The Ministry of Finance: It is proposed to increase the debt limit on a one-time basis, which is the most significant measure to support debt-to-equity swaps in recent years; the central government still has a considerable amount of borrowing space and deficit expansion space

The highly anticipated press conference of the Ministry of Finance focused on "the intensity of countercyclical adjustments in fiscal policies," with a new round of incremental fiscal policies being implemented.

The State Council Information Office held a press conference at 10 a.m. this morning, where Minister of Finance Lan Fo'an introduced the relevant information on "increasing the intensity of countercyclical adjustments in fiscal policies to promote high-quality economic development" and answered questions from reporters. In addition, three deputy ministers also attended, responsible for areas including the General Office, Budget Office, and Treasury Office, all of which are related to many tools in the fiscal policy toolbox, such as ultra-long-term special national bonds and special bonds.

At the press conference, Minister Lan Fo'an pointed out that the central government still has considerable room for borrowing and deficit expansion, and will gradually introduce a targeted package of incremental policy measures in the near future. This increase in the intensity of countercyclical fiscal policies has eight key points worth noting.

1. Intending to increase a large amount of debt limit at one time, the largest measure to support debt conversion in recent years

Minister of Finance Lan Fo'an stated that the plan to increase a large amount of debt limit at one time is to replace the hidden debts of local governments, intensify support for local debt risk resolution, and the relevant policies will be explained in detail to the public after fulfilling the relevant legal procedures. This policy is the largest measure to support debt conversion in recent years, providing timely relief to local governments, freeing up more resources to support economic development, and consolidating the "three guarantees" at the grassroots level.

2. Issuing special national bonds to support large state-owned commercial banks in replenishing core Tier 1 capital, the work has been initiated and is awaiting capital replenishment proposals from various banks

Minister of Finance Lan Fo'an stated that since the beginning of this year, the fiscal authorities have been actively implementing fiscal policies to enhance quality and efficiency. China's finances have sufficient resilience, and through comprehensive measures, a balance between revenue and expenditure can be achieved to meet the annual budget targets. The Ministry of Finance will issue special national bonds to support large state-owned commercial banks in replenishing capital.

Deputy Minister of Finance Liao Min stated at the State Council Information Office press conference that as of the end of June 2024, the average core Tier 1 capital adequacy ratio of six large state-owned banks was 12.3%. The Ministry of Finance will adhere to market-oriented and rule-of-law principles, adopt a comprehensive approach, and actively raise funds through channels such as issuing special national bonds to further increase the core Tier 1 capital of large state-owned commercial banks in a stable and orderly manner. This work has been initiated and is awaiting capital replenishment proposals from various banks, and specific capital replenishment plans will be disclosed in a timely and lawful manner in accordance with relevant regulations.

3. Allowing special bonds to purchase existing housing or land, and restarting land reserve special bonds

Deputy Minister of Finance Liao Min stated at the State Council Information Office press conference that the Ministry of Finance and relevant departments are working together to promote the balance of supply and demand in the real estate market. Next, the Ministry of Finance will actively study and introduce incremental measures conducive to the stable development of the real estate market, allowing special bonds to be used for land reserves. This is mainly considering that there is a relatively large amount of idle undeveloped land in various regions, and areas with a genuine need can be used for new land reserve projects. This policy can adjust the supply and demand relationship in the land market, reduce idle land, enhance the control over land supply, and help alleviate the liquidity and debt pressure of local governments and real estate enterprisesLiao Min also stated that the Ministry of Finance will actively study and introduce incremental measures conducive to the stable development of the real estate market, supporting the acquisition of existing housing stock and increasing the supply of affordable housing. Considering the relatively large number of completed but unsold houses at present, two main support measures will be taken: one is to use special bonds to acquire existing commercial housing for use as affordable housing in various regions, and the other is to continue to effectively utilize subsidy funds for affordable housing projects.

4. Special bonds will support forward-looking and strategic emerging industry infrastructure

Wang Dongwei, Vice Minister of Finance, stated at a press conference of the State Council Information Office that the next step will involve studying the expansion of the scope of special bond usage, maintaining the government's investment intensity and pace, and reasonably reducing financing costs.

Regarding the expansion of scope, first, there will be a study to improve the management of the special bond investment list, increasing its use in the field of project capital. Second, special bonds will be effectively used to support the acquisition of existing commercial housing for affordable housing purposes. Third, they will support forward-looking and strategic emerging industries.

5. Various policy tools are still under study, and the central government has ample room for debt issuance and deficit increase

Minister of Finance Lan Fo'an stated that counter-cyclical measures have other policy tools that are still under study, such as the central government having ample room for debt issuance and deficit increase.

6. From 2023 to 2024, 34 trillion yuan in local government bonds will be allocated to support debt conversion

Minister of Finance Lan Fo'an stated that in 2023, on the basis of allocating over 2.2 trillion yuan in local government debt limits, an additional 1.2 trillion yuan will be allocated in 2024 to support local areas, especially high-risk regions, in resolving existing debt risks and clearing overdue corporate accounts. Overall, the risks of local government debt have been alleviated, and progress has been made in debt conversion.

7. Plans to introduce a batch of mature and feasible financial and tax reform measures in the next two years

Minister of Finance Lan Fo'an stated that efforts are being made to introduce a plan to deepen the financial and tax system reform, focusing on problem-oriented and goal-oriented approaches, emphasizing the acceleration of reform and promoting the scientific management of finance. A preliminary plan to deepen the financial and tax system reform has been formulated as a roadmap for future reforms. Efforts are being made to implement reform measures, with plans to introduce a batch of mature and feasible reform measures in the next two years, especially some fundamental institutional reforms related to top-level design, such as improving the budget system and enhancing the fiscal transfer payment system.

