1 China’s October revenue, expenditure figures reveal worsening structural deficit
PRC public revenue and expenditure data for Jan-Oct 2025
On Nov. 17, the PRC Ministry of Finance released China’s fiscal revenue and expenditure data for the first ten months of 2025.
National general public budget revenue
- China’s national general public budget revenue increased 0.8 percent year-on-year to reach 18.6490 trillion yuan.
- Tax revenue increased 1.7 percent to 15.3364 trillion yuan.
- Non-tax revenue decreased 3.1 percent to 3.3126 trillion yuan.
- Major tax items:
- Domestic VAT increased 4 percent to 5.8858 trillion yuan.
- Domestic consumption tax increased 2.4 percent to 1.4390 trillion yuan
- Corporate income tax increased 1.9 percent to 3.9182 trillion yuan.
- Individual income tax increased 11.5 percent to 1.3363 trillion yuan.
- Securities transaction stamp tax increased 88.1 percent to 162.9 billion yuan.
National general public budget expenditure
- China’s national general public budget expenditure increased 2 percent year-on-year to reach 22.5825 trillion yuan.
- Central government expenditure increased 6.3 percent to 3.4727 trillion yuan.
- Local government expenditure increased 1.2 percent to 19.1098 trillion yuan.
- Major expenditure categories:
- Education spending increased 4.7 percent to 3.4117 trillion yuan.
- Science and technology spending increased 5.7 percent to 784.7 billion yuan..
- Culture, tourism, sports, and media spending increased 2.5 percent to 287.8 billion yuan.
- Social security and employment spending increased 9.3 percent to 3.7742 trillion yuan.
- Healthcare spending increased 2.4 percent to 1.6877 trillion yuan.
- Energy conservation and environmental protection spending increased 7 percent to 423.5 billion yuan.
- Urban and rural community affairs spending decreased 7.3 percent to 1.5253 trillion yuan.
- Agriculture, forestry, and water spending decreased 11.7 percent to 1.7627 trillion yuan.
- Interest payments on government debt increased 4.2 percent to 1.0952 trillion yuan.
National government fund budget revenue
- China’s national government fund budget revenue decreased 2.8 percent year-on-year to 3.4473 trillion yuan.
- Central government revenue increased 1.6 percent to 361.8 billion yuan.
- Local government revenue decreased 3.3 percent to 3.0855 trillion yuan.
- State-owned land-use rights transfer revenue decreased 7.4 percent to 2.4982 trillion yuan.
National government fund budget expenditure
- China’s national government fund budget expenditure increased 15.4 percent year-on-year to 8.0892 trillion yuan.
- Central government expenditure increased 220 percent to 856.4 billion yuan.
- Local government expenditure increased 7.3 percent to 7.2328 trillion yuan.
- Land-related expenditure decreased 6.5 percent to 3.3752 trillion yuan
Overall fiscal position
- Total revenue increased 1.2 percent year-on-year to 22.0963 trillion yuan.
- Total expenditure increased 4.9 percent year-on-year to 30.6717 trillion yuan.
- Total fiscal deficit increased 20.5 percent year-on-year to 8.5754 trillion yuan.
Our take
At first glance, the official January–October 2025 fiscal data seem to show tentative signs of stabilization. For instance, the PRC’s general public budget revenue grew 0.8 percent from a year ago, and tax revenue rebounded by 1.7 percent. Yet when placed in the broader fiscal context — including the government fund budget, land sales, and interest burdens — a far more concerning picture emerges of accelerating structural decay.
Compared with the same period in 2024, the nature of China’s fiscal challenge has evolved from cyclical downward pressure to entrenched long-term imbalance. More alarmingly, fiscal strain is now reinforcing and being reinforced by a slowing real economy, the prolonged property-sector downturn, mounting local government debt, and growing reliance on central bank accommodation of de facto deficit financing. These dynamics have coalesced into a self-reinforcing vicious cycle linking fiscal deterioration, debt accumulation, and economic weakness.
1. From the revenue side, China’s fiscal position appears to have bottomed out and begun a modest recovery. A closer examination, however, reveals that the underlying structural deterioration persists. Notably, revenue growth continues to be driven almost entirely by administrative and policy measures rather than by a genuine economic recovery.
