China’s Ministry of Finance had provided further details on its plans for more active fiscal policy, as escalating trade tensions with the United States casts a shadow on the country’s economic health.
An executive meeting of the State Council held on 23 July flagged more active fiscal policy in the near-term, with a heavy emphasis upon tax and administrative fee reductions.
Finance vice-minister Liu Wei (刘伟) has further elaborated upon China’s plans for more active fiscal policy at a routine meeting of the State Council held on 26 July.
“These [measures] further add weight to the overall broad logic at the start of the year,” said Liu. “It isn’t at all that the macro-economy has undergone any major volatility, and we are not undertaking any irrigation-style, shock-style measures.
“We stress the need to effectively see to financing demand for projects under construction, but these projects must satisfy relevant policies and be included in relevant plans, and be projects that regions should have originally advanced.
“[They] cannot be blindly established stalls that exceed financing capabilities, and we must avoid further increases in hidden debt.”
With regard to the significance of “more active” fiscal policy, Liu Wei said that it would cover three key areas, including:
i) Micro-adjustments based on new circumstances, the additional allocation of certain policy measures;
ii) Expanding the vigour of the implementation of work that has already been included in planning;
iii) The policies of all departments must be linked and complementary. Fiscal policy and monetary policy will be jointly advanced and co-ordinated.
Liu reiterated China’s emphasis on tax reductions as a key plank of upcoming fiscal policy.
“While maintaining comparatively high vigour of and support for fiscal expenditures, the main focal point of active fiscal policy is at present the expansion of tax and fee reductions, and reductions in costs for the real economy,” said Liu.
Beijing has committed to a reduction of at least 1.1 trillion yuan in the tax and fee burden for China’s market entities in 2018.
An increase in the added deduction percentage for R&D expenses to 75% will be expanded from small and medium-sized tech companies to cover all Chinese companies, and is expected to lead to full year savings of 65 billion yuan.
A value-added tax rebate covering sectors including advanced manufacturing and modern services that is expected to be worth around 113 billion yuan will reach basic completion prior to the end of September.
During the period from January to June 2018, national standard public budget revenues were approximately 10.4 trillion yuan, for a year-on-year increase of 10.6%.
National standard public budget expenditures were 11.2 trillion yuan, for YoY growth of 7.8%.