Fiscal spending likely to focus more on public services to improve livelihoods
Consumption is expected to become a major driving force for China's
economic growth in 2021 with more supportive policies in place, while
the country's fiscal spending is likely to focus more heavily on public
services to improve livelihoods, particularly in education, health and
elderly care, to keep the economy stable and within a proper range,
A report issued on Sunday by the Academic Center for Chinese Economic
Practice and Thinking at Tsinghua University forecast that China's GDP
is expected to expand by 2.1 percent year-on-year in 2020, with
fourth-quarter growth of 5.5 percent.
It predicted that the economy is likely to grow by 8 to 9 percent in
2021 if the COVID-19 pandemic situation continues to taper off, and by
about 5 percent if the pandemic makes a severe comeback during the
winter and spring.
"Inadequate demand and weak consumption are the major issues facing
China's growth at the moment. Robust policy support shall be put in
place to boost effective demand, particularly in consumer activities,"
Li Daokui, a professor and dean of the Tsinghua think tank, said on
Sunday at the release of the report.
In particular, Li said future policy steps shall focus more on
people's pursuit of better livelihoods and their demand for smoother,
more facilitated migration between urban and rural areas with certain
institutional hurdles gradually being phased out. Internet business and
the digital economy shall develop with more targeted regulatory
"Internet business and the digital economy have been a major
contributor to China's growth, particularly during the pandemic
outbreak, as they have facilitated our lives and boosted consumption,"
Li said. "Healthy growth of these businesses is also crucial in adding
to China's competitive edge in emerging industries."
Well-calibrated regulatory approaches shall be stepped up in pursuit
of a more effective oversight for the healthy growth of these
businesses, said Wu Xiaoqiu, a senior economist at Renmin University of
China will keep its economic fundamentals within a proper range, and
the country's proactive fiscal policy will be maintained and introduced
in a more effective and sustainable manner, according to the Central
Economic Work Conference, which was held from Dec 16 to 18 in Beijing.
Both the deficit-to-GDP ratio and growth of the quota of special
local government debt are likely to decline in 2021, yet readjustment
and optimization of the fiscal spending structure can be anticipated,
according to the report.
Li Keaobo, a senior researcher at the Tsinghua think tank, added that
quicker issuance and allocation of next year's special local government
bonds can be expected, while the requirement for the profitability of
investment using funds released from these bonds will be raised.
This year, China has set its target for the deficit-to-GDP ratio at
over 3.6 percent, up from 2.8 percent a year ago, and the local
government bond issuance quota at 3.75 trillion yuan ($573.4 million).
Zhang Bin, a senior fellow at the Chinese Academy of Social Sciences'
Institute of World Economics and Politics, suggested on Sunday in a
separate interview that efforts in building a stronger social safety net
for low-income residents, as well as education and healthcare, shall
carry more weight in a refined fiscal spending structure to make it more
effective and bring greater benefits.
Fairer income distribution is needed to ensure economic expansion
brings benefits to everyone, Zhang said, adding that more efforts are
required on public services and social security.
Zhu Ning, deputy dean and professor of finance at the Shanghai
Advanced Institute of Finance, summarized fiscal spending in these areas
as "new spending on livelihoods", which he believes is crucial for
China to achieve high-quality growth in the years to come.
"Such spending closely relates to core areas of livelihood, and will
reduce people's worries over medical care and education and shore up
their confidence in spending," Zhu said. "On the other hand, these areas
have strong and constant demand from the public, and will make our
fiscal spending more effective."
As the Central Economic Work Conference pledged to maintain policy
support for the economy with no sudden shift in policies, experts
believe that some gradual winding down in 2021 of China's easing
measures introduced since the start of the COVID-19 situation can be
Zhu said he believes that efforts in tax and fees cuts, particularly
for smaller firms, will be continued as part of a proactive and
effective fiscal policy.
The National Bureau of Statistics announced on Sunday that in the
first 11 months of the year, the profits of major industrial firms
expanded 2.4 percent year-on-year to more than 5.74 trillion yuan, up
1.7 percentage points from that in the first 10 months.
"Such growth, though mild, is hard won as demand for bulk commodities
remains weak worldwide. Robust growth of major industrial sectors such
as petrochemicals and steel requires effectively boosting domestic
demand and consumption. Expanding domestic demand will become
increasingly important for China's growth with the possible decline in
our exports of medical supplies," said Li Keaobo from the Tsinghua think