China's October Tax Revenue Continues Robust Rise

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China’s tax revenue continued its upward trend in October, marking the fourth consecutive month of growth, according to official statistics. Last month, tax collections increased by 8.6% compared to the same period last year. This follows a similar pattern of growth in September, which saw an 8.7% rise, and data from July and August indicated increases of over 5%. These gains come after declines during four of the first six months of the year.

The government did not specify the reasons behind October’s robust tax performance, but earlier explanations for September’s positive figures cited economic recovery, a reduction in producer price index declines, and a lower base comparison from the previous year.

Over the first ten months of the year, the country’s overall public budget revenue, encompassing both tax and non-tax income, increased by 0.8% to approximately 18.65 trillion yuan (around $2.62 trillion). Tax revenue specifically rose by 1.7% to about 15.34 trillion yuan, while non-tax revenue decreased by 3.1% to roughly 3.31 trillion yuan (approximately $465.3 billion).

The vibrant stock market has significantly contributed to recent tax revenue growth. The Shanghai Composite Index reached a decade-high in September, with daily average trading volumes hitting 2.3 trillion yuan in August and 2.4 trillion yuan in September. This activity bolstered tax collections from sectors related to capital markets, including securities trading stamp duties, which surged by 88% to 162.9 billion yuan (around $22.9 billion) in the first ten months compared to the previous year. Personal income tax revenue increased by 12% during the same period, totaling roughly 1.34 trillion yuan.

Signs of improvement also appeared in producer price index (PPI) figures, with October registering the first month-on-month increase of 0.1% this year. Year-over-year, the PPI decline narrowed to 2.1%, marking the third consecutive month of improvement.

However, tax revenue growth is expected to slow in the final quarter due to a high comparison base from the previous year, according to Huang Lixin, head of the Tax Science Research Institute at the State Taxation Administration.

Government fund revenue, primarily derived from land sales, declined at a sharper rate over the first ten months, mainly because of the sluggish real estate market. Revenue from government funds fell by 2.8% to approximately 345 billion yuan, with land sale income dropping 7.4% to around 249 billion yuan.

Although China has maintained an expansionary fiscal policy this year, government spending growth has shown signs of moderation. Public budget expenditure increased by 2% to about 22.58 trillion yuan in the first ten months, slower than the 3.1% rise during the first nine months.