Economic Observer reporter Du Tao2024 will be the 16th consecutive year of China's proactive fiscal policy.
The first economic work conference held on December 11-12 required that the counter-cyclical and cross-cyclical adjustment of macro policies should be strengthened, the active fiscal policy and prudent monetary policy should be continued, and the innovation and coordination of policy tools should be strengthened.
This also means that China will continue to implement an active fiscal policy and a prudent monetary policy next year.
Previously, the Politburo meeting of the Communist Party of China held on December 8 set the tone for next year to "adhere to the principle of seeking progress while maintaining stability, promoting stability with progress, establishing first and then breaking down, strengthening counter-cyclical and cross-cyclical adjustment of macro policies, and continuing to implement active fiscal policies and prudent monetary policies." ”
* The Economic Work Conference proposed that the proactive fiscal policy should be moderately strengthened, and the quality and efficiency should be improved. It is necessary to make good use of the fiscal policy space and improve the efficiency of funds and the effectiveness of policies. Optimize the structure of fiscal expenditures and strengthen the financial guarantee for major national strategic tasks. Reasonably expand the scope of local ** special bonds to be used as capital. Implement structural tax and fee reduction policies, and focus on supporting scientific and technological innovation and the development of manufacturing industry. Strict supervision of transfer payment funds, strict financial discipline. Enhance fiscal sustainability and strengthen the bottom line of the "three guarantees" at the grassroots level.
The meeting also said that it is necessary to plan a new round of reform of the fiscal and taxation system and implement the reform of the financial system.
On December 12, Luo Zhiheng, chief economist and dean of the Research Institute, told the Economic Observer that the tone of the economic work conference on fiscal policy was roughly the same as that of the meeting at the end of last year, and it was generally positive. The meeting proposed "moderate strengthening, quality and efficiency", which means that it is necessary to strengthen efforts to expand aggregate demand and prevent and resolve economic and social risks, but at the same time, it also emphasizes "moderation", "improving quality and efficiency", "strengthening counter-cyclical and cross-cyclical adjustment", and "making good use of financial space", which should be implemented according to economic and social needs, and not to engage in flood irrigation. The proactive fiscal policy is still active under the framework of high-quality development, so as to avoid significantly increasing fiscal risks and make the fiscal situation more sustainable.
In addition, the meeting also proposed to plan a new round of reform of the fiscal and taxation system, which is a measure that is more beneficial to the long-term in addition to short-term debt reduction and expansion of aggregate demand. This reform will help promote high-quality economic development and promote sustainable fiscal development.
Luo Zhiheng**, in view of the current economic situation is not yet stable, the confidence of market players needs to be boosted, and it is necessary to increase the implementation of fiscal policy. He believes that it is necessary to raise the fiscal deficit ratio from 3 percent to 4 percent, and the scale of special bonds is more appropriate at about 4 trillion yuan. In the short term, the tax and fee reduction policy should continue to implement the existing policy, rather than introducing new large-scale tax and fee reduction measures. This is a short-term policy, intended to stabilize growth and boost confidence. In the medium and long term, a system should be established for reserve projects to determine the size of special bonds, and then the scale of the deficit should be reversed, so as to avoid the debt risk caused by the coexistence of sustained high growth in the scale of special bonds and low returns on projects.
Fiscal proactive
The proactive fiscal policy, also known as the expansionary fiscal policy, mainly includes two measures: expanding spending and reducing taxes and fees. Taking 2022 as an example, China has implemented a series of large-scale tax and fee reduction policies, of which tax refunds are one of the main measures. These policies have effectively reduced the burden on enterprises and provided strong support for economic recovery and development.
In 2024, China will continue to implement a proactive fiscal policy. Luo Zhiheng believes that the main tone of the active fiscal policy will not change, and the deficit rate in 2024 may need to exceed 3%, and the scale of the deficit will be dominated by **. In the fourth quarter of 2023, an additional 1 trillion yuan of treasury bonds will be issued, and part of the new local bond quota for 2024 will be issued in advance, which will help form a physical workload as soon as possible and provide strong support for a good start to the economy in 2024.
