China's fiscal policy has been launched in four directions, and countercyclical adjustment has been intensified, and a package of incremental policies has promoted a sustained economic recovery

Yangtze River Business Daily News ● Yangtze River Business Daily reporter Li Jing

The market is looking forward to a package of incremental fiscal policy boots landing.

The Ministry of Finance announced on October 12 that on the basis of accelerating the implementation of the determined policies, focusing on stabilizing growth, expanding domestic demand, and reducing risks, it will successively launch a package of targeted incremental policy measures in the near future, including supporting local governments to resolve hidden debts, supporting large state-owned commercial banks to replenish core Tier 1 capital, supporting and promoting the real estate market to stop falling and stabilizing, and increasing support and protection for key groups.

The Yangtze River Business Daily reporter noted that the meeting of the Political Bureau of the Central Committee held on September 26 proposed to "launch the incremental policy", and the subsequent National Standing Committee meeting studied and deployed the implementation of a package of incremental policies, and pointed out the direction for the follow-up supporting fiscal policies on how to exert force and strengthen. Recently, a package of incremental policies has been introduced one after another, which will help improve the fiscal revenue and expenditure situation while boosting social expectations and stabilizing the overall economic market.

The Ministry of Finance said that in the next step, it will coordinate development and security in accordance with the decisions and arrangements of the Party Central Committee, and make reasonable use of debt policy tools to promote the sustained improvement of the economy in combination with factors such as the economic situation, the needs of macroeconomic regulation and control, and the state of fiscal revenue and expenditure.

A large amount of debt swap will be increased at one time

Since the beginning of this year, the financial sector has adhered to the active fiscal policy of appropriately strengthening and improving quality and efficiency, combining the use of deficits, special bonds, ultra-long-term special treasury bonds, preferential taxes and fees, financial subsidies and other policy tools, increasing the intensity of fiscal policies, strengthening guarantees in key areas, actively preventing and defusing risks, and promoting a sustained economic recovery.

In terms of expanding the scale of fiscal expenditure, in 2024, the Ministry of Finance will arrange a fiscal deficit of 4.06 trillion yuan, an increase of 180 billion yuan from the budget at the beginning of last year, add a new special debt limit for local governments by 3.9 trillion yuan, an increase of 100 billion yuan over the previous year, issue 1 trillion yuan of ultra-long-term special treasury bonds, and make good use of the additional treasury bond funds issued in 2023, so that the annual general public budget expenditure scale will reach 28.55 trillion yuan, continuing to maintain a high expenditure intensity and providing strong support for high-quality development.

The relevant person in charge of the Ministry of Finance said that on the whole, the implementation of the active fiscal policy has achieved remarkable results, effectively guaranteed the implementation of major national strategic tasks, and promoted the overall stable and steady progress of economic operation. China's fiscal resilience is sufficient, and through comprehensive measures, it can achieve a balance between revenue and expenditure and meet the annual budget target.

According to the deployment of the meeting of the Political Bureau of the Central Committee, on the basis of accelerating the implementation of the determined policies, the Ministry of Finance will launch a package of targeted incremental policy measures in the near future focusing on stabilizing growth, expanding domestic demand, and reducing risks, including strengthening support for local governments to resolve government debt risks, increasing debt quotas on a large scale, and supporting local governments to resolve hidden debts.

Among them, the prevention and resolution of local government debt risks is a major issue related to development and security, and to sustainable fiscal development.

According to data from the Ministry of Finance, more than 2.2 trillion yuan of local government bonds will be arranged in 2023 to support local governments, especially high-risk areas, to resolve existing debt risks and clear arrears of enterprises, and local government debt risks have been alleviated as a whole. As of the end of 2023, the balance of implicit debt included in the government debt information platform nationwide has decreased by 50% compared with the 2018 map, and the debt risk is controllable.

