China’s Local Governments Grow More Dependent on Beijing as Revenue Shortfalls Deepen

China’s local governments are becoming increasingly dependent on financial support from Beijing as tax revenues and land-sale income fail to keep pace with spending obligations, according to the regime’s official data.

Budget figures released by finance departments across mainland China show that 28 provincial-level regions—including Beijing, Shanghai, Guangdong, and other major economic centers—were unable to generate enough revenue through their general public budgets to cover expenditures during the first quarter of 2026.

The data underscore mounting fiscal strains that have emerged after years of slowing economic growth, a prolonged property-market downturn, and shrinking land-sale revenues, which for decades served as a critical funding source for local governments.

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According to figures released by China’s Ministry of Finance in April, nationwide general public budget revenue reached 6.16 trillion yuan ($860 billion) during the first quarter, up 2.4 percent from a year earlier. Government spending totaled 7.47 trillion yuan, up 2.6 percent.

At the local government level, the imbalance was more pronounced. Local governments collected 3.66 trillion yuan in budget revenue while spending 6.56 trillion yuan, meaning locally generated revenue covered only about 55.9 percent of expenditures.

Even Wealthy Provinces Fall Short

Among the 28 provincial-level jurisdictions reviewed, Zhejiang recorded the highest fiscal self-sufficiency ratio at 96 percent, followed by Shanghai at 90 percent and Tianjin at 89 percent. Jiangsu, Fujian, Shandong, Guangdong, and Beijing all ranked below 85 percent.

Fiscal self-sufficiency rates were substantially lower in many inland and border regions. Gansu’s ratio stood at 22 percent, while Tibet’s was just 14 percent.

The figures indicate that even some of China’s wealthiest provinces and municipalities were unable to fully finance their spending through locally generated revenue.

Several China-based analysts spoke to The Epoch Times on condition of anonymity out of fear of reprisal.

A Chinese finance scholar said that the fiscal self-sufficiency ratio measures a local government’s ability to fund expenditures using its own revenue sources.

“The lower the ratio, the more dependent a region is on transfers from higher levels of government,” he told The Epoch Times.

The scholar said the fact that all 28 regions posted self-sufficiency ratios below 100 percent suggests deeper structural problems within China’s fiscal system.

“This shows that local governments’ tax and non-tax revenues—including fines and administrative fees—are no longer sufficient to cover ordinary public expenditures,” he said.

“In the past, they could make up the difference through land sales. Now that source is disappearing.”

The scholar noted that Zhejiang and Shanghai remain among China’s strongest regional economies and have long benefited from favorable national policies.

“If even these regions cannot achieve fiscal self-sufficiency, it shows local revenues are no longer keeping up with spending,” he said.

Land Revenue Continues to Deteriorate

The financial pressure has been intensified by a continuing decline in land-related income.

Ministry of Finance data show that government-managed fund budget revenue—a category heavily tied to land transactions—fell 16.2 percent year-over-year in the first quarter. Local government fund revenue declined 19.1 percent.

Revenue from state-owned land-use rights sales, one of the most important sources of local-government funding during China’s property boom, dropped 24.4 percent in the first quarter.

The decline accelerated through April. From January through April, land-sale revenue totaled 680.1 billion yuan ($100.5 billion), down 27.2 percent from a year earlier.

Xu, a professor at Jiangsu University in China, told The Epoch Times land sales had been the most flexible source of local-government revenue for more than two decades.

“Local governments relied on selling land, borrowing money, and expanding cities to keep finances running,” he said. “That model has reached its limits.”

According to Xu, local governments used land-sale income to finance urban expansion projects, including subway systems and large-scale infrastructure development. As property developers reduce land purchases and home sales remain weak, that source of revenue has deteriorated.

“When developers stop buying land and homes stop selling, fiscal pressure becomes very difficult to resolve,” he said.

Xu also pointed to China’s 1994 tax-sharing reform, which shifted many major revenue sources to the central government while leaving local authorities responsible for a large share of spending on education, healthcare, pensions, infrastructure, and grassroots administration.

He argued that rapid economic growth following China’s entry into the World Trade Organization helped mask these structural imbalances for years, particularly during the country’s real-estate boom.

Growing Reliance on Beijing

In recent years, Beijing has increasingly relied on transfer payments, special-purpose bonds, refinancing bonds, and debt-restructuring programs to support local governments.

Another Chinese scholar told The Epoch Times the trend could further strengthen central government control over local authorities.

“If the central [government] provides the money and arranges debt relief, local governments will have less independent fiscal capacity,” he said. “That inevitably increases Beijing’s influence.”

The scholar also questioned the accuracy of official fiscal statistics, arguing that actual financial conditions may be worse than publicly reported.

“I don’t believe the official figures fully reflect reality,” he said. “The real situation could be more severe.”

He pointed to ongoing capital outflows by middle-class Chinese households as a sign of growing concerns about the country’s economic outlook.

“The fact that many people continue moving money overseas tells you something about confidence in the future,” the scholar said.

Wang Xin contributed to this report.