However, it should be noted that policy continuity is the key to avoid the situation of weak project funds. It is necessary to face the real deficit rate realistically and avoid the situation that the long-term use of 'deficit control + expansion of special bonds' leads to a situation in which the deficit scale is too small and the efficiency of the use of special bonds is low. Luo Zhiheng said that the deficit rate exceeded 3%, which can send a more positive fiscal policy signal to the domestic and international markets, which will help boost the confidence of micro subjects. At the same time, in view of the current challenges of fiscal contradiction and debt risk, local governments may need to increase leverage to assume more expenditure responsibilities or transfer funds to local governments.
According to Feng Qiaobin, deputy secretary-general of the China Fiscal Society, the proactive fiscal policy in 2024 mainly refers to optimizing the structure of fiscal expenditure and improving fiscal efficiency.
Feng Qiaobin said that optimizing the expenditure structure is to focus on supporting major national strategies within the space of limited financial resources. The direction of fiscal expenditure is more prominent, and the expenditure for the transformation and upgrading of the economic structure, the consolidation of the foundation for development, and the realization of the major strategic intentions of the state is guaranteed.
In terms of tax and fee reductions, the Economic Work Conference once again emphasized the importance of "structural tax cuts and fee reductions". Luo Zhiheng believes that this kind of structural tax reduction and fee reduction is conducive to further stabilizing the macro tax burden. "China has implemented a positive fiscal policy for more than ten consecutive years, and large-scale tax cuts and fee reductions have led to a gradual decline in the macro tax burden. Therefore, future tax and fee reductions should focus on efficiency and effectiveness, pay attention to structural tax and fee reductions, and focus on supporting scientific and technological innovation and manufacturing industries, which is conducive to stabilizing the macro tax burden and avoiding the scale of debt rising too quickly due to tax and fee reductions. ”
In the past few years, China has implemented a large-scale tax and fee reduction policy. According to the data of the State Administration of Taxation, from January to October this year, the country added 1,660.7 billion yuan in tax cuts and fee reductions and tax refunds and deferrals, which effectively promoted industrial upgrading and stable economic development.
Hebei Jili Rigging *** is an enterprise mainly engaged in the manufacture and sales of lifting slings, and the head of the company, Su Yuxiang, told reporters that in 2023, the company will enjoy tax incentives and exemptions of 67660,000 yuan. "In the critical period of optimizing the company's structure and expanding its scale, the company enjoys a large amount of tax incentives, which effectively promotes the positive cycle of enterprise development and adds a fulcrum to enterprise innovation. This year, we plan to invest the funds saved from tax and fee reductions in expanding our operations. ”
In Luo Zhiheng's view, in order to further make good use of the fiscal space, the future fiscal policy needs to be dominated by the expenditure policy, supplemented by tax cuts and fee reductions and other revenue policies, to promote the fiscal policy to gradually shift from heavy investment to equal emphasis on investment and consumption, and improve the efficiency of the use of fiscal funds.
Luo Zhiheng said that in the economic downturn, the effect of expenditure policy is usually better than that of income policy. This is because the revenue policy of tax cuts needs to be played by market players, and the transmission chain is long and may be interfered with by other factors. If market players lack confidence, revenue-side policies such as tax and fee cuts will not promote economic growth, but may also push up deficits and debt, falling into the "tax and fee reduction trap". In the past, China continued to introduce measures such as tax and fee reductions, tax refunds, and tax deferrals, which effectively alleviated the problem of tight cash flow of market entities and improved the ability of enterprises to resist risks. However, this has also led to a continuous decline in the macro tax burden.
A new round of fiscal and taxation reform
This time, the first economic work conference proposed to plan a new round of fiscal and taxation system reform.
Historically, China's last round of fiscal and taxation system reform was the "tax sharing" reform launched in 1994. This reform is to readjust the incremental distribution of fiscal revenue in combination with the tax reform on the premise of not changing the basic situation of local relief and subsidy under the original lump sum system and not touching the vested interests of the local government.
In 2016, Lou Jiwei, then Minister of Finance, said in an interview that the new round of fiscal and taxation system reform focused on comprehensively deepening the overall reform, adhered to the problem-oriented, and focused on the three major tasks of "improving the budget management system, improving the tax system, and establishing a system that is compatible with power and expenditure responsibility" deployed by the Third Plenary Session of the 18th Central Committee of the Communist Party of China.
