Summary of Key Points
In the first seven months of this year, China's broad fiscal expenditure (including general public budgets such as taxes and government funds from land sales) exceeded revenue by 4.6 trillion yuan, reflecting the efforts of proactive fiscal policies. However, the growth rate of expenditures (a year-on-year decrease of 3.1%) fell far short of the initial forecast of 4.6%, mainly due to factors such as a decline in local land sales revenue. In the second half of the year, fiscal policies will focus on three areas: accelerating spending, expanding domestic demand, and reforming management. Additional measures such as special bonds and special treasury bonds have been prepared, with more funds allocated to improving people's livelihoods and fostering new drivers of economic growth to support stable economic performance.
I. Fiscal Situation in the First Seven Months: Expenditures Exceeded Revenue, but Growth Rate Did Not Meet Expectations
In the first seven months, broad fiscal expenditure amounted to 20.8 trillion yuan, while revenue was 16.2 trillion yuan, resulting in a difference of 4.6 trillion yuan—indicating that the government was actively spending to stimulate the economy. Nevertheless, the growth rate of expenditures not only failed to increase but actually decreased by 3.1%, significantly falling short of the expected 4.6%. There are three main reasons for this:
1. Decline in Local Land Sales Revenue: Local land sales revenue decreased by 30.8% in the first seven months, leading to a 16.4% reduction in government fund expenditures, which rely heavily on these revenues.
2. Slow Project Initiation: There were fewer high-quality projects, and the cost of construction materials (such as rising oil prices) was high, causing some government projects to be delayed, resulting in less spending.
3. Local Fiscal Tightening: Unnecessary expenditures were cut (such as non-essential office expenses), and irregular subsidies were standardized (such as arbitrary benefits given to enterprises).
II. Where the Fiscal Funds Are Being Prioritized
Proactive fiscal policies are aimed at making targeted investments:
- Livelihood Improvement: Expenditures on healthcare and social security increased by 9.8% (e.g., medical subsidies) and 7% (e.g., pension benefits). Additionally, 100 billion yuan was allocated for childcare subsidies, and 24.1 billion yuan for preschool tuition waivers, directly reducing the burden on the public.
- Support for Local Governments: The central government transferred 9.4 trillion yuan to local governments (90% of the budget) to help alleviate their financial pressures and ensure the normal operation of grassroots services.
- Future Directions: The 14th Five-Year Plan will place more emphasis on investing in people, such as increasing the proportion of public service expenditures to enhance social security.
III. Three Key Areas for Fiscal Efforts in the Second Half of the Year
To stabilize the economy, fiscal policies will focus on the following three areas:
1. Accelerating Spending: Speeding up the delivery of funds for livelihood projects in areas where expenditures have been slow (for example, the decline in expenditure narrowed in July, and local bond issuance reached a year-high in August).
2. Expanding Domestic Demand: Implementing special bonds for infrastructure projects, issuing special treasury bonds to support major initiatives, and promoting cooperation between finance and government (e.g., providing interest subsidies for enterprise loans to encourage investment in production).
3. Reforming Management: Establishing a negative list of irregular subsidies to prevent arbitrary benefits for enterprises and standardizing existing subsidies. Improving the efficiency of fund usage will also be a priority; for example, a 1% increase in the effectiveness of 30 trillion yuan in budget expenditures could save 300 billion yuan, which could be reinvested in critical areas.
IV. Reserve Measures to Address Economic Changes
If economic pressures increase, the government has contingency plans:
- Adequate Funds: There are 4.69 trillion yuan in government bonds pending issuance, 1.13 trillion yuan more than last year, ready to be released at any time.
- Possible Additional Measures: Utilizing remaining balances of special bonds, issuing ultra-long-term special treasury bonds, and expanding policy-based financial tools (e.g., providing loans for infrastructure projects). Additionally, there may be increases in pension benefits for urban and rural residents to boost consumer spending.
- Timing of Implementation: These measures are likely to be introduced in the third quarter (September–October), depending on the economic situation.
In summary, fiscal policies are being strengthened to support the economy. The goal is to make effective use of existing funds while preparing for potential changes, with the ultimate aim of stabilizing and improving the economic situation.