Fiscal policy must be more active and precise
Li Ming
(Source: "Economic Information Daily" 2020-04-21)
The current international epidemic continues to spread, and the risk of a downward trend in the world economy has intensified. Domestic and foreign experts predict that the impact of this epidemic may exceed that of the 2008 global financial crisis. In order to offset the impact of the epidemic, countries have generally stepped up macroeconomic policy adjustments. The G20 special summit stated that member countries have injected more than 5 trillion US dollars into the world. Eurozone countries are preparing a stimulus package worth 500 billion euros, and before that, some countries have already released relevant policies. For example, Germany introduced an economic rescue plan worth 750 billion euros on March 23. The introduction of my country's fiscal policy has also gone through multiple stages. The Political Bureau meeting held on February 21st proposed for the first time that proactive fiscal policies should be more proactive; according to the central government’s deployment, my country’s fiscal policy continues to intensify. As of late March, finance at all levels has allocated more than 121 billion yuan in epidemic prevention and control funds, and plans to reduce taxes and fees by more than 1 trillion yuan throughout the year. The Political Bureau meeting held on March 27 further requested that we promptly study and propose a package of macro policy measures to actively respond, and decided to appropriately increase the fiscal deficit ratio, issue special treasury bonds, and increase the scale of local government special bonds.
Based on international experience, by taking three measures including increasing the deficit ratio, the scale of my country's new fiscal expenditure should not be low. In terms of expenditure direction, the market expects that in addition to the additional fiscal funds that may be used to supplement the capital of policy financial institutions, guide increased liquidity support for small and medium-sized enterprises, supplement the social security system, and increase support for low-income groups, most of the remaining fiscal funds should be project expenditures. At the same time, there is no consensus on the direction of project spending. Behind the debate are differences in understanding of the connotation of "more active and promising". Based on our previous research results published in "Management World", we put forward the following ideas:
The connotation of “more positive and promising”
Since the global financial crisis in 2008, my country has implemented active fiscal policies for 12 consecutive years. However, from the perspective of policy focus, the focus of active fiscal policies is different at different stages. In the early days, it focused on implementing aggregate demand management through expanding expenditures. After the 18th National Congress of the Communist Party of China, it was committed to promoting supply-side structural reform through expenditure structure adjustments and large-scale "tax and fee reductions." After the outbreak, our country emphasized that proactive fiscal policies should be "more proactive" and even proposed three measures including increasing the deficit rate. There is no doubt that "being more proactive" includes expanding the scale of expenditure to manage aggregate demand. However, from a longer historical perspective, the policy is both an emergency measure based on the current situation and a foundation for the long-term.
The 19th National Congress of the Communist Party of China pointed out that my country's economy has shifted from a stage of rapid growth to a stage of high-quality development, requiring the construction of a modern economic system to promote high-quality development, and making specific arrangements from multiple dimensions such as industrial structure, regional structure, and urban and rural structure. The Fourth Plenary Session of the 19th CPC Central Committee called for continuous advancement of the modernization of the national governance system and governance capabilities. Finance is the foundation and important pillar of national governance and plays an important role in promoting high-quality development and advancing the modernization of national governance. Regarding the path to implementation, the Central Economic Work Conference held at the end of 2019 stated: “Proactive fiscal policies should vigorously improve quality and efficiency, and pay more attention to structural adjustment.” In addition, the "Opinions of the Central Committee of the Communist Party of China and the State Council on the Comprehensive Implementation of Budget Performance Management" promulgated in 2018 stated that "the comprehensive implementation of budget performance management should be the key point and breakthrough point to promote the concentration and efficiency of fiscal funds, improve the quality of public service supply, and enhance the government's credibility and execution capabilities."
Judging from the above regulations and requirements, "more active and promising" combines the dual requirements of expenditure expansion and structural reform. On the one hand, it is necessary to better support enterprises, expand domestic demand, stabilize employment, and help alleviate poverty. On the other hand, it is necessary to form good material and non-material assets for long-term development. In summary, in the process of expenditure expansion, it is necessary to always follow the requirements of high-quality development, pay more attention to structural adjustment and promote the improvement of governance levels.