Feng Qiaobin told reporters that the new round of fiscal and taxation system reform proposed by the economic work conference may be mainly focused on the financial system, involving two directions: one is to reform the financial system between the first and the local government, the current scale of transfer payments is too large, in order to maintain fiscal sustainability, reform is needed. In addition, the local government debt pressure is relatively large, and it is also necessary to enhance the financial resources available to the local governmentThe second involves tax reform, which is also carried out in the direction of enhancing local financial resources, such as changing the proportion of tax sharing with local governments.
In 2023, the scale of transfer payments to local governments will exceed the 10 trillion yuan mark for the first time. After the "business tax reform", the business tax, the largest local income tax, was abolished, coupled with the decline in land revenue, the local government lacked the main income.
Gao Ruidong, chief macroeconomist of Everbright, believes that the report of the 20th National Congress of the Communist Party of China pointed out that it is necessary to "improve the modern budget system, optimize the tax structure, and improve the fiscal transfer payment system", which is expected to be the focus of the new round of fiscal system reform.
Luo Zhiheng believes that at present, there are still problems such as unclear relationship and boundary with the market, unclear division of local powers and expenditure responsibilities, excessive local powers and expenditure responsibilities, insufficient coordination of financial resources, non-standard transfer payments, and the need to further deepen the financial system below the provincial level, which need to be further solved in future reforms.
In Luo Zhiheng's view, the future fiscal and tax reform is to further clarify the relationship between the market and the market, define the scale, and avoid the continuous expansion of expenditure responsibilities** Collect part of the authority and expenditure responsibility, reduce the expenditure responsibility and expenditure burden of the local government;Further stabilize the macro tax burden;We will continue to regulate transfer payments, especially those of joint authority.
Consistency of macro policy orientation
On December 8, the Politburo meeting of the Communist Party of China proposed to enhance the consistency of macroeconomic policy orientation. The subsequent economic work conference emphasized that it is necessary to enhance the consistency of macro policy orientation, and pointed out that it is necessary to strengthen the coordination and cooperation of fiscal, monetary, employment, industrial, regional, science and technology, environmental protection and other policies, and incorporate non-economic policies into the consistency assessment of macro policy orientation, strengthen policy coordination, and ensure that the same direction is used to form a joint force.
Luo Zhiheng believes that this requires next year's macro policy to have an overall awareness and system concept, and the formulation and implementation of policies should focus on the overall strategic deployment of the first country. Handle the relationship between the demand side and the supply side, urban and rural, and the safety and sustainability of development, cooperate with each other, connect with each other, form a joint force, and avoid the fallacy of synthesis. "In recent years, the implementation of the policy has been generally good and has achieved good results. However, there is a lack of systematic and overall planning among some policies, and there is a tendency to fragmentation, which restricts the synergy of policy effects. The premise of effective and efficient policies is the systematic planning and coordination between policies, that is, to avoid the impact of contractionary non-economic policies on expansionary economic policies, and to proceed from the overall situation rather than the sectoral standard. Luo Zhiheng said that after the tax cut and fee reduction, enterprises still do not dare to significantly increase investment, residents do not dare to increase consumption, the result is that tax and fee reduction can not effectively stimulate economic growth, the role of tax reduction and fee reduction is attenuated, and it falls into the "tax and fee reduction trap". Therefore, it is necessary to comprehensively consider the impact of non-economic policies on the economy to avoid triggering supply shocks and discouraging the enthusiasm of market players.
Luo Zhiheng believes that on the one hand, fiscal and monetary policies should be actively coordinated. Monetary and financial policies should be coordinated with the issuance of bonds and the conversion of bonds by the government in terms of quantity and quality. At the same time, monetary and financial policies also need to support real estate risk prevention, and this model is expected to continue into next year. "On the other hand, we need to enhance the synergy between economic and non-economic policies. Luo Zhiheng said that the tightening effect of some non-economic policies, such as the "one-size-fits-all" environmental protection policy in some areas in the past, power rationing and the adjustment of some industries, has objectively led to a lack of confidence in enterprises and residents.