Some key observations:
i) China’s tax revenue growth remains anemic. National tax revenue increased by only 1.7 percent year-on-year in the first ten months, up from 0.7 percent in the first nine months but still well below nominal GDP growth of around 4 to 5 percent. This gap highlights the continued disconnect between reported economic activity and taxable income.
ii) Non-tax revenue contracted further, falling 3.1 percent year-on-year in the first ten months of the year (from negative 0.4 percent in the first nine months of 2025). This signals that one-off and “extractive” revenue sources — administrative fines, state-owned enterprise profit remittances, asset monetization initiatives, and even “deep-sea fishing” levies — are approaching exhaustion.
iii) Personal income tax is becoming the primary driver of incremental revenue. Against modest gains in domestic VAT (up 4.0 percent) and corporate income tax (up 1.9 percent), personal income tax recorded a sharp increase of 11.5 percent year-on-year (from up 9.7 percent in the first nine months of the year). The additional personal income tax collected in the year to date (137.6 billion yuan) accounted for fully 92 percent of the total increase in general public budget revenue (149.2 billion yuan).
The surge in personal income tax collected does not reflect improving corporate profitability or rising household incomes. Rather, it is the direct result of intensified tax enforcement under the Golden Tax Phase IV system, which has significantly strengthened scrutiny of high-income individuals, overseas income declarations, and cross-border earnings:
- Between March and June 2025, local tax bureaus issued a wave of notices to investors requiring payment of supplementary personal income tax on previously undeclared foreign investment income for 2022–2023 (effective rate of about 20 percent), with look-back periods of 3 to 5 years.
- On Nov. 12, 2025, Bloomberg reported that the PRC tax authorities have compelled international e-commerce platforms including Amazon, Temu, Shein, and AliExpress to disclose revenue data of Chinese sellers in an effort to curb tax evasion. Affected sellers face retrospective VAT (13 percent) and corporate income tax (25 percent) on under-reported sales. Given typical cross-border e-commerce net margins of only 5 to 10 percent, the financial impact on platforms could be severe, with potential look-back periods again extending 3 to 5 years. We estimate that tens of thousands of sellers are likely to be affected by the move.
iv) Securities transaction stamp tax continues to surge, but on shaky foundations. Securities transaction stamp tax revenue rose 88.1 percent year-on-year in the first ten months (compared to up 103.4 percent in the first nine months) mainly due to the 2025 “water buffalo” equity rally rather than fundamental improvement. The surge reflects increased central bank reverse-repo operations and loose liquidity in the first half of the year, declining government bond yields forcing capital into equities, and large-scale capital rotation from fixed-income into equities (“bond-equity rotation”) boosting trading volume. Such policy-induced trading booms are inherently fragile and unlikely to prove sustainable.
v) Property-related taxes and land-sale income continued their sharp decline, consistent with October’s weak real estate indicators. The steep decline in land-sale income has become so severe that China’s consolidated fiscal revenue (general public budget plus government fund budget) totaled just 22.1 trillion yuan, or lower than the 22.6 trillion yuan recorded in the same period of 2022 when the economy was still laboring under the harshest phase of “zero-COVID” lockdowns and widespread mobility restrictions.
Meanwhile, government fund expenditure (predominantly infrastructure) expanded at a double-digit pace (up 15.4 percent YoY in first ten months of 2025, up 23.9 percent in first nine months of the year) despite three consecutive years of falling land-sale revenue. The divergence underscores heavy reliance on special local government bonds to fund infrastructure and stabilize growth.
2. From the expenditure side, the Jan–Oct 2025 data reveal a marked expansion of non-discretionary items that is rapidly eroding fiscal flexibility. At face value, general public budget expenditure rose a modest 2.0 percent year-on-year — hardly eye-catching. Beneath the headline, however, the composition has shifted dramatically toward rigid, inescapable commitments.