The direction in which the force should be applied accurately
The direction of active fiscal policy should be determined based on the main problems caused by the epidemic and combined with the requirements for high-quality development. In the short term, the epidemic has led to increased survival pressure on a large number of small and medium-sized enterprises and private enterprises in my country, and the accumulation of secondary risks. In the medium to long term, the epidemic has exposed some shortcomings and deficiencies in economic and social governance. Focusing on the above-mentioned shortcomings and deficiencies, we recommend that for new project expenditures, we should clearly focus on making up for the shortcomings, advance and retreat, maintain and suppress, and use greater structural reform efforts to coordinate the response to the impact of the epidemic and adapt to the requirements of high-quality development. The shortcomings and shortcomings exposed by the epidemic include: insufficient provision of basic public services such as medical and health care, low levels of industrial basic capabilities and industrial chains, unreasonable regional economic patterns, continued imbalances in urban and rural structures, mismatches between the responsibilities and vitality of youth groups, and weak community governance foundations.
Compensating for weaknesses has the compound effect of taking into account both the long and short term. First of all, making up for shortcomings is an important way to expand domestic demand. Through direct or indirect resource allocation, the development of industries and fields that benefit both supply and demand and have a multiplier effect (such as new infrastructure and solidifying the foundation of community governance) will not only directly increase investment demand, but also help increase income and promote consumption upgrades through industrial upgrading, thereby increasing final demand. Secondly, making up for shortcomings is an important way to benefit people's livelihood. People's needs for a better life (such as life and health, high-quality education, and high-quality community living environment) are mostly concentrated in the field of people's livelihood. Making up for these shortcomings is an effective way to enhance residents' sense of gain. Furthermore, making up for shortcomings is an important way to adjust the structure. Key core technologies are missing, and advanced manufacturing is underdeveloped; developed regions have insufficient leadership, low quality urbanization, and low contribution to urban-rural integration; young people have strong sense of responsibility, consumption, and innovation capabilities, but are under great pressure and heavy burdens. Improving these shortcomings is a reflection of structural adjustment.
The main directions of proactive fiscal policy to address weaknesses include the following aspects:
First, we must increase financial investment in key basic public services. From the perspective of the prevention and control process, there are two outstanding shortcomings that restrict my country's epidemic prevention and control. First, there is insufficient medical resources, which is related to the overall low investment in public health in my country and the unreasonable expenditure structure. The new fiscal expenditure should further support the improvement of the role of health and epidemic prevention, combine the direction of hierarchical diagnosis and treatment reform, scientifically deploy and increase investment in hospitals, health service centers, health centers and clinics, build high-level medical schools and scientific research institutes, and increase the training and scientific research of medical staff. Secondly, the lack of scientific and humanistic literacy has contributed to the occurrence and spread of the crisis and increased the cost of prevention and control. On the one hand, it is necessary to support the further improvement of the popularity of higher vocational education and general higher education on the basis of scientific adjustment of the subject structure, and to optimize the proportion of undergraduate, master and doctoral students; on the other hand, it is necessary to support the selection and establishment of specialized teams and use multiple channels to continue to popularize scientific and humanistic knowledge.
Second, we must focus on improving the basic capabilities of the industry and the level of the industrial chain. Epidemic prevention and control is also a major test of my country's industrial basic capabilities and industrial chain levels. In the early stages of the epidemic, there was a shortage of protective, inspection and treatment supplies, blocked material circulation, and insufficient deployment capabilities, which greatly restricted the progress of prevention and control as well as production and life. After the epidemic spread around the world, some countries restricted the export of grain and other agricultural products, and energy markets such as oil fluctuated violently. my country faces the risk of cut-off imports of high-tech products such as automobiles, machinery and equipment, and engines. Fiscal policies must learn from experience and lessons, seize key links, and ensure that the industrial chain is safe and controllable. On the one hand, we should systematically sort out fiscal subsidies and preferential policies and withdraw those that should be withdrawn; on the other hand, we should give full play to the advantages of the system and actively advance. The focus is to increase investment in high-standard basic farmland and water conservancy construction to ensure agricultural safety; increase investment in oil and gas pipeline construction, power infrastructure construction and energy reserves to reduce energy costs; strengthen support for "stuck neck" technologies and industries; improve fiscal discounts and tax preferential policies, support the development of warehousing and logistics and other industries, and enhance material storage and deployment capabilities.