8. This year, the growth rate of national general public budget revenue is lower than expected, but achieving a balanced budget is feasible

Minister of Finance Lan Fo'an stated that currently, the favorable conditions such as the solid foundation of the Chinese economy, vast market, strong economic resilience, and great potential remain unchanged, but new situations and issues have emerged in economic operations. It is expected that the growth rate of national general public budget revenue will be lower than expected. There is concern about whether this year's budget target can be achieved. I can responsibly inform everyone that China's finance has sufficient resilience, and through comprehensive measures, achieving a balanced budget and meeting the annual budget target is feasible.

The following is the full text of the State Council Information Office press conference:

• Shou Xiaoli, Director of the State Council Information Office and spokesperson:Ladies and gentlemen, good morning! Welcome to the State Council Information Office press conference. Today, we have invited Minister of Finance, Mr. Liao Fu'an, to introduce the situation regarding "increasing the intensity of fiscal counter-cyclical adjustments and promoting high-quality economic development", and to answer questions of concern. Also present at today's press conference are: Deputy Minister of Finance, Mr. Liao Min, Mr. Wang Dongwei, and Ms. Guo Tingting.

Now, let's first invite Minister Liao Fu'an to give an introduction.

• Minister of Finance, Liao Fu'an:

Dear media friends, hello everyone! I am very pleased to have the opportunity to communicate with you face to face. First of all, on behalf of the Ministry of Finance, I would like to express my heartfelt thanks to everyone for your long-term care, attention, and support for fiscal work. Next, I will summarize the implementation of proactive fiscal policies this year, as well as the overall considerations for increasing the intensity of fiscal counter-cyclical adjustments and promoting high-quality economic development in the next step.

Since the beginning of this year, the Ministry of Finance has conscientiously implemented the requirements of the Central Economic Work Conference, adhered to actively moderate fiscal policies, enhanced quality and efficiency, used a combination of tools such as deficits, special bonds, ultra-long-term special national bonds, tax incentives, and fiscal subsidies, increased the intensity of fiscal policies, strengthened guarantees in key areas, actively prevented and resolved risks, and promoted the sustained recovery and improvement of the economy. This mainly includes the following six aspects:

1. Expanding the scale of fiscal expenditures. In 2024, a fiscal deficit of 4.06 trillion yuan was arranged, an increase of 180 billion yuan from the initial budget of the previous year; the quota for local government special debt was increased by 1 trillion yuan to 3.9 trillion yuan; issuing 1 trillion ultra-long-term special national bonds, utilizing the funds from the increased issuance of national bonds in 2023, the total general public budget expenditure for the year reached 28.55 trillion yuan, maintaining a high level of expenditure intensity to provide strong support for high-quality development.

• Liao Fu'an:

1. Optimizing tax and fee preferential policies. Implementing structural tax cuts and fee reductions, continuously implementing policies such as pre-tax deduction for R&D expenses, additional deduction of VAT for advanced manufacturing enterprises, and tax exemptions for technology transfer, improving tax preferential policies for technological transformation of manufacturing enterprises. From January to August, the main policies supporting technological innovation and the development of the manufacturing industry reduced taxes, fees, and refunds by over 1.8 trillion yuan.

2. Actively expanding domestic effective demand. Urging localities to make good use of the funds from increased national bond issuance, supporting post-disaster recovery and reconstruction, and enhancing disaster prevention, reduction, and relief capabilities. Doing well in the issuance and use of ultra-long-term special national bonds, supporting the construction of national major strategic and key areas' security capabilities, actively promoting large-scale equipment renewal and consumer goods replacement. Continuously strengthening the management of local government special bonds, expanding the scope of investment and the use of capital, supporting localities to increase efforts in key areas. From January to September, 3.6 trillion yuan of new special bonds were issued to support over 30,000 projects, with over 260 billion yuan used as project capital.

3. Strengthening grassroots "three guarantees" and guarantees in key areas. Implementing the requirement for party and government organs to tighten their belts, strictly controlling general expenditures, freeing up funds to ensure basic livelihoods, wages, operations, and expenditures in key areas. In 2024, the central government arranged over 10 trillion yuan for transfers to local governments, with balanced transfer payments increasing by 8.8%, and county-level basic financial security mechanism subsidy funds increasing by 8.6%, allocating more funds to supplement local financesSupport the local to firmly secure the "three guarantees" at the grassroots level. At the same time, increase support for areas such as science and technology, rural comprehensive revitalization, and ecological civilization construction. Central-level science and technology expenditures increased by 10%, and central finance connected to advance the allocation of 177 billion yuan in subsidies for rural revitalization, with 65.1 billion yuan allocated to support the fight against pollution. Improve financial and tax support policies to promote regional coordinated development, solidly implement regional development strategies such as the coordinated development of Beijing-Tianjin-Hebei, the development of the Yangtze River Economic Belt, and the integrated development of the Yangtze River Delta.

