China leverages fiscal toolbox to consolidate economic growth

BEIJING - China has appropriately enhanced the intensity of the proactive fiscal policy so far this year, utilizing a combination of policy tools, including ultra-long special treasury bonds and tax and fee reductions to promote its sustained economic recovery.

The country has leveraged the multiplier effect of government spending to support development in key areas.

Some 700 billion yuan ($98.31 billion) in the central government budget has been earmarked for investment this year, with the focus on supporting scientific and technological innovation, new infrastructure and carbon reduction, and improving people's livelihoods, according to the Ministry of Finance (MOF).

The special-purpose bonds for local governments to be issued this year stand at a record 3.9 trillion yuan. In the first three quarters, the MOF said that 3.6 trillion yuan of bonds had been issued to support over 30,000 projects.

Some 700 billion yuan of funds raised via the ultra-long special treasury bonds have been allocated to support the implementation of major national strategies and build up security capacity in key areas.

To promote steady consumption growth, China introduced a large-scale equipment upgrade and consumer goods trade-in program in March this year and stepped up policy support in July with a fund injection of 300 billion yuan via ultra-long special treasury bonds.

Since its launch, the trade-in program for automobiles and home appliances has achieved positive results. It is set to help further spur consumer spending and consolidate the country's ongoing economic recovery, according to the Ministry of Commerce (MOC).

As of Oct 24, the MOC had received 1.57 million applications for scrappage incentives and 1.26 million applications for automobile replacement subsidies.

The trade-in policy has revitalized consumer demand, propelled the development of new quality productive forces, promoted the green transformation of relevant industries, and injected strong impetus into consolidating the upward economic trajectory, said Li Gang, an official with the MOC.

China has also optimized preferential tax and fee policies to boost the vitality of market entities.

In the first eight months of the year, tax and fee cuts and tax rebates in support of scientific and technological innovation and the development of the manufacturing industry exceeded 1.8 trillion yuan, according to MOF.

Minister of Finance Lan Fo'an told a news conference last month that China will introduce a package of targeted incremental fiscal policy measures in the near future to boost the economy.

The package includes increasing the debt ceiling on a relatively large scale in a lump sum to replace existing hidden debts of local governments and help defuse their debt risks.

Calling it "the strongest debt alleviation measure introduced in recent years," Lan said the move is "undoubtedly a timely policy rain."

"It will greatly reduce the pressure on local governments to dissolve debts, free up more resources for economic development, and boost the confidence of business entities," the minister said.