高盛-中国观察-财政偏弱预期未来债券发量0722

22July2024|9:11PMHKT

China:FiscalweaknesslingeredinJune;expectinggovernmentbondissuancetopickupinQ3

Bottomline:

Chna’son-budgetfiscaevenuegowthemanedsubduednJune,weghedon

aganbyfangtaxevenuegowth(especayVATandcopoatencometax),

athoughnon-taxevenuegowthmpovedfuthe.FscaexpendtuegowthfenJune,despteaeboundnnfastuctuenvestmentgowth.Landsaesevenue

contactedmoeshapynJunevs.pevousmonths,andweexpectttoface

poongeddownwadpessuenthecomngquates.Ths,togethewththe

ongongLGFVdeeveagngandcontnuedant-couptonnvestgatons,mayhaveweakenedtheeffectvenessoftheongongfiscaeasng.Accodngy,ou

popetay“augmentedfiscadefict”(AFD)metcemanedageystabenJune.WecontnuetoexpectgovenmentbondssuancetonceasenotabynQ3fom

Q2,whchshoudsuppotfiscaspendngandnfastuctuenvestmenttosomedegee.

Keynumbers:

Fscaevenuegowth:-2.6%yoynJune(-0.9%momsanon-annuazed,estmatedbyGS),vs.-3.2%yoynMay(-1.9%momsanon-annuazed).

Fscaexpendtuegowth:-3.0%yoynJune(-4.9%momsanon-annuazed),vs.+2.6%yoynMay(-3.1%momsanon-annuazed).

_

Landsaesevenuegowth:-35.3%yoynJune(-14.8%momsanon-annuazed),vs.-27.4%yoynMay(-8.4%momsanon-annuazed).

Popety-eatedtaxevenuegowth:-2.1%yoynJune,vs.-0.9%yoynMay.

LshengWang

+852-3966-4004|

lishengwang@gscom

GoldmanSachs(Asia)C

HuShan

+852-2978-6634|huishan@gscomGoldmanSachs(Asia)C

XnquanChen

+852-2978-248|

xinquanchen@gscom

GoldmanSachs(Asia)C

YutngYang

+852-2978-7283|

yuingyyang@gscom

GoldmanSachs(Asia)C

AndrewTton

+852-2978-802|andrewilon@gscomGoldmanSachs(Asia)C

Effectvefiscadefictato(afteGSseasonaadjustment):-4.3%ofGDP3mmaand-4.4%12mmanJune,vs.-4.6%ofGDP3mmaand-4.5%12mmanMay.

Augmentedfiscadefict(AFD)ato:-9.1%ofGDP3mmaand-9.4%12mmanJune,vs.-8.6%ofGDP3mmaand-9.6%12mmanMay.

Mainpoints:

1.Onthebudget,fiscaevenuegowthemanedsubduedat-2.6%yoynJune(vs.

1OurmeasureofaugmentedfiscadefictsasumofeffectveonbudgetfiscadefictandoffbudgetfiscadefictWeestmatetheoffbudgetspendngbymajorchannesthatfinancequasfiscaactvteswhchncudesnewocagovernmentspecabonds(GSB)andsaesrevenueocagovernment

financngvehce(GFV)bondspocybankssupportshadowbankngoansetc

Investosshoudconsdethsepotasonyasngefactonmakngthenvestmentdecson.FoRegAC

cetficatonandothempotantdscosues,seetheDscosueAppendx,ogoto/eseach/hedge.htm.

GoldmanSachsChna

-3.2%yoynMay;Exhbt1),amdweake-than-expectedQ2GDPandJuneetasaesdata.BasedontheMOFdata,weestmatethatadjustngfotheunfavoabebase

effectseatedtomoetaxpaymentsfomSMEsneay2023(foowngthe2022taxdefeas),fiscaevenuedecned1.0%yoynJune,vs.a2.0%yoygannMay.Bytaxvs.non-taxevenuebeakdown,taxevenuegowthfefutheto-8.5%yoynJune

fom-6.1%yoynMay,edmanybysowegowthnVATandcopoatencometaxevenue.Incontast,non-taxevenuegowthosefutheto+16.4%yoynJunefom+15.8%yoynMay,patyeflectngnceasedfeesandfinesnsomeegons.

