Optimizing fiscal policy to stabilize economic growth

China's steady economic recovery has laid a solid foundation for the growth of its fiscal revenue, but new economic downward pressures have put constraints on revenue growth, which, together with the impact of the COVID-19 pandemic, will further exacerbate the problem.

Therefore, the country should use its policies effectively to draw maximum benefits from its limited financial resources. China should guard against fiscal risks and strive to strike a balance between ensuring steady growth and preventing risks, and between cutting taxes and fees and promoting sustainable fiscal growth.

China should appropriately increase spending intensity and make it more targeted. Its deficit-to-GDP ratio has been below 3 percent for many years, and to ensure steady growth, the country should appropriately raise it, maintain the necessary intensity of spending, and tilt financial resources to major projects with national strategic importance. It should vigorously improve its spending structure, support key projects in science and technology, environmental protection, basic living standards, major regional strategies, modern agriculture, and major projects mapped out in the 14th Five-Year Plan (2021-25). It should also improve the mechanism for the use and monitoring of government funds.

Infrastructure investment should be carried out appropriately ahead of schedule to stabilize investment demand and expectations. It is also necessary to strengthen the matching degree between projects and funds, strengthen the supervision of project performance, prevent funds from lying idle, and strive to improve the investment benefits of projects.

Also, new and greater efforts for cutting taxes and fees should be made to invigorate market entities. A recent State Council executive meeting decided that the country will increase income tax reductions and exemptions for industries and services, and increase support for periodic tax reductions and the deferral of some social insurance premiums for catering, retail, tourism, transportation and other industries that are in a difficult position.

Some measures should also be introduced to reduce taxes and fees, strengthen tax preferences for small and micro businesses, and further increase tax reductions and exemptions for small and micro businesses and individual businesses.

Lastly, practical measures should be taken to strictly guard against local government debt risks. The country should determine the size of special bonds for local governments to ensure the construction of key projects while strictly blocking the "back door" of illegal debt financing and resolutely curbing the increase of hidden local government debts.