• Lan Fo'an:

  Fifth, provide greater support for basic livelihood security. Since the beginning of this year, the central finance has allocated 66.7 billion yuan in employment subsidies to support local efforts in employment for key groups such as college graduates and vocational skills training. National education expenditure from January to September reached 3 trillion yuan. Increase the basic pension level for retirees by 3% nationwide, significantly raise the minimum standard for basic pensions for urban and rural residents. Increase the fiscal subsidy standard for basic public health services to 94 yuan per person per year, and raise the fiscal subsidy standard for basic medical insurance for urban and rural residents to 670 yuan per person per year. Next, we will respond to changes in China's population development and the diverse needs of the people, further increase expenditures in related areas, and better benefit people's livelihoods.

  Sixth, effectively address the risks of local government debt. Strengthen the responsibilities of local governments, implement various debt conversion measures according to the situation of each province. Based on arranging local government debt limits exceeding 22 trillion yuan in 2023, an additional quota of 1.2 trillion yuan was arranged in 2024 to support local areas, especially high-risk regions, in resolving existing debt risks and clearing overdue corporate accounts. Overall, the risks of local government debt have been alleviated, and debt conversion work has achieved phased results.

  Overall, the implementation of proactive fiscal policies has shown significant effects, effectively ensuring the implementation of major national strategic tasks, and promoting overall stable and progressive economic operation. Currently, the fundamental conditions of China's economy, such as its broad market, strong economic resilience, and great potential, remain unchanged, while some new situations and problems have emerged in economic operation. It is expected that the growth rate of national general public budget revenue will be lower than expected. Many are concerned about whether this year's budget targets can be achieved. Here, I can responsibly tell everyone that China's finances have sufficient resilience. Through comprehensive measures, a balance between revenue and expenditure can be achieved to meet the annual budget targets. Please rest assured!

• Lan Fo'an:

  In accordance with the deployment of the Central Political Bureau meeting held on September 26, the Ministry of Finance, based on accelerating the implementation of established policies, will launch a series of targeted incremental policy measures around stabilizing growth, expanding domestic demand, and mitigating risks in the near future. The main aspects include:

  First, increase efforts to support local governments in resolving debt risks, significantly increase the scale of debt quotas, support localities in resolving implicit debts, allowing local governments to free up more energy and financial resources to promote development and safeguard people's livelihoods.

  Second, issue special national bonds to support large state-owned commercial banks in supplementing core Tier 1 capital, enhancing these banks' risk resistance and credit lending capabilities to better serve the development of the real economy

Third, the superimposed use of local government special bonds, special funds, tax policies, and other tools to support the stabilization of the real estate market.

Fourth, increase support and protection for key groups. Before National Day, one-time living allowances have been distributed to disadvantaged groups. Next, efforts will be increased to provide awards and assistance to student groups to enhance overall consumption capacity.

Let me add one more point, countercyclical adjustment is definitely not just limited to the above four points. These four points are policies that are currently in the decision-making process. We are also studying other policy tools. For example, the central government still has a considerable amount of room for debt issuance and deficit expansion.

That's all for my introduction. Next, my colleagues and I are very willing to answer questions from the reporters. Thank you!

• Shou Xiaoli:

  Thank you Minister Lan for your introduction. Now we will move on to the question and answer session. Before asking your question, please state the name of your news organization.

• Xinhua News Agency Reporter:

  We saw that at a recent meeting of the Central Political Bureau, it was proposed to ensure necessary fiscal expenditures. What specific measures will the Ministry of Finance take? Thank you.

• Lan Fo'an:

  Thank you for your question. Since the beginning of this year, we have been earnestly implementing proactive fiscal policies, adhering to moderate strengthening, improving quality and efficiency, increasing funding guarantees for basic livelihoods and key areas, maintaining the intensity of fiscal expenditures, and ensuring the overall stability and orderliness of fiscal operations. Key expenditures have been well protected. Here are some figures:

  From January to September, the national general public budget expenditure was 20.18 trillion yuan, an increase of 2%. Among them, social security and employment expenditures increased by 4.3%, education expenditures increased by 1.1%, agriculture, forestry, and water expenditures increased by 6.4%, urban and rural community expenditures increased by 6.1%, and housing security expenditures increased by 2.5%. The execution of the national general public budget revenue is below the target set at the beginning of the year. We will take multiple measures and comprehensive strategies to ensure a balance between revenue and expenditure for the whole year. As I mentioned earlier, in our work, we must not only raise fiscal revenue in accordance with the law and regulations but also avoid excessive taxation to effectively protect the rights and interests of market entities. At the same time, we will maintain the necessary strength of fiscal expenditures, ensure that key expenditures are fully supported, play a good role in fiscal countercyclical adjustment, and promote the completion of the annual economic and social development goals. We have the following three measures:

  First, effectively supplement financial resources. The central government has allocated 400 billion yuan from the limit of local government debt balance to supplement the comprehensive financial resources of local governments, support local governments in resolving the debt of existing government investment projects, and digest government arrears to enterprises. Encourage eligible localities to revitalize idle assets, strengthen the management of state-owned capital returns, and strive to increase fiscal revenue. Guide localities to use budget stabilization funds and other stock funds in accordance with the law and regulations to meet the needs of fiscal expenditures.