2.Fscaexpendtuegowthfeto-3.0%yoynJunefom+2.6%yoynMay,edmanybysowespendnggowthonagcutue&wateconsevancyaffas,

tanspotaton,heathcae,andenegysavng&envonmentapotecton.Basedonouestmates,gowthnnfastuctue-eatedfiscaspendngdoppedsgnficantyto-2.0%yoynJunefom+5.3%yoynMay,2suggestngtheJuneeboundnnfastuctue

nvestment(+8.0%yoynJunefom+3.7%yoynMay)mghthavebeensuppotedbyoff-budgetfinancngchannes.

3.Regadngpopety-eatedgovenmentevenue,offthebudget,yea-on-yea

contactonnandsaesevenuewdenedfutheto-35.3%nJunefom-27.4%nMay(Exhbt2),andgowthnon-budgetevenuefompopety-eatedtaxesmodeatedto-2.1%yoynJunefom-0.9%yoynMay.3Combnngthesetwotems,weestmate

yea-on-yeagowthngovenmentevenuedectyfomthepopetysectofefutheto-24.8%nJunefom-20.0%nMay.Weexpectandsaesevenuetofacepoongeddownwadpessuenthecomngquates/yeas,aspopetydeveopefundng

condtonsemanstetched,andtheongongpocysuppotmaynotbenefitand

puchasesandnewstats.Ths,togethewththeongongLGFVdeeveagngand

contnuedant-couptonnvestgatons,mayhaveweakenedtheeffectvenessofthe

ongongfiscaeasng.AccodngtoNBS,gowthnfundsavaabefopopetydeveopesemaneddepessedat-15.2%yoynJune(vs.-21.8%yoynMay).

_

4.Combnngmajoon-andoff-budgetchannes,weestmateoupopetay

“augmentedfiscadefict”(AFD)metcemanedageystabenJune—wdenng

sghtyona3-monthmovngaveagebassbutnaowngsghtyona12-monthmovngaveagebass(Exhbt3).Webeevethatstongexpotsandthedfficutesnfindng

sufficentpojectswthdecentetunshavesowedthepaceofgovenmentbond

ssuanceeaythsyea.Foecentmonths,adveseweathecondtonsnSouthChnamayhaveconstanedsomeconstuctonactvtyandasothepaceoffiscaspendng.

Howeve,gventheageamountofgovenmentbondssuancequotaavaabefothe

emandeofthsyeaandthenceasedpojectppenes,4weexpectgovenmentbondssuancetonceasenotabynQ3fomQ2(Exhbt4),whchshoudsuppotfisca

spendngandnfastuctuenvestmenttosomedegee.

2Wedefinenfrastructurereatedfiscaspendngasfiscaspendngonenergysavng&envronmentprotectonagrcuture&waterconservancytransportatonandurban&ruracommuntyaffars

3Propertyreatedtaxesncudepropertytaxdeedtaxandapprecatontaxurbanandtownandusetaxandfarmandoccupatontax

4NatonaDeveopmentandReformCommsson(NDRC)andMOFhaveapprovedRMB59tnworthprojectstobefundedbyGSBasofateAprpavngthewayforfasterGSBssuancenH2

22Juy20242

GoldmanSachsChna

Exhibit1:On-budgetfiscalrevenuegrowthremainedsubduedinJune,whilefiscalexpendituregrowthslowed

Exhibit2:Year-on-yearcontractioninlandsalesrevenuewidenedfurtherinJune

%yoy%yoy

6060

Fiscalrevenueandexpendituregrowth

50Fiscalrevenue50

Fiscalrevenueadjustedforbaseeffects

4040

Fiscalexpenditure

3030

2020

1010

00

-10-10

-20-20

-30-30

-40-40

Jan-19Jan-20Jan-21Jan-22Jan-23Jan-24

%yoy

80

60

40

20

0

-20

-40

-60

Jan-19

%yoy

80

Off-budgetlandsalesrevenuevs.on-budgetproperty-relatedtaxrevenue

60

40

20

0

-20

Landsalesrevenuegrowth

-40

Property-relatedtaxrevenuegrowth

Govtrevenuefromthepropertysector

-60

Jan-20Jan-21Jan-22Jan-23Jan-24

SourceWND,DatacompedbyGodmanSachsGobanvestmentResearchSourceWND,DatacompedbyGodmanSachsGobanvestmentResearch

