-- Q&A by Lan Foan, Secretary of the Party Leadership Group and Minister of the Ministry of Finance, on the current economic and financial situation
Reporter: Fiscal policy is an important means of macroeconomic regulation and control, how can the proactive fiscal policy continue to be effective in recent years and provide support for macroeconomic stability?
Lan Foan: General Secretary Xi Jinping attaches great importance to fiscal work, and has made a series of important instructions and instructions on major long-term issues related to the development of financial undertakings from a strategic and overall perspective, providing guidelines, guidelines and guidance for promoting fiscal reform and development in the new era. Scientific and effective macroeconomic regulation and control is an important part of Xi's economic thinking, and at the annual Central Economic Work Conference, General Secretary Xi Jinping sets the tone for active fiscal policies, and puts forward clear requirements on the scale of deficits, tax support policies, the use of government bonds, and guarantees in key areas. The financial department resolutely implements the spirit of General Secretary Xi Jinping's important instructions and instructions and the decisions and arrangements of the Party Central Committee and the State Council, continuously implements active fiscal policies, and contributes to macroeconomic stability.
First, it is necessary to scientifically determine the level of the deficit rate and maintain an appropriate expenditure intensity. The deficit ratio is an important bellwether for macroeconomic policy. General Secretary Xi Jinping stressed that "macro-control must adapt to the characteristics of the development stage and changes in the economic situation, expand demand when it is time to expand demand, adjust supply when it is time to adjust supply, make camera choices, and prescribe accurate prescriptions." We have set the level of the deficit ratio in a reasonable and prudent manner, so as to appropriately expand the scale of spending to meet actual needs, and at the same time "leave a trail of hands" to leave room for coping with possible risks and challenges in the future. At the beginning of 2023, in accordance with the deployment of the CPC Central Committee on strengthening the efficiency of the active fiscal policy, the fiscal deficit rate will be arranged at 3%. In the middle of the year, many places on the mainland were hit by torrential rains, floods, typhoons, and other disasters, and we must respond in a timely and effective manner, both in terms of supporting the people affected by the disaster to rebuild their homes and resume production and life as soon as possible, and in terms of long-term plans for disaster prevention, mitigation and relief. In the fourth quarter, in accordance with the decisions and arrangements of the CPC Central Committee and the State Council, and after being reported to the Standing Committee of the National People's Congress for review and approval, an additional 1 trillion yuan of treasury bonds was issued, all of which were arranged to local governments through transfer payments, to support post-disaster recovery and reconstruction and improve disaster prevention, mitigation and relief capabilities. Correspondingly, the national fiscal deficit ratio increased from 3% to around 3.8%. Although the deficit ratio has increased, the debt ratio of the mainland government is still within a reasonable range. In recent years, through the rational arrangement of the scale of the deficit, the national general public budget expenditure has maintained a relatively large strength, from 12.6 trillion yuan in 2012 to 26.1 trillion yuan in 2022, ensuring the implementation of major national strategies and people's livelihood policies.
The second is to optimize the policy of tax reduction and fee reduction to support the development of the real economy. Taxation is the basic form of government revenue, and tax and fee reductions have both demand management and supply management attributes, which can not only expand aggregate demand, stimulate market vitality, but also promote the upgrading of industrial structure and increase the potential growth rate. General Secretary Xi Jinping stressed: "Tax and fee reduction policies and measures should take root, so that enterprises can travel lightly. "In recent years, the tax and fee reduction policies have an obvious feature, that is, the combination of institutional arrangements and phased policies, which not only deepens the tax reform based on the long-term, but also focuses on strengthening the adjustment of tax policies in the present. In 2023, we will further highlight the forward-looking, continuous and accurate, and continue and optimize the continuation and optimization of preferential tax policies, especially allowing qualified manufacturing enterprises to add 5% to offset the VAT payable, and increasing the additional deduction ratio of R&D expenses of integrated circuit and industrial machine tool enterprises to 120%, reflecting the precise support for the manufacturing industry.
