Fiscal leeway sufficient to spur growth

China has sufficient headroom to maneuver fiscal policies in the future, in order to position the world's second-largest economy well for forestalling risk and stimulating growth, Finance Minister Lan Fo'an said on Friday.

"The fundamentals of China's economy remain sound, which provide a solid foundation for the stable and sustainable operation of the country's fiscal system," Lan said during a news conference.

Over the past four years, China's economy has achieved an average annual growth rate of 5.5 percent, maintaining its contribution to global economic expansion at around 30 percent, according to Lan's ministry.

Going forward, the fiscal authorities will "stay ahead of the curve" and "build a robust policy reserve" that could be front-loaded should the evolving situations call for it, so as to facilitate high-quality development, Lan added.

In particular, Lan noted that China will leverage innovative fiscal and tax policy tools to unleash the consumption potential of its vast domestic market, while also expanding effective investment.

This year, policymakers have rolled out an array of consumption-boosting initiatives, as bolstering domestic demand is high on the country's economic agenda amid rising external uncertainties.

In addition to the trade-in program that has been ongoing since last year, the ministry has unveiled child care subsidies and loan interest subsidies for personal consumption and services businesses.

These, according to analysts, are a clear signal that the country is shifting its fiscal firepower toward addressing household needs and stimulating consumer demand.

"It's a key step forward, and we could expect further initiatives in a broader range of areas that are directly relevant to the lives of ordinary citizens, including pensions, healthcare and affordable housing," said Luo Zhiheng, chief economist at Yuekai Securities.

Regarding fiscal and tax reforms that have been closely watched by the market, the ministry made it clear that it will increase the central government's spending responsibilities as appropriate.

Meanwhile, Vice-Minister of Finance Liao Min said that the central government will channel more financial resources to governments at sub-provincial level to ensure they are better equipped to promote growth and maintain stability. "We have formulated detailed implementation plans and annual work schedules to drive the steady progress of its fiscal reform agenda," Liao said, adding that the government is poised to roll out new initiatives as conditions mature and situations evolve.

The reforms aim to address a long-standing challenge: the mismatch between the financial resources available to local authorities and the expenditure responsibilities they bear, said Li Xuhong, a professor at the Beijing National Accounting Institute.

This will ensure that the level of government best positioned to manage a service is the one equipped with the funding to provide it, Li added.

Lan said during the conference that the overall debt burden of local governments has shown a steady decline as a result of targeted policy measures.

The finance minister noted that more than 60 percent of local government financing vehicles had achieved exits by the end of June, eliminating over 60 percent of the hidden debt associated with these platforms.

wangkeju@chinadaily.com.cn