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.
Zhao Wei, chief economist of Kaiyuan securities, told China first finance and economics that in order to cope with the epidemic situation, China has launched a large-scale financial backing measures in 2020. These measures are more emergency measures than normal. In the post epidemic period, policy ebb is the general trend. From increasing lever to stabilizing lever, the focus is back to structural adjustment and risk prevention. During the period of the epidemic, the policy of providing minimum funds led to a substantial increase in the leverage ratio of entities and further accumulation of debt risk. With the gradual recovery of the economy, the policy ebb tide has begun. Since May, the three red lines of cracking down on capital idling, real estate regulation and control, as well as the frequently mentioned risk prevention and stable leverage, have gradually returned to the normal, and so has the fiscal policy.
This years fiscal policy is a hedge and emergency measure to deal with the once-in-a-century epidemic. If the epidemic situation can be controlled as it is now, next years fiscal policy should return to normal and remain positive, but the intensity will be smaller than this year. Shi Wenwen, a professor at China University of political science and law, told first finance and economics.
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.
Fiscal policy in 2021 needs to consider the economic recovery. At present, the epidemic prevention and control has achieved remarkable results. This years economic growth is expected to grow by 2%. Therefore, the active fiscal policy should consider returning to a conventional state. A senior finance and taxation expert told first finance and economics.
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%
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.
In order to increase government investment, the new special bonds of local governments will reach 3.75 trillion yuan in 2020, an increase of 1.6 trillion yuan over last year, a year-on-year increase of 43%. According to the principle of funds follow the project, special bonds are allocated to local governments for overall use, and are mainly invested in infrastructure construction projects supported by the state and guaranteed by asset income.
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.
According to the data of the Ministry of finance, by the end of 2019, the local government debt balance was 21.31 trillion yuan, and the local government debt ratio was 82.9%, which was lower than the international standard of 100% to 120%.
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.