China's new budget book reveals fiscal priorities for 2024

BEIJING - China's central and local budgets for 2024 approved by the country's top legislature were released on Wednesday, detailing a series of measures and policy instruments to ramp up economic recovery while advancing social improvement.

The issuance of ultra-long special treasury bonds involving 1 trillion yuan ($140.9 billion) this year has drawn wide attention.

Special government bonds play a role in improving the fiscal situation, increasing government investment, driving social investment, stabilizing expectations and promoting development without affecting the deficit-to-GDP ratio.

China issued special government bonds respectively in 1998, 2007 and 2020, all of which had positive impacts on economic and social stability and improvement.

The bonds will be used to focus on supporting science and technology innovation, integrated urban-rural development, coordinated regional development, food and energy security, and high-quality population growth, said Zheng Shanjie, director of the National Development and Reform Commission, the country's top economic planner.

Greater fiscal input

The ultra-long special treasury bonds to be issued over each of the next several years, along with other arrangements including budget deficits, special-purpose bonds, preferential tax and fee policies as well as government subsidies, mark the country's strengthened fiscal support for key industrial sectors, new growth drivers and better public services.

The country has raised its expenditure in the national general public budget to about 28.55 trillion yuan this year, up 4 percent from the previous year.

It has also planned a 3 percent deficit-to-GDP ratio, which means 4.06 trillion yuan in deficit. The figure is 180 billion yuan more than that projected at the beginning of 2023.

This year, a ceiling of 3.9 trillion yuan will be set on new local government special debts, an increase of 100 billion yuan over last year, to help local governments shore up weaknesses in key areas.

"China's deficit, local government special bonds and ultra-long special treasury bonds are worth 8.96 trillion yuan in total this year, up from 8.68 trillion yuan last year," said Luo Zhiheng, chief economist of Yuekai Securities, adding that the increase of fiscal expenditure is in line with the current economic and social demand.

Minister of Finance Lan Fo'an underlined the role of government bonds in stimulating and expanding effective social investment, better supporting key areas to increase strengths, targeting weak links, activating the driving force of economic development, and promoting economic transformation and upgrading.

Prioritized areas

Aiming at advancing new industrialization and enhancing the core competitiveness of industry, China has planned to upgrade traditional industries, develop emerging industries, and cultivate future-oriented industries, while at the same time fostering new quality productive forces to cultivate new growth drivers.

With special emphasis on the manufacturing industry, the central government will allocate 10.4 billion yuan in special funds to support efforts addressing weaknesses related to basic products and core technologies and increasing the resilience and competitiveness of industrial and supply chains.

The country will support the cultivation of new growth engines, such as biomanufacturing, commercial space industry, and the low-altitude economy. It will also encourage investment to support the faster development of industries including artificial intelligence and next-generation information technology.

Taking sci-tech innovation as a priority for high-quality development, China has also planned to offer extra pre-tax deductions on enterprises' research and development costs and tax relief for the application of sci-tech advances, while guiding financial institutions to offer low-cost credit support to high-tech firms.

Measures will be taken to continue fiscal support for small and medium-sized enterprises (SMEs) applying special and sophisticated technologies to produce novel and unique products, designate more pilot cities for digital transformation of SMEs, and promote in-depth integration of digital technology into the real economy.

In terms of booming consumption, the country will increase the spending power of consumers and improve their expectations giving play to the regulating role of social security and transfer payments.

It will foster new areas of consumption growth related to culture, tourism, education, health, and elderly care, and make coordinated use of existing funding channels to improve consumption-related infrastructure and develop county-level commercial systems.

Improve people's well-being

To ensure people in different regions have equal access to basic public services, China has projected transfer payments from the central government to local governments at about 10.2 trillion yuan this year.

The transfer payments, a Chinese-style fiscal decentralization, will rise 4.1 percent compared with the actual figure for 2023 after deducting one-time special transfer payments over last year and this year.

On multiple fronts closely related to people's well-being, including education, employment and health care, the country has planned to shore up accurate fiscal support.

China's projected budget for education, social insurance and employment will all surpass 4 trillion yuan this year, according to Lan.

The central budget has also planned 66.7 billion yuan of employment subsidies, 76.5 billion yuan in subsidies for basic public health services, and specific payments will be allocated to support rural senior secondary schools, local universities, vocational education and students from families in difficulty.

In the next stage, financial authorities will focus on the urgent needs of the people, continue to increase fiscal support, promote the introduction of targeted policies, and resolutely safeguard the people's livelihood, Lan said.