Third, we must promote the formation of a regional economic pattern with complementary advantages. Central cities and urban agglomerations are becoming the main spatial forms that carry development elements. Accordingly, on the one hand, we should focus on promoting the coordinated development of Beijing-Tianjin-Hebei, the integrated development of the Yangtze River Delta, the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, and the construction of the Chengdu-Chongqing Economic Circle to create a world-class innovation platform and growth pole; on the other hand, we should strengthen the support of regional hub cities such as railways, airports, and ports, and give full play to their role as access centers and radiating hinterland. Focus on increasing the construction of intercity railways, high-grade highways and information infrastructure in central cities and urban agglomerations. Increase the density of transportation infrastructure between central cities and urban agglomerations connecting regional hub cities, and smooth inter-regional connections. The newly released "Key Tasks for New Urbanization Construction and Urban-rural Integrated Development in 2020" clearly states that financial incentives and subsidies for the urbanization of the agricultural transfer population will be increased, and the planned indicators for new construction land will be more closely linked to the number of settled households. In the future, we can further adopt measures such as expanding the ecological compensation transfer payment system, reducing the fiscal support population and the total number of establishments in population-exporting areas, and improving the efficiency and use efficiency of fiscal funds to promote better urban services and support rural areas.
Fourth, we must focus on releasing the vitality of youth groups. Epidemic prevention and control has demonstrated the responsibilities and responsibilities of young people in the new era. Frontline medical staff, grassroots community workers, and volunteers, a considerable number of whom are young people. But at the same time, we should also be aware that as a generation that is generally well-educated and grew up in an Internet environment, this group has high requirements for information disclosure and transparency. They are still the main force in consumption and innovation and entrepreneurship, but they are under great pressure and heavy burden. Fiscal policy must play a greater role on the basis of better solving their problems. Effectively reduce their living burden, actively create a good environment for innovation and entrepreneurship, promote the basic role of consumption, accelerate innovation, and ensure social stability.
Fifth, we must focus on laying a solid foundation for community governance. Experience in epidemic prevention and control shows that communities are the cornerstone of national governance, but my country’s current community governance foundation does not match its positioning. In the future, we should focus on two aspects of work. First, increase the supply of service facilities. Finance departments at all levels should cooperate with relevant departments to formulate a high-standard standard system for local public service supply, support the full planning of new communities and the renovation of old communities to free up space, accelerate the layout of community medical, elderly care, schools, vegetable markets, catering and other life service facilities, integrate Internet of Things technology, and build a high-quality comprehensive community management information platform. A few days ago, the Ministry of Finance has made it clear that local government special bond funds will be invested in increasing the renovation of old communities. All localities should seize the opportunity and actively promote it. The second is to speed up the improvement of the team of community workers. In accordance with the new positioning of community functions, we will actively support major and medium-sized cities to carry out special recruitment of community workers and increase volunteer recruitment and training. While promoting stable employment, we will enrich and improve the team of community workers and consolidate the micro-foundation of national governance.
Corresponding mechanism guarantee
The first is to implement a people-centered approach in a practical and detailed manner. The Fourth Plenary Session of the 19th Central Committee of the Communist Party of China pointed out that adhering to the people-centered development idea is one of the significant advantages of our country’s national system and national governance system. Fiscal policy must adhere to the people-centered approach to fixing shortcomings. In particular, it must: where there are shortcomings, listen to the opinions of the people; the process of making up for the shortcomings must fully involve the public; the effect of making up for the shortcomings must be tested by the people.
Second, we need to do in-depth and thorough budget management. Mainly carry out two tasks. The first is to list the new fiscal expenditures separately in addition to the regular budget preparation, approval and adjustment in accordance with legal procedures, or form a special budget as some experts suggest. Clarify the classification of expenditure functions, fund allocation areas, projects and amounts, etc., guide market expectations, increase regulations and constraints, and ensure that the direction of fiscal expenditures is in line with policy guidance and social expectations. The second is to implement budget performance management in depth. On the one hand, through revenue budget performance management, we ensure the implementation of tax reduction and fee reduction policies, prevent excessive tax collection and the "seesaw" phenomenon of tax reductions and fee increases, while promoting high-quality growth in fiscal revenue and providing strong financial support for the central work of the party and the state. On the other hand, through the evaluation of the performance of major policies and expenditure projects, there is strong pressure to continuously improve the efficiency and use efficiency of fiscal funds, and promote the improvement of fiscal expenditure effects.
Third, we must insist on correctly handling the relationship between the government and the market. Enhance the competitiveness of government procurement and fiscal investment project bidding, and drive innovation through competition. Improve the inclusiveness of government procurement and project bidding, encourage the use of priority procurement, reserved shares, joint bidding and other methods, increase the participation of private enterprises, small and medium-sized enterprises, and self-employed individuals, so that policies can benefit a larger group, and retain and cultivate new momentum for long-term economic development. Ensure the diversification of public service supply, both government provision and market provision, and improve supply efficiency through comparison.
(Author’s affiliation: w88 casino of International Business and Economics, w88 casino)
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