Since 2024, the Ministry of Finance has arranged a debt limit of 1.2 trillion yuan to support local governments in resolving existing hidden debts and digesting government arrears to enterprises. In order to alleviate the pressure on local governments to reduce their debts, in addition to continuing to arrange a certain amount of bonds in the new special bond limit every year to support the resolution of existing government investment project debts, it is planned to increase the debt limit of a larger scale at one time to replace the existing implicit debts of local governments, and increase efforts to support local governments to resolve debt risks.

The Ministry of Finance will effectively supplement the comprehensive financial resources of local governments by 400 billion yuan, encourage qualified localities to revitalize idle assets, strengthen the management of state-owned capital gains, strive to increase fiscal revenues, and guide local governments to use funds such as budget stabilization and adjustment funds in accordance with laws and regulations to ensure the needs of fiscal expenditures.

The relevant person in charge of the Ministry of Finance stressed that this policy to be implemented is the largest measure to support the debt in recent years, and it is undoubtedly a policy "timely rain", which will greatly reduce the pressure of local debt, free up more resources to develop the economy, and boost the confidence of business entities.

Make good use of special bonds to acquire the stock of commercial housing

It is worth noting that the steady and healthy development of the real estate market is an important part of stabilizing the economy. In view of the incremental policy measures for the property market, local government special bonds, special funds, tax policies and other tools will be superimposed to support and promote the real estate market to stop falling and stabilize.

Regarding the consideration of the next real estate policy, the relevant person in charge of the Ministry of Finance pointed out that it will adhere to strict control of increments, optimize stocks, improve quality, and actively study and introduce policies and measures conducive to the steady development of real estate.

Special bonds are allowed to be used for land reserves. Mainly considering that there is a relatively large amount of idle and undeveloped land in various places, local governments are supported to use special bonds to recycle eligible idle stock land, and areas that are really in need can also be used for new land reserve projects. This policy can not only regulate the supply and demand relationship of the land market, reduce idle land, enhance the ability to regulate and control land supply, but also help alleviate the liquidity and debt pressure of local governments and real estate enterprises.

Support the acquisition of stock housing and optimize the supply of affordable housing. Considering that there are relatively many houses built for sale, two main support measures will be taken, including making good use of special bonds to acquire the stock of commercial housing for use as affordable housing in various places, and continuing to make good use of the subsidy funds for affordable housing projects. By optimizing and adjusting the direction of subsidy funds for affordable housing projects, appropriately reducing the scale of new construction, and supporting local governments to raise more affordable housing by digesting the stock of housing. These two measures can not only digest the stock of commercial housing and promote the balance between supply and demand in the real estate market, but also optimize the supply of affordable housing to meet the housing needs of the majority of low- and middle-income people.

Optimize and improve relevant tax policies in a timely manner. In accordance with the decision and deployment of the Party Central Committee, the Ministry of Finance is stepping up the study and clarification of the value-added tax and land value-added tax policies that are linked to the cancellation of ordinary residential and non-ordinary residential standards, and the next step will be to further study and increase support, adjust and optimize relevant tax policies, and promote the steady and healthy development of the real estate market.

The relevant person in charge of the Ministry of Finance said that promoting the stable development of real estate is a systematic project, which requires the coordinated efforts of various policies. In the implementation of the policy, we will continue to strengthen the coordination of fiscal policy and other policies, strengthen the linkage between the central and local governments, strengthen the connection between new and old policies, play a good combination of punches, and unswervingly promote the real estate market to stop falling and stabilize.

In addition, the package of incremental policies also makes arrangements for the capital replenishment of large state-owned banks and the protection of people's livelihood. This includes the issuance of special treasury bonds to support large state-owned commercial banks to replenish their core Tier 1 capital, and enhance their ability to resist risks and provide credit; We have strengthened the support and guarantee for key groups, and have issued a one-time living allowance to the needy people before the National Day, and the next step will be to increase the number of students who are in need.

The Ministry of Finance said that counter-cyclical adjustment is by no means only four aspects, and other policy tools are also being studied, such as the central government still has more room for borrowing and deficit improvement. At present, the policies that have entered the decision-making process have been initiated, and various related work is being carried out in an orderly manner.