Recently, the highest level of financial supervision of the Communist Party of China (CPC) has been issuing warnings about the risk of a real estate bubble and has imposed severe regulation and control measures on real estate, starting with a strict investigation of the inflow of funds into the property market. Under the severe regulation, the balance of local and foreign currency deposits in Shenzhen decreased by about 190 billion yuan in March this year, according to official data. Despite the ongoing regulatory measures, Laoban, an independent Chinese financial commentator who specializes in data analysis, concluded that it is difficult for China to kick its dependence on real estate by combing through data on the changes in China’s fiscal revenue in recent years.
On April 22, Laoban published an article titled “The Real Estate that Can’t Be Quit – Analysis of Fiscal Revenue Data by Sector”.
The article will analyze the evolution of the fiscal contribution ratio of major industries from 2006-2019, writes Laoban.
Laoban affirms that the data source of the article is the Taxation Yearbook released by the General Administration of Taxation in previous years. A clear vein can be seen from the tax value of each industry in the Tax Yearbook in previous years. From 2006 to the present, the better the development of the industry, the higher the tax contribution value. Considering that the real estate industry contributes land grant revenue in addition to tax revenue.
In terms of trend, the real estate industry has been incredibly supportive of China’s finances, writes Laoban. in 2006, the real estate industry contributed only 21.7% of the full-caliber revenue, much lower than the 31.9% of the manufacturing industry in that year. But by 2010, the real estate industry had overtaken it, raising its share to 36.4 percent, substantially higher than the manufacturing sector’s 24.6 percent.
Laoban said that 2010 was a big turnaround year for China’s macro economy. Since that year, real estate has become the most important economic pillar of China, there is no one. Since then, China has been in a policy cycle of regulation-relaxation-regulation-relaxation, and with each cycle, the dependence on real estate has to be strengthened. 2011-2012 saw a wave of regulation and relaxation of regulation in 2013. 2015-2016 saw another wave of regulation, when the fiscal contribution of real estate did decline, to just over 30%, but In the end of 2016, the regulation was relaxed again, and an unprecedented “real estate destocking” policy was launched. These two rounds down, the Chinese people are fatigued, do not believe that China will really regulate real estate, so from 2017 onwards, into the era of universal speculation.
In this context, by 2019, the dependence of China’s finances on real estate, raised to 40.3%. And the contribution of the manufacturing industry to the fiscal in that year is only 20.0%, which is only half of that of real estate. 2020 data is not released now, but the full year of 2020 resists the epidemic, the overall decline in fiscal revenue, while the real estate industry also maintains the basic stability of volume and price, and the enthusiasm of developers to buy land has not cooled down. Therefore, the old barbarian estimated that the fiscal contribution of the real estate industry in 2020, estimated to be raised to about 45%.
Contribution of each industry to fiscal revenue
Old barbarian pointed out that the real estate industry has become a giant support sector of the Chinese economy, it is simply impossible to allow any big fluctuations in the real estate industry, the treasury simply can not afford the risk of a decline in the contribution of the real estate industry.
The old barbarian said that many other industries in China have big fluctuations compared to real estate. For example, the mining industry, the tax contribution value of low to 290 billion also, high to 690 billion also, 2019 is 581.5 billion, just like a roller coaster, following the international commodity price trend of high and low; and then for example, the financial industry, the stock market in 2015 during the artificial bull market contributed 1.85 trillion tax revenue, since then the financial industry has entered a period of severe consolidation, from the bank off-balance sheet financing to trust channel consolidation, the value of the financial sector’s tax contribution fell to $1.48 trillion in 2019. The fluctuation is normal, but when the real estate industry accounts for more than 40% of the ratio of fiscal revenue, it can not fluctuate, if it fluctuates, the pulse of the Chinese economy, the minute may occur the symptoms of myocardial infarction, which can not afford.
This is the huge problem that the Chinese economy is now facing, writes Barbara: the dependence on real estate is too high, which everyone knows; but how to quit the addiction to real estate, but no one knows. If the real estate control situation in 2016 can be sustained, perhaps now has successfully suppressed the financial contribution of real estate to less than 25%, but unfortunately at that time really can not help, have to take another puff, the result of this puff, it became completely addicted, there is no way to get rid of.
The old barbarian said, the next, imported inflation and China’s absolute dependence on real estate economy collision, what will happen to the fission, let us wait and see. This kind of thing has never happened in the history of human economy, so I guess we can witness history again soon.
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