  Second, effectively guarantee various key expenditures. Adhere to the requirement for party and government organs to tighten their belts, strictly control general expenditures, allocate more funds to fill shortcomings, strengthen weak areas, benefit people's livelihoods, and ensure that the intensity of key expenditures does not decrease. As can be seen from the numbers listed earlier, key expenditures have maintained a relatively high growth rate. Strengthen the guarantee of key expenditures in areas such as science and technology, education, implement well policies related to increasing the basic old-age pension for urban and rural residents, increasing fiscal subsidies for basic public health services, effectively support the comprehensive revitalization of rural areas, green development, regional coordinated development, and other major strategies, and ensure the implementation of various policies determined by the central governmentThree, make full and good use of all kinds of debt funds. At present, the issuance of national bonds is accelerating, and ultra-long-term special national bonds are also being gradually issued. In terms of special bonds, with the amount to be issued plus the unused funds that have already been issued, a total of 2.3 trillion yuan of special bond funds can be arranged for use in various regions in the next three months. We will urge local governments to effectively use various bond funds, accelerate project implementation progress, allocate funds in a timely manner according to actual needs, quickly generate physical work output, and play a role in driving investment. Thank you.

• Southern+ reporter from Southern Daily:Minister Lan just mentioned that the next step is to strengthen support for local governments to resolve hidden debts. Could you please introduce the measures taken and the policy arrangements for the next step? In addition, there are market rumors about trillions of fiscal policy arrangements. You also mentioned just now the need to significantly increase debt quotas to support local debt resolution. Can you confirm this? Thank you.

• Lan Fo'an:Thank you for your question. Preventing and resolving the risks of local government debt is a major issue related to development, security, and the sustainable development of public finances. Since 2015, the Central Committee of the Communist Party of China has required the establishment of a sound and standardized mechanism for local government debt financing, opening the "front door" and strictly blocking the "back door", resolutely curbing the scale and increment of hidden debts, prudently resolving the stock, and effectively preventing debt risks. The Ministry of Finance, together with relevant departments, has resolutely implemented a series of measures, such as issuing local government bonds to replace existing government debts, establishing a "closed-loop" management system for local government debts, promoting Beijing, Shanghai, and Guangdong, where debt risks are relatively low, to achieve zero hidden debts in stock, conducting debt resolution pilots in counties and districts with higher debt risks, and cooperating with relevant departments to prevent and resolve the risks of hidden debts of financing platforms and strengthen government investment project management. Local party committees and governments at all levels have earnestly fulfilled their main responsibilities, established a multi-department collaborative mechanism, coordinated debt management and risk prevention and resolution work, actively repaid debts through arranging financial funds, utilizing asset resources, etc., prudently resolved government debt risks, and achieved phased results.

Starting from the second half of 2022, due to various factors, some regions have encountered hidden risks in debt. In July 2023, the Central Political Bureau meeting required effective prevention and resolution of local debt risks and the formulation and implementation of a comprehensive debt resolution plan. The State Council has established a work coordination mechanism to guide provinces to formulate specific debt resolution plans. Relevant departments, local party committees, and governments at all levels have intensified their efforts, taken more practical measures, and the Ministry of Finance has allocated over 2.2 trillion yuan of local government bond quotas to support local areas, especially high-risk areas, in resolving stock debt risks and clearing overdue corporate accounts. The overall risk of local government debt has been alleviated. By the end of 2023, the balance of hidden debts included in the government debt information platform nationwide has decreased by 50% compared to the baseline data in 2018, and debt risks are under control.

Since 2024, after completing relevant procedures, the Ministry of Finance has arranged a debt limit of 1.2 trillion yuan to support local governments in resolving stock hidden debts and digesting government arrears to enterprises. In order to alleviate the pressure of local governments in resolving debts, in addition to continuing to allocate a certain scale of bonds each year in the newly added special bond quota specifically for supporting the resolution of stock government investment project debts, it is planned to increase the debt limit by a large scale at one time to replace the stock hidden debts of local governments, intensify support for local debt risk resolution, and detailed explanations of relevant policies will be provided to the public after completing the statutory proceduresIt is worth emphasizing that this upcoming policy is the most supportive measure for debt reduction in recent years. Undoubtedly, this is a timely policy that will greatly alleviate the pressure of local debt, freeing up more resources for economic development, boosting the confidence of operating entities, and consolidating the "three guarantees" at the grassroots level.

Next, the Ministry of Finance will work with relevant departments to further strengthen the responsibility of local debt entities, guide localities in prudently resolving hidden debt risks, and promote the transformation of financing platforms. At the same time, illegal debt-raising issues will be strictly investigated and held accountable, with a time limit for rectification. Discover, investigate, and hold accountable together to resolutely curb the risk of new hidden debts.

Regarding the specific funding arrangements you mentioned, they will be disclosed to the public in a timely manner after the statutory procedures. Thank you.

• Reporter from TASS:My question is about the real estate market. Could you please elaborate on the considerations of fiscal policies in supporting the development of the real estate market? Thank you.

• Lan Fo'an:This question will be answered by Vice Minister Liao Min.

• Vice Minister of Finance Liao Min:Thank you for the question. Real estate is a matter of great concern to everyone. The Ministry of Finance is working together with relevant departments to focus on promoting the balance of supply and demand in the real estate market, continuously optimizing fiscal and tax policies, and promoting the real estate industry to return to a stable and healthy development track.

Let me introduce to you the policies that have been implemented, including the demand side, the supply side, and risk mitigation:

On the demand side, the main focus is on supporting the satisfaction of diverse housing needs for residents and reducing the cost of home purchases. This includes the phased individual income tax refund policy for "selling old and buying new" homes. For example, if you sell a house for 2 million yuan, with an original value of 1 million yuan, you should pay about 200,000 yuan in taxes. However, if you purchase another house worth over 2 million yuan within a year, the 20,000 yuan tax already paid can be fully refunded. Additionally, we have cooperated with relevant departments to reduce the housing provident fund loan interest rate by 0.25 percentage points. It is estimated that this policy can save about 20 billion yuan in personal housing provident fund loan interest payments nationwide each year. These two policies have played an important role in reducing residents' housing burdens and increasing housing demand.

