Better fiscal positions for Chinese local governments in 2016: Report

Local governments will likely see improved fiscal positions throughout 2016 due to stabilization in the property market and macro economy, global ratings agency Moody's said Monday.

The tax and non-tax revenue of local governments rose 11 percent year on year in the first quarter (Q1) of 2016 and will continue rising in the coming quarters, according to a research report by Moody's.

Real estate markets are stabilizing in many provinces, buoying up house prices and land sales, a major source of revenue for local governments, said the report.

In Q1, 22 of 31 province-level regions on the Chinese mainland reported increases in residential and commercial real estate construction on a year-on-year basis.

The housing market started to warm up in the second half of 2015 after cooling for more than a year, boosted by government support measures such as interest rate cuts, transaction tax reductions and lower down payment requirements.

Of 70 large and medium-sized Chinese cities surveyed in April, 65 saw new home prices climb month on month, up from 62 in March, official data showed.

Faster economic growth, a result of monetary and fiscal stimulus, will also support local fiscal revenue, Moody's said.

GDP growth accelerated in 14 provincial regions in Q1, with more than half of 31 regions showing higher debt and equity credit growth, according to the report.

However, fiscal positions will vary widely among local governments, with regions heavily exposed to excess capacity industries such as steel and coal lagging behind, Moody's noted.

An industrial glut, combined with weaker property investment and foreign trade, dragged down China's economic growth to 6.7 percent in Q1, the lowest level since the global financial crisis. Endi