Policymakers are unlikely to make any changes to
China's existing fiscal stimulus package next year, but may focus on
additional steps to bolster economic recovery, especially to improve
people's livelihood and save jobs, officials from the Ministry of
Finance said on Thursday. The scale of directly channeled fiscal funds, from the central
government to municipal-and county-level governments, will be further
expanded next year to spur economic growth, said Hao Lei, an official
from the budget department of the Ministry of Finance. More funds, especially under the existing central-to-local government
transfer payment scheme, will be included in the direct channel system
for the primary-level authorities, bypassing the provincial-level
governments, to finance projects that can improve people's livelihood
and ensure sufficient employment opportunities, said Hao. The direct fund system will be included in the nation's budget
management system in the future with tighter regulations and auditing
requirements. Meanwhile, the existing fiscal management system and
regulatory standards for the use of the transferred funds will not
change, the official said. "This arrangement will make the direct funds even larger, covering
more areas, and (the tool) will be more targeted, which can generally
cover all the central government subsidies for improving people's
livelihood," said Hao. By the end of October, the central government had directly
transferred 1.7 trillion yuan ($256 billion) of fiscal funds to
primary-level governments, with local governments having spent 1.198
trillion yuan, or 70.9 percent of the total, to support COVID-19
pandemic control and economic recovery. About 57 percent of the funds
have been injected into projects related to people's livelihood,
according to official data. Under the direct fund system, the funds can be received by the
primary-level authorities in a week, compared with a month earlier. Wang Zecai, a researcher at the Ministry of Finance's Chinese Academy
of Fiscal Sciences, said the measures will further strengthen the
capacity of the primary-level governments to increase fiscal fund
supply. "The measures will encourage local governments to make detailed
budget plans for supporting economic growth and encouraging investment
in fields that need urgent funding. It will also prevent misuse of
government funds," said Wang. Cutting taxes and fees is another objective of the fiscal stimulus
package and the same is expected to exceed 2.5 trillion yuan this year,
it said. During the past five years, China's tax reductions might have been
around 7.6 trillion yuan. In the first three quarters of the year, the
tax burden for some large companies dropped by 9.4 percent, compared
with a decline of 6.9 percent in 2019, said Cai Zili, a senior official
from the State Taxation Administration. This year, half of the funds under the direct system of 1 trillion
yuan was raised through special COVID-19 treasuries, and the money has
been sent to local governments after evaluating their debt repayment
capabilities. The special COVID-19 treasuries are being used to support
infrastructure contraction or projects to control the pandemic. For some
projects with very low investment returns, local governments can
transfer funds from other earned income to repay the treasuries, said
Deputy Finance Minister Xu Hongcai, adding that the additional debt
burden on local governments due to the issuance of the special COVID-19
bonds was not a cause for concern. "Because of its low risk level, debt defaults are unlikely in the
case of special treasuries," said Xu. He, however, urged proper control
of the risks arising from local governments' contingent liabilities and
said it was necessary to prevent systemic financial risks.
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