12 billion had been disbursed in accordance with the construction progress, and RMB 76.38 billion of the principal payments had been repaid.

 

(2) The commercial pension insurance industry

Commercial pension insurance is a category of insurance products and services provided by commercial insurance agencies that focuses on aging security and pension fund management. As an important part of a pension system, the accelerated development of commercial pension insurance is crucial to improving the pension system, promoting the development of an elderly-care service industry, and enhancing the quality and efficiency of the economy.

 

Thanks to over two decades’ development, China’s pension system, which mainly rests on three pillars—basic pension insurance, supplementary pension insurance provided by employers, and personal commercial pension insurance—has taken shape. The pension system has played an important role in supporting the basic living conditions of retirees, boosting economic development, and safeguarding social stability. However, in recent years as the population is aging against the background of the new normal in the economy and the social transition, the current pension system in China is facing many new challenges. In particular, while it is common that commercial pension insurance plays a leading role in overseaspension systems, the development of commercial pension insurance has been sluggish in China, and there is still some way to go before a multi-level and sustainable commercial pension insurance system is established. As a result, the current commercial pension insurance cannot serve as an efficient supplement to the first pillar—basic pension insurance.

 

Above all, the development of commercial pension insurance in China has lagged behind its international counterparts, as indicated by the following facts. In 2016 the premium revenue of China’s personal insurance (mainly annuities) that could support old age stood at RMB 860 billion, accounting for 25 percent of the total premium revenue of personal insurance. In contrast, the premium revenue of commercial pension insurance, where insurees take pensions in installments after retirement, registered RMB 150 billion, accounting for only 4.4 percent of the total, as opposed to the ratios in the US, the UK, and Canada where they all exceeded 35 percent. Second, the risk and insurance awareness of Chinese citizens is weak so they are not keen to purchase commercial pension insurance. Due to the underdeveloped insurance market and the weak insurance willingness, the participation rate of Chinese citizens in commercial pension insurance is low. The number of long-term life insurance policies per capita in China averages 0.1, which is far below the average of 1.5 in the developed countries. Third, the professional standards and service capacity of commercial insurance agencies still need to be improved. Personalized and differentiated products are rare and product homogeneity is serious, which leads to inadequate and narrow coverage of products and services. In addition, policy support is insufficient and there is much room for improvement. For example, preferential tax policies for commercial pension insurance should be further improved so as to provide strong incentives for the development of the third pillar of aging security. 

 

In order to cope with the aging population and to meet the increasing demand for pension security, efforts should be made to fully tap the role of commercial pension insurance to strengthen the pension system. The State Council recently issued the Guiding Opinions on Accelerating the Development of Commercial Pension Insurance, setting the goals for the development of commercial pension insurance by 2020 and making arrangements to promote the development of commercial pension insurance. During next stage, efforts should be made to accelerate the development of commercial pension insurance in the following respects.

 

First, innovations of products and services in commercial pension insurance will be promoted. Support will be provided for commercial insurance agencies to develop diverse commercial pension insurance products, to foster commercial pension annuities that are sound and well-warranted and that cater to the demand for long-term or life-long claims, and to actively participate in the pilot program of income tax deferred commercial pension insurance. Meanwhile, commercial insurance agencies will be encouraged to provide products and services such as corporate (vocational) annuity plans, to deliver a variety of aging security options for employees in innovative enterprises and start-ups, and to duly participate in the investment and management of basic pension funds and the national social security fund according to the laws and regulations.

 

Second, steps will be taken to promote the healthy development of the elderly-care service industry. Commercial insurance agencies will be encouraged to invest in the elderly care service industry, to provide risk prevention services for elderly-care institutions, and to formulate and improve comprehensive aging security plans for the elderly.

 

Third, work will be done to ensure safe and sound operations of commercial pension insurance funds. In line with the principle of risk controllability and business sustainability, the advantages of commercial pension insurance funds as long-term investors will be tapped so that they can participate in the implementation of major national strategies in a steady and orderly manner. Furthermore, coordinated development between commercial pension funds and the capital market will be enhanced and commercial pension funds will be allowed to make overseas investments in a prudent manner.

 

Fourth, capacity building will be strengthened, service quality will be upgraded, professional institutions will be cultivated, and supervision and management will be stepped up so as to maintain the value of the commercial pension insurance funds, to realize reasonable returns, and to reinforce security provided by the insurance.

 


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