Exhibit3:AugmentedfiscaldeficitremainedlargelystableinJuneaftermovingaverageadjustments

PercentofGDP

5

PercentofGDP

5

0

0

-5

-5

-10

-10

-15

Augmentedfiscaldeficit-3mmaAugmentedfiscaldeficit-12mmaEffectivefiscaldeficit-3mma

Effectivefiscaldeficit-12mma

-15

-20

-20

_

09101112131415161718192021222324

SourceGodmanSachsGobanvestmentResearch,CEC,WND

22Juy20243

GoldmanSachsChna

Exhibit4:GovernmentbondnetissuanceissettoaccelerateinQ3

RMBtn2.0

Monthlygovtbondnetissuancebybondtype

CentralgovtgeneralbondCentralgovtspecialbondLocalgovtgeneralbondLocalgovtspecialbond

1.0

0.5

0.0

-0.5

20202021202220232024

RMBtn2.0

GSe

-0.5

0.5

0.0

1.5

1.5

1.0

SourceWnd,CEC,GodmanSachsGobanvestmentResearch

_

22Juy20244

GoldmanSachsChna

DisclosureAppendix

RegAC

WeshengWangHuShanXnquanChenYutngYangandAndrewTtonherebycertfythataofthevewsexpressednthsreportaccurateyreflectourpersonavewswhchhavenotbeennfluencedbyconsderatonsofthefirm’sbusnessorcentreatonshps

UnessotherwsestatedthendvduasstedonthecoverpageofthsreportareanaystsnGodmanSachs’GobanvestmentResearchdvson

Disclosures

Regulatorydisclosures

DisclosuresrequiredbyUnitedStateslawsandregulations

Seecompanyspecficreguatorydscosuresaboveforanyofthefoowngdscosuresrequredastocompanesreferredtonthsreportmanagerorcomanagernapendngtransacton;1%orotherownershp;compensatonforcertanservces;typesofcentreatonshps;managed/comanagedpubcofferngsnprorperods;drectorshps;forequtysecurtesmarketmakngand/orspecastroeGodmanSachstradesormaytradeasa

prncpandebtsecurtes(ornreateddervatves)ofssuersdscussednthsreport

ThefoowngareaddtonarequreddscosuresOwnershipandmaterialconflictsofinterest:GodmanSachspocyprohbtstsanaystsprofessonasreportngtoanaystsandmembersoftherhousehodsfromownngsecurtesofanycompanyntheanayst’sareaofcoverage

Analystcompensation:AnaystsarepadnpartbasedontheprofitabtyofGodmanSachswhchncudesnvestmentbankngrevenuesAnalyst

asofficerordirector:GodmanSachspocygenerayprohbtstsanaystspersonsreportngtoanaystsormembersoftherhousehodsfromservngasanofficerdrectororadvsorofanycompanyntheanayst’sareaofcoverageNon-U.S.Analysts:NonUSanaystsmaynotbe

assocatedpersonsofGodmanSachs&CoCandthereforemaynotbesubjecttoFNRARue2241orFNRARue2242restrctonsoncommuncatonswthsubjectcompanypubcappearancesandtradngsecurteshedbytheanaysts

AdditionaldisclosuresrequiredunderthelawsandregulationsofjurisdictionsotherthantheUnitedStates

ThefoowngdscosuresarethoserequredbythejursdctonndcatedexcepttotheextentareadymadeabovepursuanttoUntedStatesawsandreguatonsAustralia:GodmanSachsAustraaPtytdandtsaffiatesarenotauthorseddeposttakngnsttutons(asthattermsdefinednthe

