What is countercyclical fiscal policy? How is it implemented? The Ministry of Finance is preparing to discuss this

The press learned from the State Council Information Office on the 9th that the State Council Information Office will hold a press conference at 10:00 am on October 12th. Relevant officials from the Ministry of Finance will introduce the situation regarding "increasing the countercyclical adjustment of fiscal policies and promoting high-quality economic development."

What is "Countercyclical Adjustment"?

This press conference will focus on "the intensity of countercyclical adjustment of fiscal policies." So, what is countercyclical adjustment?

Countercyclical adjustment refers to the government using policy tools and measures according to the stage of the economic cycle to smooth out the volatility of the entire economic cycle, better promoting economic development. Fiscal policy is an important category within this.

Currently, the fundamental conditions of China's economy, the broad market, strong economic resilience, and great potential have not changed. At the same time, new situations and problems have emerged in economic operation. In order to better promote economic development, in recent years, China has adhered to implementing proactive fiscal policies. By increasing fiscal expenditures, implementing tax cuts, and fee reductions, the government has expanded government investment and unleashed consumption potential, promoting economic growth, increasing employment, and expanding domestic demand.

Experts believe that countercyclical adjustment of fiscal policies is of great significance for stabilizing economic growth, promoting employment, controlling inflation, and stabilizing financial markets. As the national economy continues to evolve, fiscal policies will also be flexibly adjusted according to changes in the economic situation in order to achieve smoother economic development.

Active Fiscal Policies Continuously Strengthened to Promote High-Quality Economic Development

This year, China continues to implement proactive fiscal policies, using a combination of various policy tools to promote sustained economic recovery and improvement. So, what are the "treasures" in the fiscal policy toolbox? Where has the national purse been invested?

Policy Highlight - Ultra-Long-Term Special National Bonds

Speaking of the fiscal policy toolbox, the biggest highlight this year is the ultra-long-term special national bonds. The 1 trillion yuan ultra-long-term special national bonds are specifically used for "two focuses," which are the implementation of major national strategies and the construction of security capabilities in key areas. As of the end of July, a total of 418 billion yuan of ultra-long-term special national bonds have been issued.

Moreover, to better support large-scale equipment upgrades and the trade-in of consumer goods for new ones, out of the trillion yuan ultra-long-term special national bonds, around 300 billion yuan is allocated to support equipment upgrades in key areas, further enhancing the ability of localities to trade in old consumer goods for new ones.

Special Bonds Strongly Support Infrastructure Construction

In addition to the ultra-long-term special national bonds, this year, the quota for new local government special bonds has increased to 39 trillion yuan, an increase of 100 billion yuan from the previous year, supporting local efforts to strengthen weaknesses in key areas. From January to August, new local government special bonds worth 25.8 trillion yuan have been issued, with an accelerated issuance speed. This has provided strong support for municipal construction, industrial park infrastructure, transportation infrastructure, social undertakings, and affordable housing projects, driving the expansion of effective investment and promoting stable economic operation.

Balancing Consumption and Investment to Revive Domestic Demand

Of course, the fiscal policy toolbox not only includes special bonds and special national bonds but also actively promotes sustained economic recovery and improvement through the combined use of deficits, fiscal subsidies, interest subsidies, and tax policies In terms of interest subsidies, this year, for operating entities included in the list of alternative projects and meeting the refinancing conditions for equipment updates, the central government provides an annual interest subsidy of 1.5 percentage points on the loan principal for a period of 2 years to help reduce financing costs for the operating entities.

In terms of tax policies, the fiscal authorities comprehensively utilize tax incentives, special funds, and other policy tools to effectively implement large-scale equipment updates and trade-ins for consumer goods, forming a virtuous cycle of mutual promotion between consumption and investment.

Key areas of expenditure are guaranteed

Overall, this year, the proactive fiscal policy further strengthens the financial support for major national strategic tasks and basic livelihoods, allocating fiscal funds to urgent development and livelihood needs. In the first eight months, the total expenditure of the national general public budget was 17.3898 trillion yuan, an increase of 1.5% year-on-year. Expenditures in key areas such as social security and employment, education, agriculture, forestry, water resources, urban and rural community development, science and technology, and housing security have been guaranteed