The fiscal divergence in China was obvious in the first half the year.

The published data shows that the growth of government revenue in the resource-rich provinces was lower than the national average of 7.1% while the developed regions have maintained a rapid growth of government revenue.

If we were to compare the absolute value of the revenue in public budgets, the gap between them is even bigger; with the latter has 4-5 times more than the former.

The research team at ANBOUND Consulting is of the view that the fiscal divergence in China has close correlation with the divergences of the local revenues and economies, the divergence in the industries as well as the divergence in the market environment, reflecting the structural problems in the economy.

The sharp drop in tax revenue could means that local governments' debts problems as well as corporate debts problems might break out and lead to systemic financial risk.