BankngAct1959(Cth))nAustraaanddonotprovdebankngservcesnorcarryonabankngbusnessnAustraaThsresearchandanyaccesstotsntendedonyfor“whoesaecents”wthnthemeanngoftheAustraanCorporatonsActunessotherwseagreedbyGodmanSachsn

producngresearchreportsmembersofGobanvestmentResearchofGodmanSachsAustraamayattendstevstsandothermeetngshostedbythecompanesandotherentteswhcharethesubjectoftsresearchreportsnsomenstancesthecostsofsuchstevstsormeetngsmaybemetnpartornwhoebythessuersconcernedfGodmanSachsAustraaconsderstsapproprateandreasonabenthespecficcrcumstancesreatngtothestevstormeetngTotheextentthatthecontentsofthsdocumentcontansanyfinancaproductadvcetsgeneraadvceonyandhas

beenpreparedbyGodmanSachswthouttakngntoaccountacent’sobjectvesfinancastuatonorneedsAcentshoudbeforeactngonany

suchadvceconsdertheappropratenessoftheadvcehavngregardtothecent’sownobjectvesfinancastuatonandneedsAcopyofcertan

GodmanSachsAustraaandNewZeaanddscosureofnterestsandacopyofGodmanSachs’AustraanSeSdeResearchndependencePocy

Statementareavaabeathttps//wwwgodmansachscom/dscosures/austraanewzeaand/ndexhtmBrazil:DscosurenformatonnreatontoCVMResoutonn20savaabeathttps//wwwgscom/wordwde/braz/area/gr/ndexhtmWhereappcabetheBrazregsteredanaystprmaryresponsbeforthecontentofthsresearchreportasdefinednArtce20ofCVMResoutonn20sthefirstauthornamedatthebegnnngofthsreportunessndcatedotherwseattheendofthetextCanada:ThsnformatonsbengprovdedtoyoufornformatonpurposesonyandsnotandundernocrcumstancesshoudbeconstruedasanadvertsementofferngorsoctatonbyGodmanSachs&CoCforpurchasersof

securtesnCanadatotradenanyCanadansecurtyGodmanSachs&CoCsnotregsteredasadeaernanyjursdctonnCanadaunder

appcabeCanadansecurtesawsandgeneraysnotpermttedtotradenCanadansecurtesandmaybeprohbtedfromsengcertansecurtesandproductsncertanjursdctonsnCanadafyouwshtotradenanyCanadansecurtesorotherproductsnCanadapeasecontactGodman

SachsCanadancanaffiateofTheGodmanSachsGroupncoranotherregsteredCanadandeaerHongKong:Furthernformatononthe

securtesofcoveredcompanesreferredtonthsresearchmaybeobtanedonrequestfromGodmanSachs(Asa)CIndia:Furthernformaton

_

onthesubjectcompanyorcompanesreferredtonthsresearchmaybeobtanedfromGodmanSachs(nda)SecurtesPrvatemtedResearch

AnaystSEBRegstratonNumberNH000001493951ARatonaHouseAppasahebMaratheMargPrabhadevMumba400025ndaCorporatedenttyNumberU74140MH2006FTC160634Phone+912266169000Fax+912266169001GodmanSachsmaybeneficayown1%ormoreofthesecurtes(assuchtermsdefinedncause2(h)thendanSecurtesContracts(Reguaton)Act1956)ofthesubjectcompanyorcompanes

referredtonthsresearchreportnvestmentnsecurtesmarketaresubjecttomarketrsksReadathereateddocumentscarefuybefore

nvestngRegstratongrantedbySEBandcertficatonfromNSMnnowayguaranteeperformanceofthentermedaryorprovdeanyassuranceofreturnstonvestorsGodmanSachs(nda)SecurtesPrvatemtednvestorGrevanceEmandacentsupport@gscomCompanceOfficerAnRajputTe+912266169000Emaanmrajput@gscomJapan:SeebeowKorea:Thsresearchandanyaccesstotsntendedonyfor

“professonanvestors”wthnthemeanngoftheFnancaServcesandCaptaMarketsActunessotherwseagreedbyGodmanSachsFurther

nformatononthesubjectcompanyorcompanesreferredtonthsresearchmaybeobtanedfromGodmanSachs(Asa)CSeouBranchNew