On the supply side, we mainly support the optimization of affordable housing supply to ensure the basic livelihood of the people. In the past three years, the central government has allocated 212.4 billion yuan in subsidies for affordable housing projects, 280 billion yuan in central budget investment, and coordinated local government special bonds to support the construction of 6.66 million units of various types of affordable housing. These are used to meet the basic housing needs of urban low- and middle-income groups, new urban residents, and young people. At the same time, we also support various regions in actively and prudently advancing the renovation of 160,000 old residential communities, benefiting 27.25 million households, supporting the renovation of 4.2 million households in shantytowns, urban villages, and old and dangerous houses, playing an important role in stabilizing investment, promoting consumption, and benefiting the people.

In terms of resolving existing risks, the Ministry of Finance has cooperated in issuing a special loan policy for "guaranteeing the completion of construction projects," providing interest subsidies for 350 billion yuan in special loans. Since last year, 6.2 billion yuan in interest subsidy funds have been pre-allocated to support the protection of the legitimate rights and interests of homebuyers. We also cooperate in promoting the battle to guarantee the completion of construction projects, digesting existing commercial housing and idle land, etc., to prevent and resolve real estate risks and stabilize social expectationsAbout the next steps, the third measure introduced by Minister Lan just now is about real estate policies. Next, we will adhere to strict control of incremental, optimization of existing, and improvement of quality, actively study and introduce policy measures conducive to the stable development of the real estate market. Here, I would like to inform everyone that the Ministry of Finance has the following three main considerations:

First, allowing special bonds to be used for land reserves. This is mainly considering the relatively large amount of idle undeveloped land in various regions. Supporting local governments to use special bonds to reclaim qualified idle land reserves, and areas in need can also be used for new land reserve projects. This policy can adjust the supply and demand relationship in the land market, reduce idle land, enhance the control ability of land supply, and help alleviate the liquidity and debt pressure of local governments and real estate enterprises.

Second, supporting the acquisition of existing housing to optimize the supply of affordable housing. Considering the relatively large number of completed but unsold housing units, we are mainly taking two support measures: one is to use special bonds to acquire existing commercial housing for use as affordable housing in various regions. The other is to continue to use subsidies from the affordable housing project, which was originally used to support the construction of affordable housing through new construction. Now, we are optimizing the direction of support, appropriately reducing new construction scale, and supporting local areas to raise affordable housing sources through the digestion of existing housing units. Through these two measures, we can digest existing commercial housing, promote the supply-demand balance in the real estate market, optimize the supply of affordable housing, and meet the housing needs of the general middle and low-income population.

Third, timely optimize and improve relevant tax policies. In accordance with the decisions and arrangements of the Party Central Committee, we are actively studying and clarifying the value-added tax and land value-added tax policies that are connected to the standards for ordinary and non-ordinary residential properties. Next, we will further study to increase support, adjust and optimize relevant tax policies to promote the stable and healthy development of the real estate market.

Promoting the stable development of the real estate market is a systematic project that requires coordinated efforts of various policies. In policy implementation, we will continue to strengthen the coordination of fiscal policy with other policies, enhance the linkage between the central and local governments, strengthen the connection between new and old policies, and firmly promote the stabilization of the real estate market.

Thank you!

• Reporter from Daily Economic News:We have noticed that the pressure to ensure basic livelihoods, wages, and operations in some places has increased. Minister Lan also mentioned the "three guarantees" work just now, and various parties are paying close attention to this. What measures has the Ministry of Finance taken this year to support local governments in ensuring the "three guarantees" at the grassroots level?

• Lan Fo'an:Thank you for your question. Doing a good job in ensuring basic livelihoods, wages, and operations at the grassroots level, which we often refer to as the "three guarantees," is a basic requirement to safeguard the immediate interests of the people and is also the basic function of finance. In 2024, the Ministry of Finance continuously improved the "three guarantees" management system covering budget formulation, budget execution, dynamic monitoring, and emergency response, to promote the smooth operation of the grassroots "three guarantees." We mainly have the following four measures: first, strengthening financial support for the "three guarantees" at the grassroots level. In 2024, the central government has arranged over 10 trillion yuan in transfer payments to local governments and urged local governments to allocate financial resources to the grassroots level, prioritizing full and sufficient budget allocation for the "three guarantees."Here we are mainly referring to the grassroots level, which is mainly at the county level. The second point is to establish a sound working mechanism. Following the principle of "county-level as the main support, city-level as the backup, provincial-level backup, and central-level incentives", we are progressively implementing responsibilities and refining emergency response plans for "three guarantees" risks. The third point is to enhance the guarantee capacity of funds. By strengthening the allocation of funds to difficult counties and regions, we ensure the payment needs for the "three guarantees". The fourth point is to strengthen the monitoring of local financial operations. Currently, with the support of an integrated budget management system, the financial operations of all budget units and grassroots levels nationwide can be monitored, including the amount of funds available and the progress of the "three guarantees". We send out monthly "three guarantees" risk alerts to all regions and urge them to respond promptly.

