Active fiscal policy may return to normal, and the deficit rate will drop to about 3percent next year

category:Finance
 Active fiscal policy may return to normal, and the deficit rate will drop to about 3percent next year


At the beginning of this year, the sudden outbreak of the epidemic has had an unprecedented impact on Chinas economy and society. Therefore, active fiscal policy has been adopted to strengthen counter cyclical regulation and introduce a series of measures to hedge the impact of the epidemic.

Among them, in order to hedge business difficulties, an unprecedented 2.5 trillion yuan tax reduction and fee reduction policy was introduced this year to reduce the burden on enterprises. In order to alleviate the contradiction between fiscal revenue and expenditure and boost market confidence, the scale of fiscal deficit increased to 3.76 trillion yuan, and the deficit ratio exceeded 3% for the first time, reaching more than 3.6%. In order to hedge the downward pressure of the local government bonds, the government issued special bonds to RMB 1.75 trillion for the first time, and increased the scale of special government bonds to RMB 1.75 trillion.

Lou Jiwei, former Minister of finance, recently publicly said that with the epidemic under control, Chinas economic recovery is at the forefront, and both fiscal and monetary policies have requirements for withdrawal. However, the fiscal policy tends to be medium-term in general, and it takes a long time to withdraw. The (positive) fiscal policy may still be maintained, but the expansion will certainly be smaller next year.

The deficit rate will be lower than this year

The impact of the epidemic on the fiscal revenue is great, and this years large-scale tax reduction and fee reduction will bring about a substantial decrease in revenue, as well as a substantial increase in rigid expenditure under the implementation of the six stabilities and six guarantees policy, resulting in the aggravation of fiscal revenue and expenditure contradictions.

In order to hedge against the impact of the epidemic, the central government further expanded its fiscal deficit to 3.76 trillion yuan this year, an increase of 1 trillion yuan over the previous year. As a result, the (nominal) fiscal deficit has expanded from 2.8% in the previous year to more than 3.6%. This is the first time in Chinas history that the (nominal) fiscal deficit rate has exceeded 3%.

According to Shis analysis, due to the low fiscal revenue base this year, there will be a significant increase in fiscal revenue next year, and there will be no large-scale tax reduction and fee reduction new deal next year. Therefore, the deficit scale may be reduced, and the fiscal deficit rate may be around 3%.

Zhao Wei believes that this years deficit rate of 3.6% is a special policy in a special period. Next year, with the policy ebb, these special measures or corresponding adjustments. In the neutral scenario, the fiscal deficit rate may fall to about 3%.

Wang Tao, director of Chinas chief economist forum, predicts that fiscal policy will be tightened and normalized next year. The official deficit rate will drop from 3.7% to 3% in 2021. CICC expects that fiscal policy will still need to be exerted in 2021, and the deficit rate is expected to be around 3.3%

Yang Zhiyong, a researcher at the Institute of financial strategy of the Chinese Academy of Social Sciences, told ifnance that it should continue to implement a positive fiscal policy next year and maintain its strength basically stable. Next year, the fiscal deficit rate will not exceed 4%, and we will maintain flexibility and make timely adjustments according to the situation.

The scale of special bonds has been reduced due to the withdrawal of special bonds

In response to the epidemic, China issued 1 trillion yuan of special anti epidemic treasury bonds this year, which were all transferred to the grass-roots municipal and county governments for infrastructure construction or anti epidemic related specific projects. Will special anti epidemic bonds continue to be issued in 2021?

Many experts believe that with the control of the epidemic situation and the return of fiscal policy to normal, it is expected that no special anti epidemic treasury bonds will be issued in 2021.

According to Zhao Weis analysis, with the substantial expansion of local debt, the local debt ratio has soared, which is close to the 100% warning line previously formulated by the Ministry of finance, which means that the substantial expansion of local debt in 2021 is unsustainable. In the neutral situation, the scale of special debt may be about 3 trillion yuan.

Wang Tao believes that with the rebound in economic growth, the governments explicit support for infrastructure project financing may be weakened. Next year, the new amount of local government special bonds may drop from 3.75 trillion yuan this year to about 3 trillion yuan.

In response to the impact of the epidemic, the scale of local government debt has increased significantly. By the end of October this year, the balance of local government debt was about 25.8 trillion yuan, which was controlled within the limit approved by the National Peoples Congress.

Ministry of finance officials have publicly said that the local government debt ratio is likely to enter the internationally accepted 100% - 120% warning range by the end of this year, and the risk of government debt is gradually increasing. It is necessary to scientifically determine the optimal scale of local government debt, which not only promotes the expansion of effective investment and economic and social development, but also ensures that there is no systemic risk.

This year, in response to the epidemic situation, China issued a 2.5 trillion yuan tax reduction and fee reduction policy that exceeded expectations. During the 13th Five Year Plan period, the scale of tax reduction and fee reduction reached 7.6 trillion yuan, exceeding the national fiscal revenue in 2009. Will large-scale tax reduction and fee reduction policies continue to be introduced in 2021?

Shi Wenwen believes that it is expected to continue to implement the current tax reduction and fee reduction policy next year, and will not introduce a new large-scale tax reduction and fee reduction policy, because the relevant policies have lasted for many years and the space is relatively small. However, some small-scale structural tax and fee reduction measures may be introduced next year, aiming at small and micro enterprises and strategic emerging industries. Yang Zhiyong also believes that the current practice will be basically maintained on the basis of the tax reduction and fee reduction policy next year, because the need for the normal operation of the governments financial resources must be considered. Zhao Wei said that the 2.5 trillion yuan tax reduction and fee reduction policy will generally expire in the middle or end of this year, and it is expected that the total scale of tax reduction and fee reduction in 2021 may be significantly smaller than that in 2020. The above-mentioned senior financial and taxation experts believe that while returning to normal in 2021, the fiscal policy will also maintain a certain degree of flexibility, and take corresponding policy tools to deal with emergencies at home and abroad. Source of this article: Guo Chenqi, editor in charge of first finance and Economics_ NBJ9931

Shi Wenwen believes that it is expected to continue to implement the current tax reduction and fee reduction policy next year, and will not introduce a new large-scale tax reduction and fee reduction policy, because the relevant policies have lasted for many years and the space is relatively small. However, some small-scale structural tax and fee reduction measures may be introduced next year, aiming at small and micro enterprises and strategic emerging industries.

Yang Zhiyong also believes that the current practice will be basically maintained on the basis of the tax reduction and fee reduction policy next year, because the need for the normal operation of the governments financial resources must be considered.

Zhao Wei said that the 2.5 trillion yuan tax reduction and fee reduction policy will generally expire in the middle or end of this year, and it is expected that the total scale of tax reduction and fee reduction in 2021 may be significantly smaller than that in 2020.