Some key observations:
i) Social security and employment expenditure both grew by 9.3 percent, making it the fastest-growing expenditure item. Drivers for the increase include accelerating population aging, a widening national pension-fund deficit, higher unemployment and re-employment subsidies, and direct fiscal transfers to provinces where local social-security funds have already been depleted (“broken the bottom”). The surge aligns with the central government’s aggressive 2025 enforcement of mandatory social-insurance contributions across the country in a direct response to the ballooning shortfall.
ii) Healthcare expenditure rebounded sharply, increasing to 2.4 percent year-on-year after contracting 8.5 percent in the same period in 2024. The reversal reflects mounting pressure on local medical-insurance funds, deteriorating hospital finances requiring central and provincial subsidies, and cost spillovers from ongoing healthcare reforms. It is also consistent with widespread reports in 2025 of hospital closures, salary cuts for medical staff, and delayed supplier payments.
iii) Debt-interest payments crossed a critical threshold — reaching 1.0952 trillion yuan in the first ten months of the year (up 4.2 percent year-on-year), significantly outpacing overall revenue growth, and already accounting for 5.9 percent of the general public budget revenue. In both 2023 and 2024, Jan–Oct interest payments represented about 82 percent of the full-year total. Applying the same ratio implies full-year 2025 interest expenditure of roughly 1.34 trillion yuan — the first time the figure will exceed 1.3 trillion yuan. Rising debt-service costs are progressively locking up an ever-larger share of fiscal resources, leaving less room for discretionary stimulus or counter-cyclical support.
3. China’s consolidated fiscal deficit has deteriorated far more rapidly than anticipated and is now expanding at an apparently uncontrolled pace. The Jan–Oct 2025 all-inclusive deficit (encompassing the general public budget and government fund budget) reached approximately 8.6 trillion yuan, up 20.5 percent year-on-year. For context, the deficit was 5.7 trillion yuan, 7.1 trillion yuan, and 8.6 trillion yuan over the same period in 2023, 2024, and 2025.
The deficit is widening at a compound annual rate exceeding 20 percent, confirming that the fiscal gap has entered a new, more dangerous phase.
4. The underlying dynamics of China’s fiscal data now exhibit the classic hallmarks of a structural doom loop. Revenue contraction heightens debt dependence, which in turn leads to surging rigid expenditures. Climbing rigid expenditures crowd out productive investment, resulting in economic sluggishness and further revenue contraction.
At present, China’s tax revenue growth is not a sign of economic recovery but almost entirely the product of aggressive personal-income-tax enforcement and retroactive collections. The continued decline in non-tax revenue reflects the near-exhaustion of one-off administrative levies, underscoring that extractive pressure on enterprises has begun to destroy the tax base itself rather than expand it.
Against this backdrop of anaemic and policy-distorted income, rigid expenditures (social security, healthcare subsidies, and debt interest) are expanding at many times the rate of revenue, rapidly consuming all remaining fiscal space. The inevitable consequence is accelerating local-government debt risk. With market refinancing channels effectively closed for most local government financing vehicles, local authorities have little choice but to roll over maturing obligations through forced special refinancing bonds (“borrowing new to repay old”). The People’s Bank of China, in turn, has been left with no option but to absorb a growing share of net issuance through indirect channels (outright reverse repos) — a textbook process of stealth fiscal monetization.
Unless the cycle is broken through politically difficult expenditure reform or a genuine demand-led recovery, the interplay of shrinking revenues, expanding rigid expenditure outlays, and creeping debt monetization will drive the consolidated deficit toward still higher, and ultimately unsustainable, levels in 2026 and beyond. Mounting fiscal and economic risks will eventually translate into political risk for Xi Jinping and the CCP.
2 PRC rural ministry’s meeting on employment issues points to worsening economy, growing political risks
PRC promotes grooming of ‘rural artisans’
On Nov. 13, the PRC Ministry of Agriculture and Rural Affairs convened a national meeting on the “cultivation of rural artisans and the ‘two stabilizations and one prevention’ for employment of previously impoverished population” (i.e. stabilizing the scale of migrant employment among people “lifted out of poverty,” stabilizing their income, and preventing a return to poverty due to unemployment) in Chuxiong Yi Autonomous Prefecture in Yunnan Province.