Overall, the current situation of the grassroots "three guarantees" is generally stable, with some areas facing tighter conditions. According to the national calculation of grassroots financial resources, the "three guarantees" bottom line is guaranteed. For example, in 2023, the expenditure on the "three guarantees" at the grassroots level accounts for about 50% of the available financial resources, and when combined with other fixed expenditures, it accounts for about 80% of the available financial resources. The pressure on the "three guarantees" in some local areas is increasing, mainly due to factors such as slowing growth in fiscal revenue, declining land transfer income, and the burden of local government debt.

Next, the Ministry of Finance will continue to take practical and effective measures, formulate a "three guarantees" list, actively build a long-term mechanism, and strengthen the grassroots "three guarantees" bottom line. Specifically, there are five measures:

1. Strengthening the responsibilities of all parties. Local party committees and governments at all levels are the primary responsible entities for the "three guarantees" in their respective regions and should regularly study and improve guarantee measures. Functional departments bear the main responsibility for implementing policies in their respective areas and should establish horizontal coordination mechanisms with the finance department to work together.

2. Enhancing local financial resources. In line with annual budget arrangements, continue to increase the central government's transfer payments to local finances. As mentioned earlier, this year, using the debt balance limit, we allocated 400 billion yuan of debt limit to local governments to supplement comprehensive financial resources, which is of positive significance for ensuring the "three guarantees". Clean up and standardize special transfer payments, optimize the structure of transfer payments, increase the proportion of financial transfer payments; at the same time, expand local tax sources, appropriately expand local tax management authority, and increase local autonomous financial resources.

3. Strengthening fund allocation. Continuously track local revenue and expenditure operations and fund guarantee situations. For areas with tight funds, the central government will provide appropriate support through early fund allocation and other means. Urge provincial finance departments to strengthen fund monitoring, enhance grassroots fund guarantee capacity, and prioritize meeting the needs of "three guarantees" expenditures.

4. Easing debt pressure. Increase efforts to replace local government existing implicit debts on a larger scale. As mentioned earlier, we will explain in detail to society after completing the legal procedures for a large-scale debt limit, and continue to allocate a certain amount from the annual new local government special debt limit to supplement government fund resources, supporting local efforts to resolve debt risks.

5. Strengthening dynamic monitoring. Promote the establishment of an information-based and intelligent monitoring system that covers the entire process of the "three guarantees", dynamically capture potential risks, provide timely warnings and alerts, and ensure early detection and resolution of issues. Thank you

• Reuters reporter:

  How can China's proactive fiscal policy play a greater role in boosting consumption and preventing deflation risks? Also, could you provide a rough estimate of the scale of the comprehensive fiscal policy package? How much leverage space does the central government have? Thank you.

• Lan Fo'an:

  Thank you for your question. This year, we have paid more attention to leveraging the countercyclical adjustment role of proactive fiscal policy, maintaining the intensity of fiscal expenditures, and continuously exerting efforts in expanding domestic demand, promoting consumption, and benefiting people's livelihoods, among other aspects, to stimulate consumption potential and expand effective demand. There are mainly three aspects:

  First, increasing residents' income through multiple measures. We have steadily increased the level of social security, with the lowest standard of basic old-age pension for urban and rural residents set to be further raised by 2024, marking the largest increase in history. The overall level of pension for retirees has increased by about 3%, and the per capita fiscal subsidy standard for urban and rural residents' medical insurance has also been significantly raised. In addition to providing layered and classified social assistance and support, before the National Day this year, one-time living allowances were distributed to special hardship groups such as the extremely poor and orphans to increase their income, enhance the consumption capacity and willingness of low-income groups.

  Second, increasing government investment through multiple channels. As mentioned earlier, in 2024, the issuance of ultra-long-term special national bonds amounted to 1 trillion yuan, the quota for new local government special debts increased by 3.9 trillion yuan, and 700 billion yuan was allocated for central budgetary investments. Coupled with the additional issuance of national bonds in 2023, the actual funds available for increasing government investment have significantly increased compared to last year, driving effective investment and expanding domestic demand.

  Third, vigorously implementing the "two new" policies. Around 300 billion yuan of ultra-long-term special national bond funds have been allocated. Since the end of August and early September, various regions have successively introduced specific operational measures, mainly focusing on supporting equipment renewal in key areas, further enhancing the ability of local consumers to trade in old for new products, effectively driving investment growth, unleashing consumption potential, and promoting industrial development.

  Next, the Ministry of Finance will continue to adhere to precise policies, target forces, optimize basic policy mechanisms, improve residents' income expectations, stimulate consumption potential; make good use of special funds, loan interest subsidies, and other tools, improve the commercial circulation system, enhance the consumption environment; leverage government bonds to drive effective investment and expand domestic demand.

  Regarding your second question about the central government's leverage space. As I mentioned in the opening remarks, the central government does have considerable space in terms of borrowing and increasing the deficit. Next, we will follow the decisions and arrangements of the Party Central Committee, coordinate development and security, and combine factors such as economic situation, macroeconomic control needs, and fiscal revenue and expenditure conditions to use debt policy tools reasonably and promote sustained economic improvement. Thank you!

• First Financial reporter:

  Recently, the Ministry of Finance is studying and introducing new measures for the management of special bonds. How has the issuance and use of special bonds been this year? In which aspects will the management be strengthened in the future? Thank you.

