Proactive fiscal policy underpins economic recovery

BEIJING -- Easing burdens on businesses through extensive tax and fee cuts while enhancing spending on key sectors, China's proactive fiscal policy has underpinned the ongoing economic recovery and will continue to play its role in reinforcing the balancing progress, analysts noted.

China's fiscal revenue saw a year-on-year increase of 21.8 percent to exceed 11.7 trillion yuan (about 1.8 trillion U.S. dollars) in the first half (H1) of 2021, showed data released Tuesday.

The relatively high growth was mainly driven by a low comparison base last year and rising domestic producer prices, which indicated China's firming economic recovery, according to finance ministry official Liu Jinyun.

Compared with the corresponding pre-pandemic level in 2019, the revenue rose 8.6 percent.

Given the impact of the pandemic and still uneven domestic economic recovery, national revenue growth is likely to slow in the latter half of the year, Liu said.

Liu, however, noted that this year's budget revenue target can still be achieved due to strong H1 growth.

EXTENSIVE TAX, FEE CUTS

A breakdown of the data showed tax revenue in H1 went up 22.5 percent year on year to 10.05 trillion yuan, while non-tax revenue grew 17.4 percent.

In recent years, China has kept mobilizing financial resources to implement large-scale tax and fee reductions, combining institutional arrangements with phased policies and temporary measures to reduce government-imposed transaction costs and cut labor costs for firms.

During the 13th Five-Year Plan period, China's cumulative tax cuts and fees exceeded 7.6 trillion yuan, and authorities are determined to push ahead with the campaign to render more targeted and effective support to market entities.

The country will continue to implement systematic tax cut policies, extend the duration of several temporary policies such as value-added tax relief for small-scale taxpayers, and adopt new policies on structural tax reductions to offset the impact of some policy adjustments, according to this year's government work report.

Photo taken on Sept. 9, 2020 shows the view of the skyscrapers of the Central Business District in Beijing, capital of China. [Xinhua/Chen Zhonghao]

DIRECT FUND TRANSFER

As a creative step in fiscal policy to support tax and fee cuts, China has started to implement the direct allocation of fiscal funds on a regular basis to amplify the role of public money in benefiting targeted areas.

Last year, the central government directly earmarked 1.7 trillion yuan of much-needed fiscal funds to the prefecture and county-level governments to support their tax and fee cuts, which had helped to keep the economic fundamentals stable.

As required by the government work report, the direct allocation mechanism will become a regular practice this year, with a total amount of funds under the mechanism reaching 2.8 trillion yuan.

By the end of June, the central government had directly transferred a total of 2.59 trillion yuan to local governments, of which more than 2.5 trillion yuan was allocated to the fund users, according to the finance ministry.

In H1, China's fiscal expenditure went up 4.5 percent year on year to 12.17 trillion yuan.

"Spending will gain steam in the latter half of the year," said Liu Yuanchun, vice president of the Renmin University of China.

Powered by the proactive fiscal policy and prudent monetary policy, China's economy expanded 12.7 percent year on year in the first half of 2021 as recovery continues to consolidate.