When assessing the current situation, the meeting said that various regions have advanced the cultivation of “rural artisans” (鄉村工匠) and implemented employment support measures since the PRC entered the “transition period” between poverty alleviation and rural revitalization in 2021. The meeting added that the number of people lifted out of poverty who are employed as migrant workers has remained above 30 million nationwide for four consecutive years, and this is regarded as a key pillar in preventing large-scale relapse into poverty in the rural regions.
The meeting emphasized the need to fully implement the “spirit of the Fourth Plenum of the 20th Central Committee” and place the cultivation of “rural artisans” in an important position. The meeting instructs local governments to continue carrying out the special campaign to “promote employment among people lifted out of poverty who return to their hometowns” to prevent “large-scale returning home and remaining home” (規模性返鄉滯鄉; i.e. migrant workers traveling back and staying unemployed).
Backdrop
‘Rural artisan’ training program
In 2022, the PRC’s National Administration for Rural Revitalization and other departments issued a guiding opinion on “advancing the training of rural artisans.” The opinion defined “rural artisans” as a key force in rural industrial development, covering areas such as woodcarving, stone carving, bamboo weaving, and agricultural machinery operation. Local governments were tasked with training tens of thousands of “rural artisans” by 2025 to promote employment in rural areas.
Nationwide employment of ‘people lifted out of poverty’
The CCP authorities’ effort to “stabilize employment” for “previously impoverished people” nationwide refers to policies to find jobs for people from primarily rural areas (832 counties and 128,000 villages). Those people are referred to as “previously impoverished” because the CCP earlier claimed “success” in dealing with poverty:
- In 2013, Xi Jinping proposed “targeted poverty alleviation” that emphasized a “one household, one policy” (脫貧一戶一策) approach.
- Since 2016, the central government has regarded “maintaining the scale of migrant employment among people lifted out of poverty at over 30 million” as one of the hard indicators of poverty alleviation success.
- In May 2021, Xi announced that all 98.99 million rural residents living under the existing poverty standard had been lifted out of “absolute poverty” (i.e. those who earn less than 2,300 yuan per year).
Publicly available data shows that the number of people lifted out of poverty who were employed as migrant workers was about 32.95 million and 33.08 million respectively in August and October 2024.
Our take
The CCP authorities’ latest efforts to prevent many from “relapsing into poverty” or “returning home and remaining home” suggest that Beijing has serious concerns about the unemployment situation in the country.
1. China’s employment environment today has fundamentally changed as once cyclical economic fluctuations have morphed into structural contraction.
China’s migrant worker population has experienced at least three major employment shocks over the past three decades — the 1998 Asian financial crisis, the 2008 global financial crisis, and the 2015–2016 supply-side reform. Each time, coastal manufacturing and urban construction recovered within two to three years and were able to re-hire migrant workers. Also, migrant worker home return “waves” were relatively short-lived.
The current employment situation in China appears to be stable going by official figures (5.1 percent and 4.5 percent respectively for urban and migrant workers in October 2025). But a closer look at Beijing’s figures suggests that China’s present economic contraction is not temporary, but structural. For instance:
- Real estate, historically one of the biggest employers of migrant workers, has been in a prolonged decline for three consecutive years. For the first ten months of 2025, nationwide real-estate development investment fell by about 14.7 percent from a year ago, with residential investment down 10.9 percent and new housing starts down nearly 20 percent. When new starts and investment shrink for multiple years, demand for low-skill construction workers collapses. This demand cannot recover quickly and will impact the employment situation.
- The U.S.–China trade war has caused foreign firms to accelerate the relocation of supply chains outside China or even their withdrawal from the mainland. Such relocations tend to be one-off and hard to reverse, meaning the loss of many coastal manufacturing jobs is permanent.
- Chinese recruitment-platform data show that manufacturing jobs increasingly list age cutoffs like “under 35” or “under 40,” which hints at the institutionalization of age discrimination. In the platform economy, food delivery, courier, and ride-hailing companies impose hidden thresholds for older riders and drivers, further shrinking urban job opportunities for middle-aged and elderly migrant workers.
The aforementioned three factors suggest that migrant workers — particularly those over 40 — will struggle to find and keep jobs over a prolonged period. The CCP authorities recognize this in calling for the prevention of “large-scale returning home and remaining home” among migrant workers. As Chinese cities increasingly lose their capacity to absorb employment, the Ministry of Agriculture and Rural Affairs will correspondingly be less effective in addressing rural unemployment problems with the limited policy tools it can wield.