• Lan Fo'an:

  Thank you, I will have Vice Minister Wang Dongwei answer this question

• Deputy Minister of Finance Wang Dongwei:

  Well, thank you for your question. In recent years, the Ministry of Finance, together with relevant departments, has established and improved the system of special bond management policies, guiding localities to enhance the quality of special bond projects, and continuously playing an important role in driving the expansion of effective investment and stabilizing the overall macroeconomic situation. Since 2020, a total of 18.7 trillion yuan in new special bonds has been arranged, supporting approximately 130,000 government investment projects. In 2024, 3.9 trillion yuan in new special bonds will be arranged, as Minister Lan just mentioned, making it the largest scale year in history.

  We focus on better leveraging the role of government investment, carefully organizing the allocation and issuance of special bonds, on one hand, increasing support for economically strong provinces with special bonds, allocating quotas to regions with well-prepared projects and high investment efficiency, supporting the construction of major projects in economically strong provinces. On the other hand, reasonably allocating special bond quotas to other regions, promoting the continuation and completion of projects under construction, and the implementation of national major strategic projects. Furthermore, guiding localities to accelerate the issuance and use of special bonds, strengthening coordination, and reporting the progress of special bond issuance and use on a bi-weekly basis. As of the end of September, localities have issued 3.6 trillion yuan in new special bonds, accounting for 92.5% of the annual quota.

  Building on the above work, the next step is to study the expansion of the scope of special bond use, improve management mechanisms, maintain the strength and pace of government investment, reasonably reduce financing costs, and effectively promote high-quality development. Specifically, there are three points:

  First, expand the scope. There are mainly three points: first, research and improve the management of the special bond investment destination list, increase the areas used for project capital, and maximize the scope of use. Second, make good use of special bonds to support the acquisition of existing commercial housing for use as affordable housing, as Minister Lan and Deputy Minister Liao just mentioned, to support the healthy development of the real estate market. Third, reasonably support forward-looking and strategic emerging industry infrastructure to accelerate the development of new productive forces.

  Second, strengthen mechanisms. Research and improve project management mechanisms, open up a "green channel" for projects under construction, promote effective connection between project planning and implementation, accelerate the issuance and use of special bonds and project construction progress, accelerate the formation of physical work, and effectively play the guiding role of government investment.

  Third, strict management. There are mainly three points: first, improve the full life cycle management of "borrowing and repaying" special bonds, strengthen supervision of bond fund expenditures, and implement responsibilities of project supervisory departments and project units. Second, improve and perfect the special bond project asset ledger, categorize and manage project assets to ensure a balance between government debt and project assets. Third, explore the early repayment of special bonds, study the establishment of a sound debt repayment reserve fund system to ensure the source of repayment for special bonds. Thank you.

• Reporter from the Beijing News:

  I have a question about student financial aid policies. We have noticed that as an important part of incremental policies, the Ministry of Finance has been studying and improving the higher education student financial aid system recently. We would like to know what new policy deployments will be made in the near future? Thank you.

• Lan Fo'an:

This question will be answered by Vice Minister Guo Tingting of the Ministry of Finance.

• Vice Minister Guo Tingting of the Ministry of Finance:

  Thank you for the question. In recent years, the Ministry of Finance, together with relevant departments such as the Ministry of Education, has continuously improved the student financial aid system covering all stages of education, increased investment, gradually raised aid standards, and supported students in their studies and growth. Currently, China has established a comprehensive financial aid system led by the government with active participation from schools and society, including national scholarships and grants, national student loans, tuition waivers, living allowances, and work-study programs. In 2023, the national financial investment reached 93.2 billion yuan, benefiting over 31 million university students; through policies such as financial interest subsidies, banks were supported to issue 70 billion yuan in national student loans.

  Minister Lan also mentioned earlier that next, we will work with relevant departments to adjust and improve the policies for university student financial aid in two steps from the perspectives of awarding excellence and aiding the needy. In the first step, the following policy measures will be introduced in 2024:

  1. The number of national scholarships will double. The quota for undergraduate national scholarships will increase from 60,000 to 120,000 per year; for master's students, it will increase from 35,000 to 70,000 per year; and for doctoral students, it will increase from 10,000 to 20,000 per year.

  2. Increase the award standards for undergraduate scholarships. The award standard for undergraduate national scholarships will increase from 8,000 yuan per student per year to 10,000 yuan; and for undergraduate national inspirational scholarships, it will increase from 5,000 yuan per student per year to 6,000 yuan.

  3. Raise the national student aid standard for undergraduates. Starting from the autumn semester of 2024, the average aid standard will increase from 3,300 yuan per student per year to 3,700 yuan.

  4. Increase support for national student loans. The maximum loan amount for undergraduates will be raised from 16,000 yuan per student per year to 20,000 yuan, and for graduate students from 20,000 to 25,000 yuan; the interest rate will be reduced by 70 basis points based on the market benchmark rate for loans of the same period and grade.

  In the second step, in 2025, the award standards for graduate student academic scholarships will be increased. Additionally, the national student aid standard for general high school students will be raised, and the aid standard for secondary vocational schools will be increased and the coverage expanded.

  Going forward, we will work with relevant departments to promptly introduce relevant policies and ensure effective implementation, ensuring that funds are disbursed to students in a timely manner, allowing policies to benefit students early. Thank you!

• 21st Century Business Herald Reporter:

  In 2024, a special long-term national bond of 1 trillion yuan was issued for the construction of national major strategic and key area security capabilities. How will the funds from the special long-term national bonds be managed and utilized effectively? Thank you.

• Blue Foan:

  This question will be answered by Vice Minister Wang Dongwei.

