■Li Shanshan
The 2024 "Government Work Report" pointed out that starting from this year, it is planned to issue ultra-long-term special treasury bonds for several consecutive years, which will be used for the implementation of major national strategies and security capacity building in key areas, and 1 trillion yuan will be issued this year. As the narrow deficit ratio and the issuance of local government special bonds in 2024 are relatively stable compared with 2023, the market has high hopes for the role of ultra-long-term special treasury bonds in promoting stable economic growth. So, how to optimize the whole-process management and supervision mechanism of special treasury bonds before, during and after the event, not only to prevent the creation of a new batch of inefficient or productive process projects, but also to maximize the support of special treasury bonds for stable growth?
01
Definition and special features of ultra-long-term special treasury bonds
Regarding "ultra-long-term", according to the Ministry of Finance's Treasury Department in the article "2019 Local Government Bond Issuance Task Successfully Completed", 15-year, 20-year, and 30-year treasury bonds are all ultra-long-term treasury bonds. With regard to "special," it is generally believed that special treasury bonds are treasury bonds with special purposes that are not included in the deficit, and that the revenues and expenditures of special treasury bonds are included in the budget of government funds, and the principle of drawing up the budget of government funds is "to determine expenditure based on revenue." Therefore, the requirements for the profitability of investment projects in special treasury bonds are higher than those of general treasury bonds. If investments are made in public projects with low or no direct yields, the bonds issued should be included in the fiscal deficit. For example, in October 2023, the Standing Committee of the National People's Congress deliberated and passed a proposal to temporarily issue a new 1 trillion yuan of special treasury bonds, all of which will be listed as a deficit of the central government, and the repayment of principal and interest will be borne by the central government, without increasing the burden of local debt repayment, so this treasury bond is not strictly speaking a special treasury bond. The reason why it is included in the central fiscal deficit is that it is mainly used for public projects such as post-disaster recovery and reconstruction, key flood control projects, and natural disaster emergency response capacity improvement projects. The 2020 RMB1 trillion anti-epidemic special treasury bonds, although mainly invested in public projects such as anti-epidemic and people's livelihood, were not included in the fiscal deficit because local governments needed to repay the principal of the central government's debt.
02
The advantages of special government bonds over general government bonds in promoting economic growth
Compared with general government bonds, the advantages of special government bonds in promoting economic growth are mainly reflected in three aspects. First, the issuance process is more convenient than that of ordinary treasury bonds, which only need to be submitted by the State Council to the NPC Standing Committee for deliberation, while general treasury bonds need to be submitted by the State Council to the NPC at the beginning of the year for deliberation on the annual issuance quota. Second, thanks to the convenience of the issuance process, the pace of issuance of special treasury bonds is more flexible, which is particularly critical when there are many uncertainties in the external environment. It is worth noting that last year's 1 trillion yuan of special treasury bonds was temporarily added in the fourth quarter, which means that in the future, the central government may still flexibly arrange the pace of issuance of special treasury bonds according to the needs of the economic situation. Third, compared with general treasury bonds, special treasury bonds are more transparent and complete in terms of information disclosure on the purpose of fundraising and the use of benefits.
03
Improve the whole-process management and supervision system for special treasury bonds
This round of ultra-long-term special treasury bonds will focus on supporting the construction of scientific and technological innovation, urban-rural integrated development, regional coordinated development, food and energy security, and high-quality population development. The potential construction needs in these areas are huge and the investment cycle is long, and the existing financing methods are difficult to fully meet the demand. In view of the fact that the current round of ultra-long-term special treasury bonds will continue for many years, it is necessary to summarize the lessons learned from the past issuance of local special bonds, improve the project approval and review process, balance the relationship between public and marketization, and balance the relationship between short-term growth and project quality.
First, improve the project establishment, review, supervision and accountability mechanisms.
An important purpose of ultra-long-term special treasury bonds is to alleviate the repayment pressure of local government special bonds through central leverage, or to a certain extent, to get involved in some projects that were originally invested by local special bonds. In 2023, the audit department released the audit report on the implementation of the local budget and other fiscal revenues and expenditures in 2022, disclosing some problems in the management of special bond funds, one of which is that a considerable proportion of special bond projects have lower actual returns than expected, which may lead to repayment risks, reflecting that the quality of special bond projects is more serious. Compared with the issuance of bonds by local governments, the advantage of the issuance of bonds by the central government is that it can be unified and centralized to strictly control the approval and evaluation of projects.
