How will fiscal policy enhance counter-cyclical adjustments?
Recently, there has been a flurry of favorable policies across various sectors such as finance, real estate, and capital markets, which have driven the reshaping of confidence in the capital market and market expectations for policy introduction and fundamental improvements. For fiscal policy, in light of the Central Political Bureau meeting in September mentioning the need to "ensure necessary fiscal expenditures," and considering the fiscal deficit faced within the year, it is likely that measures such as the issuance of additional government bonds will be used to maintain the intensity of fiscal expenditures and support for the economy.
The growth rate of general public fiscal revenue is lower than the budgeted amount at the beginning of the year, and the expenditure progress is also slow. From January to August this year, public fiscal revenue decreased by 2.6%, with non-tax revenue increasing by 11.7% year-on-year and tax revenue decreasing by 5.3% year-on-year. The decline in tax revenue is partly due to tax deferrals for small and medium-sized enterprises (SMEs), tax cuts and increased personal income tax special additional deductions last year, and is also related to the slowing economic recovery and low inflation. If we exclude the disturbances caused by the deferral of tax payments by SMEs last year and the tax cuts introduced in the middle of last year, the comparable口径 national general public budget revenue would grow by about 1.0%, but it is still lower than the 3.3% annual revenue budget growth rate. Under the framework of a balanced budget, China's general public budget expenditure has increased by 1.5% year-on-year this year, with a full-year budget completion rate of 60.9%, also lower than previous years.
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The decline in land transfer income restricts the income of local government funds, and expenditures are limited under the revenue-determined expenditure model. From January to August this year, the sales of commercial housing decreased by 23.6% year-on-year, and the willingness of real estate companies to acquire land is low. Affected by this, land transfer income decreased by 25.4% year-on-year, and government fund income decreased by 21.1% year-on-year. Since the government fund budget is conducted according to the principle of revenue-determined expenditure, against the backdrop of declining revenue, government fund expenditure from January to August this year decreased by 15.8% year-on-year, which is a certain gap from the 18.6% growth set in the initial budget.
There is a certain scale of general fiscal deficit within the year. From January to August this year, the general fiscal revenue (including general public budget and government funds) was 17.5 trillion yuan, a year-on-year decrease of 6.0%, and the general fiscal expenditure was 22.2 trillion yuan, a year-on-year decrease of 2.9%, corresponding to a general fiscal deficit of 4.7 trillion yuan, which is second only to 2022 in the same period of history. Looking at the general public budget revenue and government fund revenue budgets set at the beginning of the year, the general fiscal revenue budget for 2024 is 29.5 trillion yuan, a 2.5% increase over the 2023 final account, and the general fiscal expenditure budget is 40.6 trillion yuan, a 7.9% increase over the 2023 final account. By comparing this year's actual fiscal revenue and expenditure with the initial budget values, it can be found that there is a certain scale of general fiscal deficit within the year.
The fiscal side has recently shown certain signs of effort. The Central Political Bureau meeting in September pointed out the need to increase the counter-cyclical adjustment strength of fiscal and monetary policies, ensure necessary fiscal expenditures, and effectively carry out the grassroots "three guarantees" work. It is necessary to issue and use long-term special government bonds and local government special bonds well, and better play the role of government investment in driving. Since August, the issuance and use of government bonds and local bonds have accelerated. As of the end of September, special bonds have been issued for 2.83 trillion yuan, with an issuance rate of 90% and a project start rate of 85%. In addition, the 1 trillion yuan special government bonds issued this year, in addition to being used for "two heavy" construction, also include 300 billion yuan for large-scale equipment updates and consumer goods exchange for the old, gradually showing a driving effect on manufacturing investment and consumer goods retail. The National Development and Reform Commission stated at a press conference of the State Council Information Office on October 8 that it is urgently studying the appropriate expansion of the fields, scale, and proportion of special bonds used as capital, and will soon introduce specific reform measures to reasonably expand the scope of local government special bonds. At the same time, the National Development and Reform Commission will advance the issuance of 100 billion yuan of central budget investment plan and 100 billion yuan of "two heavy" construction project list for next year, which will help support localities to accelerate the start of preliminary work and start construction in advance.
Subsequently, it may maintain the necessary intensity of fiscal expenditure through the issuance of additional special government bonds and other means to boost domestic demand and promote economic recovery.
Under the model of general fiscal revenue decline and revenue-determined expenditure, this year's fiscal expenditure may be limited to a certain extent, and there is a certain fiscal deficit within the year. Considering the requirements of the Central Political Bureau meeting in September to ensure necessary fiscal expenditure and effectively carry out grassroots "three guarantees" work, etc., to maintain the necessary intensity of fiscal expenditure, boost domestic demand, and promote the recovery and improvement of the economy, we believe that within the year, it may increase the deficit ratio, issue additional special government bonds, or issue special refinancing bonds and other means to fill the fiscal deficit, and the investment fields may include supplementing bank capital, stimulating consumption, and resolving local debt, etc.
Since August, the pace of government bond issuance has accelerated, releasing a positive fiscal signal. The Central Political Bureau meeting in September mentioned the need to ensure necessary fiscal expenditure and effectively carry out grassroots "three guarantees" work. Considering the certain fiscal deficit faced within the year, to ensure the intensity of fiscal expenditure, subsequent fiscal efforts will be further strengthened, and efforts will be made to complete the full-year budget expenditure through the issuance of additional government bonds and other means, to ensure people's livelihood, boost domestic demand, and promote the continuous recovery and improvement of the economy.