• Vice Minister Wang Dongwei:

  Thank you for the question. Issuing special long-term national bonds to support the construction of national major strategic and key area security capabilities is an important fiscal policy this year. To ensure the effective implementation of this major policy, the Ministry of Finance promptly set up a special task force to ensure that all work is effectively coordinated and progresses in an orderly mannerFirst, raise funds. Taking into account the project construction period and the demand in the national bond market, scientifically set bond varieties, grasp the issuance pace reasonably, to meet the needs of project construction, prevent fund idling, and save fund costs. By the end of September, a total of 752 billion yuan of ultra-long-term special national bonds had been issued, and the issuance interest rate remained stable overall. Second, accelerate fund disbursement. Timely budget issuance and fund disbursement according to the project list. Third, strengthen fund supervision. Recently, the Ministry of Finance issued the Interim Measures for the Supervision of Ultra-long-term Special National Bond Funds, proposing a series of specific requirements such as establishing a full life cycle management system, implementing special account management, establishing a debt repayment reserve fund system, strengthening performance management, and taking stricter, more practical, and detailed measures to manage and utilize ultra-long-term special national bond funds well.

Next, we will complete the annual issuance task of 1 trillion yuan of ultra-long-term special national bonds as planned, issue budgets and allocate funds in a timely manner. At the same time, strengthen fund supervision, establish a horizontal coordination and vertical linkage regulatory mechanism with industry management departments and local finance departments, enhance tracking and monitoring, strictly prohibit fund embezzlement and misappropriation, promptly correct violations and illegal issues, and ensure the safe, standardized, and efficient use of ultra-long-term special national bond funds. Thank you!

• Shou Xiaoli:Continue to ask questions. There are still many reporters raising their hands, due to time constraints, we will take the last two questions.

• CCTV Reporter from China Central Television:We also heard Minister Lan mention using special national bonds to supplement the core Tier 1 capital of large state-owned commercial banks. Could you please explain the specific policy considerations and how to implement it next? Thank you.

• Lan Fo'an:Thank you, this question will be answered by Vice Minister Liao Min.

• Liao Min:Thank you for your question. Large state-owned commercial banks are the main force serving the real economy and are also the cornerstone of financial stability. Currently, the six large state-owned commercial banks, including ICBC, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China, operate steadily as a whole, with stable asset quality and sufficient provision coverage, and their main indicators are in the "healthy range" according to international best practice standards. Among them, the owner's equity continues to increase, reaching 15.1 trillion yuan as of the end of June 2024, a 2.9% increase from the beginning of the year; the capital strength is relatively sufficient, with the average core Tier 1 capital adequacy ratio reaching 12.3% as of the end of June 2024.

Large state-owned commercial banks, together with various financial institutions, bear the important task of supporting high-quality economic development and implementing the "Five Major Financial Tasks". Capital is the "capital" for the continuous operation of commercial banks and the foundation for banks to promote real economic growth, facilitate economic structural adjustments, and prevent various risks. As we all know, in the past few years, capital replenishment has been carried out for some small and medium-sized banks in various regions. In the current situation, we believe it is necessary to support large state-owned commercial banks in further increasing core Tier 1 capital through appropriate means. This can not only enhance the bank's operational stability, but also leverage capital to enhance credit lending capacity, further increase the intensity of serving the development of the real economy, and provide more powerful support for promoting sustained economic recovery, boosting market confidenceAccording to the authorization of the State Council, the Ministry of Finance is responsible for centrally and uniformly performing the duties of state-owned financial capital contributors, including establishing a mechanism for capital replenishment and dynamic adjustment of state-owned financial institutions. The Ministry of Finance will adhere to the principles of marketization and rule of law, and actively raise funds through channels such as issuing special national bonds in a steady and orderly manner to support large state-owned commercial banks in further increasing their core Tier 1 capital. We believe that through this measure, the operational and profit-making capabilities of large state-owned commercial banks can be enhanced, which is also conducive to promoting the stable and far-reaching development of the entire national economy.

I would like to inform everyone of the latest developments. This work has already been initiated. The Ministry of Finance, together with relevant financial regulatory authorities, has established an inter-departmental working mechanism to provide efficient services for large state-owned commercial banks to expedite the completion of related work. Currently, we are waiting for each bank to submit specific capital replenishment plans, and various related work is progressing in an orderly manner. In addition, I would like to explain that as listed banks, the specific capital replenishment plans of large state-owned commercial banks will be disclosed in a timely and lawful manner in accordance with relevant regulations. Thank youCombining top-level design with grassroots exploration is the third key point. On the premise of clarifying reform principles and directions, we encourage and support relevant parties to promote reform and innovation according to local conditions. We have organized pilot projects for zero-based budgeting reform in central departments and plan to carry out pilot projects for financial scientific management in some regions. We will tailor different reform pilot projects based on the characteristics of each region and department, respect originality, timely summarize reform experiences, replicate and promote them, and advance reforms in depth in a timely manner.

Next, the Ministry of Finance will continue to implement reforms with a nail spirit, actively, proactively, solidly, and steadily, promote the formation of a good pattern of more precise macroeconomic regulation, a more sound budget system, a more optimized tax system, a more improved financial system, and more sustainable financial development. We will strive to provide a more solid financial guarantee for the construction of a strong modernized China.

Thank you!

• Shou Xiaoli:

Thank you Minister Lan, thank you to all the speakers, thank you to all the journalist friends for participating. Today's press conference ends here, goodbye everyone!

Transcript source: China News Network