The third is to make good use of special bonds and give full play to the leading role of government investment. Among the government investment tools, special bonds are not only an important financial tool for the implementation of macroeconomic regulation and control, but also an important means for local governments to make up for shortcomings, increase stamina, and promote the expansion of effective investment. General Secretary Xi Jinping stressed that "government investment and policy incentives can effectively drive investment in the whole society" and "government investment must play a good guiding role, which is a powerful tool to cope with cyclical fluctuations in the economy". Since 2020, we have arranged a total of RMB14.6 trillion in new special bonds, supporting the construction of a large number of major projects in the fields of water conservancy, transportation, energy and environmental protection. In 2023, 3.8 trillion yuan of new special bonds will be arranged, an increase of 150 billion yuan over 2022, fully considering factors such as the financial situation and debt risk level of various regions, focusing on large economic provinces and areas with good use efficiency, giving priority to supporting projects with high maturity and projects under construction, and not "peppering". According to preliminary statistics, among the special bonds issued in 2023, more than 300 billion yuan will be used as project capital, accounting for more than 9% of the total issuance, which is expected to drive social investment of more than one trillion yuan, and play a role in leveraging the government's investment.
In addition to the above three policy tools, we also use other policy tools to adjust, including transfer payments, government procurement, and fiscal interest discounts. For example, the scale of government procurement generally accounts for 10%-15% of a country's GDP, and it is the largest procurement entity in the domestic market. In view of the relative weakness of small and medium-sized enterprises in procurement activities, we have formulated and introduced a reserved quota policy, specifically for small and medium-sized enterprises to procure. From 2018 to 2022, government procurement contracts awarded to SMEs accounted for about 75% of the total amount of government procurement, providing stable support for SMEs. Another example is that we have promoted the basic establishment of a government financing guarantee system including the National Financing Guarantee Fund, provincial re-guarantee agencies, and municipal and county government financing guarantee institutions, so as to leverage more financial resources to flow to small, medium and micro enterprises, and alleviate the problem of difficult and expensive financing.
Reporter: In the new year, how do you understand the current economic and financial situation?
Lan Fo'an: Today's world is chaotic and intertwined, the evolution of changes in a century is accelerating, international political disputes and military conflicts have erupted at many points, the momentum of world economic growth is insufficient, the global economy is showing a trend of high inflation, high interest rates, high debt and low growth, and some countries have a difficult trade-off between controlling inflation, stabilizing growth and preventing risks, and some developing countries are facing severe risks and challenges such as currency depreciation, capital outflow and debt default. In contrast, in 2023, the mainland's economic operation will show a trend of low in the front, medium and high, and stable in the future, employment prices will be generally stable, the balance of payments will be basically balanced, and high-quality development will be solidly promoted. From a long-term point of view, the mainland has the institutional advantages of the socialist market economy, the demand advantage of the super-large-scale market, the supply advantage of a complete industrial system, and the talent advantage of a large number of high-quality workers and entrepreneurs, and has strong endogenous driving force, resilience, and potential for economic development.
Finance is closely related to the economy. Benefiting from factors such as the recovery of the economy and the base in 2022, fiscal revenue will maintain a recovery growth in 2023, which is generally consistent with the economic operation trend. In the first 11 months, the national general public budget revenue exceeded 20 trillion yuan, a year-on-year increase of 7.9%, in line with expectations, of which the local general public budget revenue at the same level was 10.84 trillion yuan, a year-on-year increase of 8.7%, and the revenue of the eastern, central, western and northeast regions increased by 8%, 6.5%, 12.2% and 11.9% year-on-year respectively, and the income of 31 provinces generally increased. In the first 11 months, the national general public budget expenditure was 23.85 trillion yuan, a year-on-year increase of 4.9%. Among them, the expenditure on social security and employment increased by 9 percent, the expenditure on education increased by 5.7 percent, the expenditure on agriculture, forestry and water resources increased by 5.8 percent, the expenditure on science and technology increased by 4.3 percent, and the expenditure on housing security increased by 8.6 percent.
In general, in 2023, under the severe and complex situation, China's economy withstood the pressure, stabilized the scale and improved the quality, which fully confirmed the correctness and foresight of the Party Central Committee with Comrade Xi Jinping as the core in the judgment and decision-making and deployment of the situation, and fully proved the superb wisdom and skillful ability of the Party Central Committee to control economic work under the complex and changeable situation. As long as we unite under the banner of the party as "a piece of hard steel" and think in one place and work hard in one place, we will certainly be able to continue to climb the slope and overcome difficulties, cope with the uncertainty of changes in the situation with the certainty of our own work, and turn the grand blueprint of Chinese-style modernization into a beautiful reality step by step.