Zealand:GodmanSachsNewZeaandmtedandtsaffiatesarenether“regsteredbanks”nor“deposttakers”(asdefinedntheReserveBankofNewZeaandAct1989)nNewZeaandThsresearchandanyaccesstotsntendedfor“whoesaecents”(asdefinedntheFnancaAdvsersAct2008)unessotherwseagreedbyGodmanSachsAcopyofcertanGodmanSachsAustraaandNewZeaanddscosureofnterestssavaabeat

https//wwwgodmansachscom/dscosures/austraanewzeaand/ndexhtmRussia:ResearchreportsdstrbutedntheRussanFederatonarenotadvertsngasdefinedntheRussanegsatonbutarenformatonandanayssnothavngproductpromotonasthermanpurposeanddonot

provdeapprasawthnthemeanngoftheRussanegsatononapprasaactvtyResearchreportsdonotconsttuteapersonazednvestment

recommendatonasdefinednRussanawsandreguatonsarenotaddressedtoaspecficcentandarepreparedwthoutanayzngthefinanca

crcumstancesnvestmentprofiesorrskprofiesofcentsGodmanSachsassumesnoresponsbtyforanynvestmentdecsonsthatmaybetakenbyacentoranyotherpersonbasedonthsresearchreportSingapore:GodmanSachs(Sngapore)Pte(CompanyNumber198602165W)whchsreguatedbytheMonetaryAuthortyofSngaporeacceptsegaresponsbtyforthsresearchandshoudbecontactedwthrespecttoanymatters

arsngfromornconnectonwththsresearchTaiwan:ThsmaterasforreferenceonyandmustnotbereprntedwthoutpermssonnvestorsshoudcarefuyconsdertherownnvestmentrsknvestmentresutsaretheresponsbtyofthendvduanvestorUnitedKingdom:PersonswhowoudbecategorzedasretacentsntheUntedKngdomassuchtermsdefinedntheruesoftheFnancaConductAuthortyshoudreadths

researchnconjunctonwthprorGodmanSachsresearchonthecoveredcompanesreferredtoherenandshoudrefertotherskwarnngsthathavebeensenttothembyGodmanSachsnternatonaAcopyoftheserskswarnngsandagossaryofcertanfinancatermsusednthsreportare

avaabefromGodmanSachsnternatonaonrequest

EuropeanUnionandUnitedKingdom:DscosurenformatonnreatontoArtce6(2)oftheEuropeanCommssonDeegatedReguaton(EU)(2016/958)suppementngReguaton(EU)No596/2014oftheEuropeanParamentandoftheCounc(ncudngasthatDeegatedReguatons

22Juy20245

GoldmanSachsChna

mpementedntoUntedKngdomdomestcawandreguatonfoowngtheUntedKngdom’sdeparturefromtheEuropeanUnonandtheEuropeanEconomcArea)wthregardtoreguatorytechncastandardsforthetechncaarrangementsforobjectvepresentatonofnvestment

recommendatonsorothernformatonrecommendngorsuggestngannvestmentstrategyandfordscosureofpartcuarnterestsorndcatonsofconflctsofnterestsavaabeathttps//wwwgscom/dscosures/europeanpocyhtmwhchstatestheEuropeanPocyforManagngConflctsof

nterestnConnectonwthnvestmentResearch

Japan:GodmanSachsJapanCotdsaFnancanstrumentDeaerregsteredwththeKantoFnancaBureauunderregstratonnumberKnsho69andamemberofJapanSecurtesDeaersAssocatonFnancaFuturesAssocatonofJapanTypeFnancanstrumentsFrmsAssocatonThenvestmentTrustsAssocatonJapanandJapannvestmentAdvsersAssocatonSaesandpurchaseofequtesaresubjecttocommsson

predetermnedwthcentspusconsumptontaxSeecompanyspecficdscosuresastoanyappcabedscosuresrequredbyJapanesestockexchangestheJapaneseSecurtesDeaersAssocatonortheJapaneseSecurtesFnanceCompany

Globalproduct;distributingentities

GodmanSachsGobanvestmentResearchproducesanddstrbutesresearchproductsforcentsofGodmanSachsonagobabassAnaystsbasednGodmanSachsofficesaroundthewordproduceresearchonndustresandcompanesandresearchonmacroeconomcscurrencescommodtesandportfoostrategyThsresearchsdssemnatednAustraabyGodmanSachsAustraaPtytd(ABN21006797897);nBrazbyGodmanSachsdoBrasCorretoradeTítuoseVaoresMobárosSA;PubcCommuncatonChanneGodmanSachsBraz08007275764and/or

contatogodmanbras@gscomAvaabeWeekdays(excepthodays)from9amto6pmCanadeComuncaçãocomoPúbcoGodmanSachsBras08007275764e/oucontatogodmanbras@gscomHorárodefunconamentosegundaferaàsextafera(excetoferados)das9hàs18h;nCanada

byGodmanSachs&CoC;nHongKongbyGodmanSachs(Asa)C;nndabyGodmanSachs(nda)SecurtesPrvatetd;nJapanby

