Fiscal moves to bolster recovery

China will strengthen its proactive fiscal stance and improve the quality and efficiency of fiscal policy this year, to bolster economic recovery and high-quality development, the Ministry of Finance said.

In a report on fiscal policy implementation last year unveiled on Thursday, the ministry vowed to intensify the coordination of fiscal resources. It will use a combination of policy tools like deficit, special-purpose bonds, treasury bonds, tax incentives and fiscal subsidies to expand the scale of fiscal expenditure in 2024 appropriately, thereby augmenting steam in economic recovery.

The report also emphasized tightening financial and economic discipline and intensifying oversight on accounting, to ensure that fiscal funds are used where they are needed most and to the best effect.

At a news conference on Wednesday on the sidelines of the ongoing annual session of the national legislature, Lan Fo'an, minister of finance, said work will be done to expand fiscal expenditure appropriately to ensure sufficient funding for major national strategic tasks, markedly increase government bonds to promote social investment, and continue structural tax and fee reduction policies with priority given to supporting sci-tech innovation and the development of the manufacturing sector.

China has set the target of 3 percent for this year's deficit-to-GDP ratio and the government deficit at 4.06 trillion yuan ($560 billion), up 180 billion yuan over the 2023 budget figure, according to the latest Government Work Report.

The general public budget expenditure is to reach 28.5 trillion yuan, growing 1.1 trillion yuan over last year. Special-purpose local government bonds worth 3.9 trillion yuan will be issued, up by 100 billion yuan over last year. Such bonds are usually not included in the general public budget.

The central government will keep transfer payments to local governments at an appropriate level while tilting toward regions facing economic difficulty. Governments at the provincial level should allocate more fiscal resources to lower-level governments, the ministry said.

In addition, the country plans to issue ultra-long-term special treasury bonds for several consecutive years starting this year, and proceeds from the bond issuances will fund the implementation of major national strategies as well as security capacity building in key areas. Such bonds worth 1 trillion yuan will be issued this year.

In 2023, the central government's expenditure on supporting basic research totaled 86.65 billion yuan, up 6.6 percent year-on-year.

Efforts have also been made to improve the fiscal fund management mechanism to make it increasingly align with the new national system supporting core technological breakthroughs in key areas, including fully meeting the funding demands and supporting the design and implementation of a batch of strategic and forward-looking major national sci-tech projects, the ministry said.

The ministry said it has also effectively ensured the organization and implementation of major"2030 projects" and accelerated the follow-up arrangements for major sci-tech projects, thus helping the country make important progress in key fields like artificial intelligence, quantum computing and brain science.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said although the deficit-to-GDP ratio target is set at 3 percent this year, the actual targeted deficit rate is actually around 3.8 percent with the issuance of the ultra-long-term treasury bonds worth 1 trillion yuan within the year.

"Considering other factors like the larger scale of special-purpose local government bonds to be issued this year, fiscal expenditure in 2024 will likely exceed last year's to a reasonable extent, to offset the impact of the sluggish property market on the economy," Wang said, adding the planned issuance of ultra-long-term special treasury bonds also reflects the trend of the central government taking on more debt to reduce local government debt risk.