Reporter: The Central Economic Work Conference held not long ago called for continuing to implement a proactive fiscal policy in 2024, with appropriate efforts to improve quality and efficiency. Please tell us about the implications of the proactive fiscal policy in 2024.
Lan Fo'an: The positive fiscal policy is moderately strengthened, and the quality and efficiency are the general tone set by the CPC Central Committee for the fiscal policy in 2024 with an eye on the overall economic and social development.
In terms of "moderate strengthening", the main thing is to strengthen the overall planning of financial resources, combine the use of special bonds, treasury bonds, tax incentives, financial subsidies, financial discounts, financing guarantees and other policy tools, moderately expand the scale of fiscal expenditure, and promote the sustained recovery of the economy. The first is to maintain an appropriate spending intensity and release positive signals. In addition to the government's own revenue, a certain deficit will be allocated in 2024, and a part of the funds will be transferred from the budget stabilization and adjustment fund and other government budgets to ensure that the total fiscal expenditure scale will increase, and better play the role of stimulating domestic demand and promoting economic circulation, so as to form the necessary support for economic and social development. The second is to rationally arrange the scale of government investment and give full play to the amplification effect. Under the principle of maintaining the basic stability of the government's overall leverage ratio, we will continue to arrange local government special bonds of appropriate scale, strengthen the management of the use of special bond funds, support local governments to increase their efforts to make up for shortcomings in key areas, and strive to improve investment efficiency. The third is to increase the intensity of balanced transfer payments and strengthen the bottom line of the "three guarantees" at the grassroots level. In 2024, the central government's transfer payments to local governments will remain on a certain scale, especially by increasing balanced transfer payments, and tilting them towards difficult and underdeveloped areas, so as to strengthen financial security for areas with weak financial resources. Fourth, optimize and adjust the tax and fee policies to improve accuracy and pertinence. Coordinate the needs of macroeconomic regulation and control, fiscal sustainability and optimization of the tax system, implement structural tax and fee reduction policies, and focus on supporting scientific and technological innovation and the development of the manufacturing industry. We should continue to standardize the management of non-tax revenues and resolutely prevent arbitrary collection of fees, fines, and apportionments.
In terms of "improving quality and efficiency", the main thing is to promote the legalization, scientificization, standardization and standardization of financial management, spend the same money to achieve greater results, and strengthen the coordination and linkage with other macro policies to improve the effect of supporting high-quality development. The first is to work hard to implement the requirements of living a tight life, save all the money that can be saved, and not spend any money that should not be spent, and concentrate financial resources to do big things. Second, efforts should be made to optimize the structure of fiscal expenditures, not only to make good use of the limited incremental funds, but also to make great efforts to revitalize and readjust the stocks, to free up funds that have not been used well to ensure key points, to prevent expenditures from becoming rigid and rigid, and to achieve "small money and stinginess, big money and generous." The third is to work hard to strengthen performance management, deeply integrate performance concepts and methods into budget management, improve the whole chain mechanism of budget preparation with goals, budget implementation monitoring, budget completion evaluation, evaluation results, and feedback results, strengthen information technology support, and improve the efficiency of financial resource allocation and the use of funds. Fourth, efforts should be made to strictly enforce financial and economic discipline, strictly enforce financial and economic laws and regulations, and resolutely investigate and deal with violations of laws and regulations, so that discipline can truly become a "high-voltage line" with electricity. Fifth, we should make efforts to enhance fiscal sustainability, do our best and do what we can, carry out in-depth assessment of fiscal affordability, effectively respond to risks and hidden dangers, and ensure fiscal stability and long-term development. Sixth, efforts should be made to strengthen policy coordination, so that fiscal and monetary, employment, industry, regional, science and technology, environmental protection and other policies maintain the same orientation, resonate at the same frequency, and amplify the combination effect.
Reporter: In the next step, focusing on promoting high-quality development and promoting Chinese-style modernization, how will fiscal policy be further strengthened?
Lan Foan: General Secretary Xi Jinping stressed at the Central Economic Work Conference that "we must take adhering to high-quality development as the last word in the new era." The financial sector has a complete, accurate and comprehensive grasp of the decision-making and deployment intentions of the Party Central Committee, closely focuses on the primary task of high-quality development, strengthens policy support and financial guarantees, and promotes the smooth circulation of the national economy.
