(Bloomberg) -- The income that local authorities in China get from land sales slid in the first quarter, a sign that a housing slump is crimping government finances.
Revenue in the first three months of 2022 from selling rights to use state-owned land fell 27.4% from the same period a year ago to 1.2 trillion yuan ($187 billion), according to Ministry of Finance data released Wednesday. That drop follows the biggest sales slump on record for the first two months of 2022.
The slide poses a test for cash-strapped local authorities, who rely on land sales as a source of income yet already face pressure to bolster economic growth by cutting taxes and spending more on infrastructure.
China’s worst Covid-19 outbreak since Wuhan in early 2020 is prolonging its property slump, starving stressed developers of cash and weighing on growth. Official data released this week showed the real estate sector contracted for a third straight quarter.
The ministry also said Wednesday that fiscal spending totaled 6.36 trillion yuan in the first three months of this year, up 8.3% on-year. Fiscal revenue for the period rose 8.6% to 6.2 trillion yuan.
The first quarter data marked “a significant fiscal expansion” and suggested “front-loading supports” were provided to the economy, Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc, wrote in a note.
The broad budget deficit reached 1.25 trillion yuan in the January-March period, “far exceeding” the 31 billion yuan seen in the same period in 2021, he estimated. There will be a fiscal room of about 5.9% of gross domestic product in April-December to support growth amid Covid disruptions and rising geopolitical risks, if the budget is to be fully implemented, he added.
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