GodmanSachsJapanCotd;ntheRepubcofKoreabyGodmanSachs(Asa)CSeouBranch;nNewZeaandbyGodmanSachsNew

Zeaandmted;nRussabyOOOGodmanSachs;nSngaporebyGodmanSachs(Sngapore)Pte(CompanyNumber198602165W);andnthe

UntedStatesofAmercabyGodmanSachs&CoCGodmanSachsnternatonahasapprovedthsresearchnconnectonwthtsdstrbutonntheUntedKngdom

GodmanSachsnternatona(“GS”)authorsedbythePrudentaReguatonAuthorty(“PRA”)andreguatedbytheFnancaConductAuthorty(“FCA”)andthePRAhasapprovedthsresearchnconnectonwthtsdstrbutonntheUntedKngdom

EuropeanEconomicArea:GSauthorsedbythePRAandreguatedbytheFCAandthePRAdssemnatesresearchnthefoowngjursdctonswthntheEuropeanEconomcAreatheGrandDuchyofuxembourgtaytheKngdomofBegumtheKngdomofDenmarktheKngdomof

NorwaytheRepubcofFnandandtheRepubcofreand;GSSuccursaedePars(Parsbranch)whchsauthorsedbytheFrenchAutortéde

contrôeprudenteetderesouton(“ACPR”)andreguatedbytheAutortédecontrôeprudenteetderesoutonandtheAutortédesmarches

financers(“AMF”)dssemnatesresearchnFrance;GSSucursaenEspaña(Madrdbranch)authorzednSpanbytheComsónNaconade

MercadodeVaoresdssemnatesresearchntheKngdomofSpan;GSSwedenBankfia(Stockhombranch)sauthorzedbytheSFSAasa“thrdcountrybranch”naccordancewthChapter4Secton4oftheSwedshSecurtesandMarketAct(Swag(2007528)omvärdepappersmarknaden)

dssemnatesresearchntheKngdomofSweden;GodmanSachsBankEuropeSE(“GSBE”)sacredtnsttutonncorporatednGermanyandwthntheSngeSupervsoryMechansmsubjecttodrectprudentasupervsonbytheEuropeanCentraBankandnotherrespectssupervsedbyGermanFederaFnancaSupervsoryAuthorty(BundesanstatfürFnanzdenstestungsaufschtBaFn)andDeutscheBundesbankanddssemnatesresearchntheFederaRepubcofGermanyandthosejursdctonswthntheEuropeanEconomcAreawhereGSsnotauthorsedtodssemnateresearch

andaddtonayGSBECopenhagenBranchfiaafGSBETyskandsupervsedbytheDanshFnancaAuthortydssemnatesresearchntheKngdomofDenmark;GSBESucursaenEspaña(Madrdbranch)subject(toamtedextent)toocasupervsonbytheBankofSpandssemnatesresearchntheKngdomofSpan;GSBESuccursaetaa(Manbranch)tothereevantappcabeextentsubjecttoocasupervsonbytheBankoftay(Bancad’taa)andthetaanCompanesandExchangeCommsson(CommssoneNazonaepereSocetàeaBorsa“Consob”)dssemnatesresearchn

tay;GSBESuccursaedePars(Parsbranch)supervsedbytheAMFandbytheACPRdssemnatesresearchnFrance;andGSBESweden

Bankfia(Stockhombranch)toamtedextentsubjecttoocasupervsonbytheSwedshFnancaSupervsoryAuthorty(Fnansnpektonen)dssemnatesresearchntheKngdomofSweden

Generaldisclosures

ThsresearchsforourcentsonyOtherthandscosuresreatngtoGodmanSachsthsresearchsbasedoncurrentpubcnformatonthatwe

consderreabebutwedonotrepresenttsaccurateorcompeteandtshoudnotbereedonassuchThenfor