China to introduce incremental fiscal policy measures to bolster economy

BEIJING, Oct. 12 (Xinhua) -- China will introduce a package of targeted incremental fiscal policy measures in the near future to boost the economy, Minister of Finance Lan Fo'an told a press conference on Saturday.

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.

In terms of special-purpose bonds, with the pending issuance quota plus the funds that have been issued but not yet used, there is a total of 2.3 trillion yuan (about 325.17 billion U.S. dollars) in special-purpose bond funds available for use from October to December this year.

The central finance has arranged a local government debt limit of over 2.2 trillion yuan in 2023, and an additional 1.2 trillion yuan in 2024, to support localities, especially high-risk areas, in resolving existing debt risks and clearing arrears owed to enterprises, he added.

For the property market, the minister said the country would apply a set of fiscal policy tools including local government special-purpose bonds, special funds and taxation policies to help stabilize the sector.

Local governments will be supported in using special-purpose bonds to reclaim eligible idle land or to expand land reserves if needed, said Liao Min, vice minister of finance, at the same press conference.

Special-purpose bonds will also be well utilized to purchase existing commodity houses for affordable housing, Liao said.

Efforts will be sped up to study clarifying policies on value-added taxes and land appreciation taxes in line with the scrapping of standards for ordinary and non-ordinary housing, Liao said, noting that measures to beef up support in this respect will be mulled.

China will issue special treasury bonds to support large state-owned commercial banks in replenishing the core tier-1 capital, according to Lan.

The move is aimed at enhancing the banks' risk resilience and lending capacity to better serve the development of the real economy, Lan said.

By the end of June 2024, the average core tier-1 capital adequacy ratio of the six state-owned large banks was 12.3 percent, official data showed.

As part of the incremental fiscal moves, China will further increase support for key groups. For instance, the country will raise the standards of financial aid for college students.

Before this year's National Day holiday, one-time living subsidies were distributed to people facing difficulties as part of efforts to boost consumption, Lan said.

Noting that China's general public budget revenue is expected to grow slower than anticipated, Lan said that the Chinese government "has sufficient resilience and can achieve a balanced budget and meet this year's budget targets by adopting comprehensive measures."

The minister stressed raising fiscal revenue in accordance with laws and regulations, while avoiding excessive taxation to protect the rights and interests of business entities.

At the same time, China needs to "maintain the necessary intensity of fiscal expenditure, ensure that key expenditures are fully funded, and play the role of fiscal counter-cyclical regulation effectively, in order to achieve the annual economic and social development goals," he said.

Party and government organs will habitually operate on a tight budget, according to the minister.

The country will strictly supervise the funds of ultra-long special treasury bonds to ensure the standardized, safe, and efficient use of the funds.

China also plans to introduce a batch of mature and tangible reform measures this year and next, such as improving the budget system and perfecting the fiscal transfer payment system, Lan said.

Saturday's press conference came after a broader-than-expected policy package announced by China's financial authorities last month to stimulate economic recovery. These policy measures include reducing the reserve requirement ratio for banks and mortgage rates for existing homes, as well as introducing new monetary programs to boost the capital market, among other initiatives.

A meeting of the Political Bureau of the Communist Party of China Central Committee held on Sept. 26 called for stepping up efforts to roll out incremental policies as the country strives to accomplish its annual economic and social development targets.