The first is to support the promotion of consumption, expand investment, stabilize foreign trade, and better coordinate domestic and international circulation. Create a fair competition market environment, treat all types of business entities equally in terms of financial subsidies, tax incentives, government procurement, etc., and promote the construction of a unified national market. Focusing on the direction of residents' consumption upgrading, we will further study fiscal and taxation policies that encourage and guide consumption, and strive to improve consumption capacity, optimize the consumption environment, and cultivate new types of consumption. Coordinate and make good use of special bond funds, investment in the central budget, local funds for vehicle purchase tax subsidies, railway construction funds, civil aviation development funds, etc., to promote the construction of key areas and major projects, and guide and drive investment by the whole society. Actively participate in international financial exchanges and cooperation, give full play to the role of tariffs and other policies, support the construction of a global network of high-standard free trade zones, and consolidate the basic market of foreign trade and foreign investment.
Second, it is necessary to adjust the structure, make up for shortcomings, strengths and weaknesses, and improve the quality of economic development. We will increase financial investment in science and technology, further adjust and optimize the direction of use, and focus on basic research, applied basic research, and national strategic science and technology tasks. We will improve the new national system, fully support winning the battle of key core technologies, and ensure the funding needs of major national science and technology projects. Vigorously promote new industrialization, coordinate the use of special funds, government procurement, the first (set) insurance compensation and other policies, support the development of advanced manufacturing clusters, promote the transformation and upgrading of traditional industries and the development and growth of strategic emerging industries, and cultivate new industries and new tracks. We will further implement the pilot cities for the digital transformation of small and medium-sized enterprises, improve the financial support policies for specialized, special and new small and medium-sized enterprises, implement tax incentives such as additional deductions for R&D expenses, and support the enhancement of enterprise competitiveness. Guided by the experience of learning and Xi applying the "Ten Million Project", we will make every effort to ensure national food security, promote the consolidation and expansion of the achievements of poverty alleviation, improve the level of rural industry, rural construction and rural governance, and accelerate the modernization of agriculture and rural areas. Improve the system and mechanism conducive to the integrated development of urban and rural areas, put the acceleration of the process of urbanization of the agricultural transfer population in a more prominent position, and promote the construction of a new type of urbanization. Improve differentiated fiscal and taxation policies, promote the implementation of major regional strategies and regional coordinated development strategies, and enhance the balance and coordination of regional development. We will continue to invest in promoting green and low-carbon transformation, strengthening ecological and environmental protection, and steadily promoting carbon peak and carbon neutrality, so as to promote the harmonious coexistence of man and nature.
Third, we need to continue to improve people's livelihood and well-being, so that the fruits of development can benefit all people in a more equitable manner. We will build the protection and improvement of people's livelihood on the basis of economic development and financial sustainability, do our best and do what we can, and promote the improvement of the level and accessibility of public services. We have always given priority to education as a national strategic investment, increased inclusive preschool education resources through multiple channels, promoted the improvement of weak links and capacity enhancement in compulsory education, supported the improvement of the basic conditions for running ordinary high schools at the county level, established a differentiated per student funding system for vocational education based on major categories, promoted the construction of "double first-class" colleges and universities, and improved the ability of high-quality development of education services. Strengthen the priority orientation of employment, coordinate the use of tax exemptions, social security subsidies, loan interest discounts and other policies, and support enterprises to stabilize and expand jobs and individual entrepreneurship and employment through multiple channels. We will continue to raise the per capita financial subsidy standard for basic public health services, deepen the comprehensive reform of public hospitals oriented to public welfare, strengthen the capacity building of primary medical and health services, and promote the improvement of the public health system. We will further improve the multi-level social security system, thoroughly implement the national overall system of old-age insurance, support the construction of a multi-level and multi-pillar old-age insurance system, and strengthen hierarchical and categorical social assistance guarantees. Improve the value preservation and appreciation of the social security fund and the safety supervision system, and expand and strengthen the strategic reserve fund. Support the innovative implementation of cultural projects to benefit the people, increase support for the protection and utilization of cultural relics, ancient books and cultural heritage, prosper and develop cultural undertakings and cultural industries, promote the comprehensive development of mass sports and competitive sports, and better meet the people's growing demand for high-quality spiritual culture.