In November 2023, in response to the new 1 trillion yuan of special treasury bonds in October, Minister of Finance Lan Foan said in an interview that in order to ensure the good management and use of treasury bond funds, the first is to strictly control the entry gates, the second is to speed up the issuance of funds, and the third is to consolidate regulatory responsibilities. In fact, in addition to strengthening the project control of central ministries and commissions and the supervision and supervision of local supervision bureaus, it is also necessary to give full play to the whole-process supervision function of the public and third-party independent institutions. In addition to ex-ante and ex-ante supervision, it is also necessary to strengthen the post-event accountability mechanism for project returns that are seriously lower than expected in the absence of significant unexpected exogenous shocks.
Second, we need to prevent the generalization of the use scenarios of special government bonds, and find a balance between public and market-oriented.
Prevent generalization of the use scenarios of special government bonds. From the perspective of international experience, special treasury bonds are mainly used to deal with major natural disasters or major crises, and very few countries use them as an important countercyclical management tool that has been used continuously for many years. If the government does not set rigid quantitative constraints on the risks and returns of the project, and regards the short-term economic growth target as a hard constraint, then in the case of insufficient sources of projects with suitable returns, the project can only be injected with water in the implementation process, which will eventually increase the future government debt burden, and the financial risk will passively transform into fiscal risk. Therefore, it is necessary to set rigid quantitative constraints on project risk and return, and resolutely prevent the generalization of the use scenarios of special treasury bonds in order to ensure short-term growth.
Finding a balance between public and market-oriented. The fields of scientific and technological innovation, urban-rural integrated development, regional coordinated development, food and energy security, and high-quality population development cover a wide range of fields, and these fields as a whole have long investment cycles and certain public characteristics, while the projects invested by special treasury bonds must meet certain returns, so they also have certain market-oriented characteristics. How to find a balance between public and marketization? Can the central government consider studying and formulating a more detailed project feasibility assessment framework, covering more detailed investment sub-areas in various fields, and setting quantitative constraints on the evaluation and selection criteria of project risks and returns? On the one hand, it is necessary to prevent the formation of a number of new inefficient or overcapacity projects at the expense of project quality in order to maintain growth; on the other hand, there may also be some competitive sub-fields in these wide-ranging fields, and it is also necessary to prevent the special treasury bonds from crowding out private investment.
Specifically, in the field of scientific and technological innovation, we can focus on supporting information network infrastructure, especially digital infrastructure with computing power as the core, such as eastern and western computing and the industrial Internet with the deep integration of a new generation of information technology and manufacturing. In the field of urban-rural integrated development and regional coordinated development, we can focus on supporting the equalization of regional basic public services, but for infrastructure investment such as rural transportation and livelihood security, which is seriously lacking in income, special treasury bonds should be used cautiously to match. In the field of food and energy security, we can focus on supporting the construction of major projects of food and energy infrastructure supply guarantee systems with better matching risks and returns. In the field of high-quality population development, we can focus on supporting pre-school education, childcare, elderly care services and other directions.
Third, further improve information disclosure and market supervision.
Although the disclosure of relevant information on special treasury bonds is better than that of general treasury bonds, it is still necessary to more fully disclose the project information of the whole process and improve the ability of market supervision, from the public to third-party independent institutions. In particular, the purpose of this round of ultra-long-term special treasury bonds is different from that of special treasury bonds that have not been included in the deficit in the past, and from the perspective of investment, the implementation requires more professional subjective and objective judgment and camera decisions of the government, so higher requirements should be put forward for the disclosure of information in the whole process. In addition, the government should solicit opinions on how to optimize the issuance of special government bonds and the investment management and supervision system, and select the best ones.
(The author is a researcher at the Chongyang Institute for Financial Studies, Renmin University, Chinese)
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Chief Producer丨Wang Hui and Che Haigang
Producer丨Li Piguang, Wang Yu, Liu Weimin
Editor-in-Chief丨Mao Jinghui Editor丨Zou Duo