China has tightened tax incentives and raised preferential rates in several sectors as part of a broader push to generate more government funds, after experiencing a sharp drop in fiscal revenues amid an economic slowdown and persistent deflationary pressure.

The Ministry of Finance and State Taxation Administration released a slew of detailed provisions for the country’s new value-added tax (VAT) law over the weekend, which included raising the rate applied to telecommunication services from 6 per cent to 9 per cent.

China’s three state-owned telecoms giants – China Mobile, China Unicom and China Telecom – all issued announcements on Sunday confirming that the adjustment would have an impact on their revenues and profits.

The Chinese government’s on-budget fiscal revenue – which refers to income raised from taxes, fines and fees – declined by 1.7 per cent in 2025 compared with the previous year, according to data from the finance ministry.

It was the first such contraction China had recorded since 2020 – when the economy was disrupted by lengthy Covid-19 pandemic lockdowns – and fell short of the government’s 0.1 per cent growth target.