2. The PRC’s Ministry of Agriculture and Rural Affairs has limited authority and policy tools to address China’s worsening employment situation. Under the current fiscal and administrative framework, the ministry can only manage the rural side of the problem (i.e. creating public-service jobs, supporting small workshops, training “rural artisans,” etc.). But the fundamental factor determining whether migrant workers stay in cities or return home is urban employment. The ministries or organs that collectively oversee the urban employment situation are the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Human Resources and Social Security and the Ministry of Housing and Urban-Rural Development.
The Ministry of Agriculture and Rural Affairs cannot stop factories from laying off workers, has no funding to launch large-scale infrastructure projects to stimulate construction, and has no say over whether local governments can issue special-purpose bonds to fund such projects. Therefore, the ministry can only make symbolic appeals and work within its portfolio to “hold the line” on employment issues. This is a classic CCP “bottom-line defense” approach — when higher authorities provide neither substantial funding nor major policy support, the ministry can only resort to the limited measures it has available to safeguard the politically non-negotiable red line of “preventing large-scale relapse into poverty.”
The Ministry of Agriculture and Rural Affairs’ recent meeting on the “cultivation of rural artisans and the ‘two stabilizations and one prevention’ for employment” is a product of its “bottom-line defense.” Sweeping macro stimulus and proactive industrial policy that could genuinely revive urban and construction jobs remain stalled or delayed at the highest levels. In the absence of those big-ticket solutions from the top, the ministry can only “shout slogans” via the meeting to show the Xi leadership that it is “taking action” on the employment situation.
3. The “cultivation of rural artisans and the ‘two stabilizations and one prevention’ for employment” meeting is a sign that China’s economic risks are evolving into political risks for the CCP.
We elaborated above on how structural contraction of the Chinese economy is impacting the employment environment. With urban jobs increasingly vanishing for tens of millions of migrant workers and with a work environment that is becoming discriminatory towards the middle-aged, the migrant worker eco-system is at risk of breaking down. Rural stop-gap measures like the creation of public-welfare posts and village “assistance workshops” can only absorb a tiny fraction of returnees.
Migrant workers who do go back to the countryside typically lack both pension coverage and family support. The rural and urban-resident basic pension currently averages roughly 200 yuan to 220 yuan per month — far below subsistence level. Younger migrant children working in cities are usually only able to cover their own living costs and have little surplus to remit home. Over time, a growing cohort of middle-aged and elderly returnees with neither jobs nor adequate social safety nets risks turning into a socially destabilizing force.
The Xi leadership may not become aware of the worsening employment situation until it is too late. Under the current cadre evaluation system, provincial leadership teams are explicitly judged on hard targets for migrant employment scale and income levels among the population that was “lifted out of poverty.” With the economy under heavy downward pressure yet performance metrics remaining rigid, local officials face overwhelming incentives to delay, downplay, or statistically “manage” deteriorating indicators for as long as possible. Problems are therefore likely to remain hidden until they erupt suddenly in concentrated regional clusters — a pattern seen in the inflated grain-production “satellites” during the Great Leap Forward (early 1960s) and the initial cover-up of the COVID-19 outbreak in Wuhan (late 2019 to early 2020). Unless Beijing recognizes and finds effective solutions to rising unemployment in time, it faces the politically explosive scenario where millions of unemployed migrant workers decide to petition the government in their localities over their plight and social stability inevitably breaks down.
The current development where economic and social risks associated with unemployment are morphing into political risks echoes long-standing concerns voiced by Xi Jinping himself. At the Fifth Plenum of the 18th Central Committee in October 2015, Xi warned that various risks often do not appear in isolation, but tend to intertwine and form composite risks. Xi then called for preventing “small risks from becoming big risks, individual risks from becoming comprehensive risks, local risks from becoming regional or systemic risks, economic risks from becoming social and political risks, and international risks from becoming domestic risks.” Xi may have correctly identified the root causes of political risks, but appears unable to prevent them from eventually materializing as the serious deficiencies of the CCP authoritarian system trap Xi and the Party on a grim trajectory.
