June 1, 2022
China – is ready to step up fiscal spending and roll out more targeted fiscal policies to keep businesses up and running and achieve reasonable growth in the second quarter, a senior official said on Monday.
Minister of Finance Liu Kun made the remark when speaking at a national teleconference held to urge greater fiscal efforts to keep the overall economic performance stable.
China’s sound economic recovery momentum has been hampered by multiple shocks that were not expected and a resurgence of COVID-19 cases since late March, Liu said.
He urged fiscal authorities at all levels to fully identify current fiscal and economic situation, and press ahead on fiscal support with a greater sense of urgency.
Specifically, fiscal spending will be accelerated to fully unlock the policy potential, a statement released after the meeting said. Transfer payments from central to local governments will be stepped up.
Construction of major programs identified in this year’s investment plan will be brought forward, and funds released from special local government bonds to generate real economic activity at the earliest possible time.
The issuance of such bonds will also proceed faster and their scope of support will be extended to more sectors to keep investment stable.
Provincial-level fiscal authorities should promptly adjust the issuance plans of such special bonds, speed up fiscal spending and ensure that increases in the special bonds will be fully issued by the end of June.
As of Friday, some 1.85 trillion yuan ($277.5 billion) of newly increased special bonds had been issued, accounting for 54 percent of this year’s total.
“A full and effective use of local governments’ special-purpose bonds is of critical importance this year to keep growth stable,” said Gao Ruidong, chief economist at Everbright Securities.
“It is imperative to step up the issuance of such bonds so that infrastructure investment can be activated at the earliest possible date,” he said.
The amount of tax cuts and refunds will be further scaled up to fully sustain market players, the meeting statement said.
The policy of refunding outstanding and value added tax credits will be extended to more industries, which is expected to increase tax refunds by 140-plus billion yuan and bring the total amount of tax refunds this year to 1.64 trillion yuan.
“The tax refund policies should be extended to many more sectors that were hit severely during recent rounds of COVID-19 outbreaks, particularly in the service sector, to alleviate their liquidity crunch and tide them over tough times. This will also meaningfully help keep employment stable,” said Shi Yinghua, a professor at the Chinese Academy of Fiscal Sciences.