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Sustaining economic momentum to be top priority, says finance ministry China will continue to take proactive fiscal steps to consolidate
economic recovery momentum and control government debt for financial
stability, the Ministry of Finance said on Thursday. Fiscal measures, especially for consistent tax and fee cuts, should
remain supportive for economic recovery and production resumption, a
spokesman from the ministry said on Thursday. The government's budgetary revenue peaked in the fourth quarter, with
a year-on-year growth rate of 5.5 percent, thanks to the economic
recovery and supportive fiscal measures that sustained industrial
production, the ministry said. The annual general public budget revenue stood at 18.29 trillion yuan
($2.82 trillion) last year, down 3.9 percent on a yearly basis, which
was "better than expected". Government spending increased 2.8 percent
year-on-year to 24.56 trillion yuan, which has supported investment in
key areas including public health, social security and employment.
Spending on improving the public health system that is directly related
to COVID-19 control rose by 74.9 percent, according to the ministry. China's economy has shown a trend of stable recovery amid the ongoing
COVID-19 pandemic and the global uncertainties, though some industries
are still digesting the negative effects. The country will further
implement the tax and fee reduction policy and maintain fiscal actions
that are consistent and stable. Such measures include value-added tax
reform, additional individual income tax deductions and tax relief for
small and micro enterprises, the spokesman said. Total tax revenue last year stood at 15.43 trillion yuan, down 2.3
percent from the level in 2019. Non-tax revenue dropped 11.7 percent
year-on-year, the official data said. China came out with a special fiscal stimulus package last year to
strengthen financing support for sectors hit by COVID-19. The fiscal
deficit rose by 1 trillion yuan, while the fiscal deficit-to-GDP ratio
increased to more than 3.6 percent from 2.8 percent in 2019. Local
government special bond quotas rose to 3.75 trillion yuan, up 1.6
trillion yuan from 2019, while the central government issued 1 trillion
yuan of special anti-COVID Treasurys. All these measures have helped narrow the gap between higher
expenditure and lower fiscal revenue, said officials from the ministry. By the end of 2020, the outstanding local government debt stood at
25.66 trillion yuan, which was under the ceiling of 28.81 trillion yuan
set by the nation's top legislature. The government's total debt
outstanding, which also includes central government debt, reached 46.55
trillion yuan, or 45.8 percent of the total GDP in 2020, lower than the
international warning limit of 60 percent, according to the ministry. The spokesman said that the ministry will continue to control the
debt level and maintain a stable macro leverage level. This year,
authorities will set a reasonable scale of government bond issuances and
prepare for investment projects early. For local government special bonds, a special debt instrument that
mainly raises funds for infrastructure construction, the time limit of
issuances should be appropriately relaxed, and the scope of using the
bond should be expanded with improvement in efficiency, the spokesman
said. Li Xin, deputy resident representative in China of the International
Monetary Fund, said on Thursday that China may need to maintain a
moderately expansionary fiscal stance this year, with the policy focus
shifting from infrastructure investment to household support. "A synchronized public investment push by the largest economies with
fiscal space to do so can enhance effectiveness of individual actions
and boost cross-border spillovers through trade linkages," the IMF said
in a report, suggesting that fiscal spending should emphasize green
infrastructure and digitalization to raise productivity growth.
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