On July 22, Tang Zaifu, Deputy Director of the Budget Department of the Ministry of Finance, stated at a press conference on the fiscal revenue and expenditure situation for the first half of 2026 that local general public budget revenue is only one of the sources of local finance expenditure, and a self-sufficiency rate of less than 100% is the norm. With the central finance increasing its transfer payments to local governments, local finance can achieve a balance between revenue and expenditure.

In early July, an article titled "For the first time in history! No province in China will achieve fiscal self balancing in the first quarter of 2026" attracted widespread attention on social media. The main content of the article is that according to the latest fiscal revenue and expenditure data of 28 provinces, the fiscal self-sufficiency rate (general public budget revenue/expenditure) of all provinces is below 100%. This means that no province can cover its expenditure needs with its own financial resources. Tang Zaifu's statement is aimed at this widely circulated viewpoint on the internet.

The above article also analyzed the reasons for the insufficient self-sufficiency rate, which are the slowdown in economic growth, the decline in land finance, and the rigid increase in livelihood and infrastructure expenditures, all of which together squeeze local financial resources.

Tang Zaifu explained that the commonly referred to fiscal self-sufficiency rate refers to the ratio of a region's general public budget revenue to its general public budget expenditure. According to the Chinese budget system, in addition to the local general public budget revenue, local general public budget expenditures also include transfer payments from higher authorities, funds transferred from government fund budgets and state-owned capital operating budgets, and surplus funds carried over from the previous year.

A county and district finance official told reporters that current local fiscal revenue mainly relies on channels such as taxation, non taxation, land transfer, state-owned enterprise profit payment, debt income, and transfer payments. Nowadays, the land transfer market continues to be sluggish, and the supervision of urban investment and financing is strict. The contribution of state-owned enterprise profits is limited, and only debt income (especially special bonds) continues to grow, but the increment is not enough to make up for the original funding gap.

The pressure on the expenditure side is more prominent. The above-mentioned financial personnel stated that in the "three guarantees (guaranteeing people's livelihood, guaranteeing wages, and guaranteeing transportation)" expenditure, the standards for livelihood subsidies such as wages, medical care, pension, and education have been raised year by year, and the increase in expenditure has far exceeded the past.

According to the data released by the Ministry of Finance, the expenditure on people's livelihoods significantly accelerated in June: education expenditure increased by 5.4% year-on-year, social security and employment expenditure increased by 13.2% year-on-year, with growth rates accelerating by 5.9 and 11.8 percentage points respectively compared to May.

In order to enhance local financial security, the central government has continuously increased the scale of transfer payments to local governments in recent years, while optimizing and improving the transfer payment system.

Tang Zaifu stated that in 2026, the central government will allocate 10.42 trillion yuan in transfer payments to local governments, with the fund size remaining above 10 trillion yuan for four consecutive years. A balanced transfer payment of 2.83 trillion yuan will be issued, an increase of 3.7% over the previous year; Reduce some special funds to increase financial transfer payments, select some provinces to explore pilot projects for integrating and coordinating the use of transfer payment funds, and enhance local independent financial resources and overall planning capabilities.

According to him, as of the end of June 2026, the central government has issued 9.4 trillion yuan in transfer payments to local governments, accounting for 90.3% of the budget at the beginning of 2026, and the progress of issuance has increased by 0.5 percentage points compared to the same period last year.

The local finance officials of the above-mentioned counties and districts admitted that although the scale of central transfer payments to local governments continues to expand, its growth rate is still difficult to cover the rigid growth of livelihood expenditures. Taking the special funds for people's livelihood subsidies as an example, the eastern region implements a 46% sharing mechanism between the central and local governments (40% central and 60% local). Against the backdrop of continuous tightening of local self owned financial resources, the pressure of supporting measures continues to rise.

Tang Zaifu stated at the press conference that the Ministry of Finance will continue to implement more proactive fiscal policies in the next step. On the one hand, it will promote the implementation of various established policies, work together to accelerate the progress of fund utilization, continue to support the expansion of effective investment, tap into consumption potential, strengthen people's livelihood protection, and promote the stable operation of grassroots finance; On the other hand, we will implement various measures for fiscal and tax reform, increase the coordination of fiscal resources and budgets, deepen the zero based budget reform, resolutely implement the requirements of party and government organs to live a tight life, vigorously optimize the structure of fiscal expenditures, free up more fiscal resources to promote high-quality development, enhance people's well-being, and effectively improve the efficiency of the use of fiscal funds.

(Author Du Tao)