The central finance has significant room for debt issuance and deficit expansion.
Yesterday (the 12th), the State Council Information Office held a press conference to introduce the situation related to "increasing the counter-cyclical adjustment of fiscal policy and promoting high-quality economic development." The reporter learned from the conference that the Ministry of Finance will soon introduce a package of targeted incremental policy measures. The policies include supporting local governments in resolving implicit debt, supporting large state-owned commercial banks in replenishing core tier-one capital, supporting the promotion of the real estate market to stop falling and stabilize, and increasing support and protection for key groups in many aspects.
To alleviate the debt resolution pressure on local governments, China plans to increase the debt limit by a large scale at one time, replace the existing implicit debt of local governments, and increase efforts to support local debt risk resolution. The relevant policies will be explained in detail to the public after going through the legal procedures. The Minister of Finance, Lan Fo'an, specifically mentioned that other policy tools are also under study, and the central finance still has significant room for debt issuance and deficit expansion.
Proposed to increase the debt limit by a large scale at one time
Lan Fo'an stated that the risk of local government debt has been generally alleviated at present. By the end of 2023, the balance of implicit debt included in the government debt information platform nationwide had decreased by 50% compared to the base number in 2018, and the debt risk is controllable.
It is reported that since 2024, after going through the relevant procedures, the Ministry of Finance has arranged a debt limit of 1.2 trillion yuan to support local governments in resolving existing implicit debt and digesting government arrears to enterprises. To further support local debt risk resolution, the Ministry of Finance plans to increase the debt limit by a large scale at one time to replace the existing implicit debt of local governments.
"This upcoming policy is the most supportive measure for debt resolution in recent years," Lan Fo'an pointed out that this policy "timely rain" will greatly reduce the pressure of local debt resolution, free up more resources for economic development, boost the confidence of business entities, and consolidate the grassroots "three guarantees."
Zhao Xijun, a professor at the School of Finance and Economics of Renmin University of China, told this reporter that judging from the current operations of the finance department, the approach to resolving local debt is very clear, which is to raise funds by issuing special bonds to help local governments repay maturing debts, and specifically implement it in a "one province, one policy" manner.
Zhao Xijun reminded that the increase in the debt limit by a large scale at one time is considered from the overall budget of fiscal expenditure. From this year's situation, the fiscal deficit increased by 180 billion yuan compared to the budget at the beginning of last year, reaching 4.06 trillion yuan; the new local government special debt limit was 3.9 trillion yuan, an increase of 100 billion yuan compared to last year.
Superimpose three policy tools to support the real estate industryReal estate issues have garnered widespread attention. The Ministry of Finance's recently released package of incremental policies mentioned the need to combine the use of local government special bonds, special funds, tax policies, and other tools to support and promote the stabilization of the real estate market.
Liao Min, the Deputy Minister of Finance, stated that the next steps will adhere to strict control over new increments, optimization of the existing stock, and improvement in quality, actively researching and introducing policies and measures conducive to the stable development of the real estate market. He further introduced arrangements and considerations in three areas.
Firstly, special bonds are allowed to be used for land reserves. Considering the relatively large amount of idle undeveloped land across various regions, the policy supports local governments in using special bonds to repurchase eligible idle land and, where necessary, for additional land reserve projects. Liao Min pointed out that this policy can regulate the supply and demand relationship in the land market, reduce idle land, enhance the control over land supply, and is also beneficial in alleviating the liquidity and debt pressures on local governments and real estate companies.
Secondly, support will be provided for the acquisition of existing housing to optimize the supply of affordable housing. Given the relatively large number of built but unsold homes, two main support measures will be taken. The first is to effectively use special bonds to purchase existing commercial housing to be used as affordable housing in various regions. The second is to continue utilizing the subsidies for affordable housing projects, optimizing and adjusting the direction of financial support, appropriately reducing the scale of new construction, and supporting localities in gathering affordable housing sources through the digestion of existing housing stock.
Thirdly, relevant tax policies will be promptly optimized and improved. In accordance with the decisions and plans of the Central Committee, the Ministry of Finance is urgently studying and clarifying value-added tax and land value-added tax policies that are connected with the cancellation of standards for ordinary and non-ordinary residences. In the next steps, further research will be conducted to increase support, adjust and optimize related tax policies, and promote the stable and healthy development of the real estate market.
University Student Financial Aid Slots Doubled and Prize Money Increased
The press conference also mentioned that China will issue special treasury bonds to support large state-owned commercial banks in replenishing their core tier-one capital, enhancing their risk resistance and credit extension capabilities, and better serving the development of the real economy.
Zhao Xijun believes that improving university student financial aid policies is also one of the highlights of this package of incremental policies. The adjustment will be divided into two steps. The first step is to double the number of national scholarship awards in 2024, increasing the number of national scholarship slots for undergraduate and associate degree students from 60,000 to 120,000 per year, and for master's students from 35,000 to 70,000. The national scholarship award standard for undergraduate and associate degree students will be increased from 8,000 yuan per student per year to 10,000 yuan. The second step is to increase the award standard for graduate student scholarships in 2025. At the same time, the national financial aid standards for high school students and the national financial aid standards for secondary vocational school students will be increased, and the scope of assistance will be expanded.
Lan Fuan emphasized that the implementation of proactive fiscal policies has been effective, strongly ensuring the implementation of major national strategic tasks, and promoting the overall stable and progressive operation of the economy. In the future, a variety of measures and comprehensive policies will be adopted to ensure a balance of revenue and expenditure for the entire year.
