On the morning of October 12, at a press conference held by the State Council Information Office, Finance Minister Liu Kun announced a package of targeted incremental policy measures aimed at further supporting stable economic growth and achieving this year’s economic growth targets. These measures primarily include: a significant increase in debt quotas to assist local governments in addressing hidden debt; the issuance of special government bonds to support major state-owned commercial banks in bolstering their core Tier 1 capital; the strategic use of local government special bonds, specialized funds, and tax policies to stabilize the real estate market; and enhanced support for key demographic groups.
The finance ministry highlighted that fiscal policy is a fundamental pillar of national governance and a crucial tool for macroeconomic regulation. Throughout this year, China has reinforced its counter-cyclical macro policy adjustments, with a proactive fiscal stance being steadily strengthened and improved. Various policy tools—including deficits, special bonds, ultra-long-term special government bonds, tax incentives, and financial subsidies—have been combined to increase the effectiveness of fiscal policies, safeguard key sectors, and actively mitigate risks, thereby facilitating a sustained recovery in the economy.
Built on the ongoing effects of previous policies, the finance ministry’s latest incremental measures are focused on risk mitigation, expanding financial capacity, benefiting people’s livelihoods, and supporting the real economy. These measures not only aim at resolving prominent issues in the current economic landscape but also address significant long-term developmental challenges, emphasizing a foundation for sustainable growth. This comprehensive approach has garnered widespread attention and positive evaluations.
Addressing the risks of local government debt is a crucial issue that impacts both development and financial sustainability. The proposed one-time significant increase in debt limits to replace existing hidden local government debt represents the most substantial measure to support debt resolution in recent years.
This initiative is expected to clarify some hidden debts, enhance transparency, and allow for the replacement of high-cost, short-term hidden debts with low-interest, long-term government bonds. This approach will significantly ease the debt pressure on local governments, freeing up more resources for economic development and public services, boosting the confidence of business entities, and solidifying grassroots financial stability.
This can undoubtedly be seen as a timely policy intervention.
According to the policy arrangements, the central government will allocate 400 billion yuan from the local government debt limits to enhance local fiscal capacity. This infusion will help expedite the clearance of overdue payments to businesses, allowing them to better navigate current challenges; it will facilitate the implementation of livelihood policies, boost residents’ expectations, and unleash consumer potential; and it will support local governments in prioritizing spending on key areas like technology and education, ensuring the successful execution of major strategies like rural revitalization and green development, thereby laying a stronger foundation for regional economic and social growth.
State-owned commercial banks play a crucial role in serving the real economy and maintaining financial stability. Capital is essential for the sustainable operation of these banks and is the basis for their ability to promote economic growth, adjust economic structures, and mitigate various risks.
In recent years, some regional small and medium banks have bolstered their capital. Given the current circumstances, supporting major state-owned commercial banks in further increasing their core Tier 1 capital is crucial. This not only enhances their operational and profit-generating capabilities but also leverages capital to boost lending abilities, thereby further amplifying support for the real economy and providing a robust foundation for propping up macroeconomic recovery and rejuvenating market confidence.
Real estate policy is intertwined with household fortunes and the broader economy. The new fiscal policies allow for special bonds to be used for land reserves, which can help regulate the supply-demand dynamics of the land market, reduce idle land, and improve land supply control. Additionally, utilizing special bonds to acquire existing commercial housing for social housing projects and channeling more funds into affordable housing will help absorb excess inventory and balance the supply-demand equation in the real estate market, while also optimizing the provision of affordable housing to meet the needs of low to middle-income groups.
The finance ministry has also committed to swiftly researching and clarifying value-added tax and land value-added tax policies linked to the distinction between regular and non-regular residential properties, ensuring continued coordination between fiscal policy and other policies, strengthening cooperation between central and local governments, and enhancing the alignment of new and existing policies to stabilize the real estate market.
Regarding increased support for key demographic groups, the finance department has already distributed one-time living allowances to struggling households before the National Day holiday. Moving forward, there will be an expansion of national scholarships and grants, as well as student loans targeting students in need. Minister Liu emphasized, “Currently, the ‘Three Guarantees’ at the grassroots level are generally stable but facing localized pressures. Based on calculations of total grassroots financial capacity across the nation, the baseline for the ‘Three Guarantees’ is secure.” The finance department plans to strengthen accountability, enhance local fiscal capacity, improve fund scheduling, mitigate debt stress, and reinforce dynamic monitoring to maintain the “Three Guarantees” baseline.
“Counter-cyclical adjustments will not be limited to just these four points,” Liu stated at the press conference, adding that other policy tools are under consideration, including the central government’s substantial capacity for further borrowing and raising deficits. His comments conveyed unwavering confidence: “We will adhere to the decisions of the Central Committee, integrating development and security while considering economic conditions, macroeconomic control needs, and fiscal status to effectively utilize debt policies and promote sustained economic improvement. China’s fiscal resilience is robust. By implementing comprehensive measures, we can achieve a balanced budget and meet this year’s targets. Everyone can feel assured!”
With a strong economy characterized by resilience, potential, and vitality, the continued implementation of the fiscal policy package will significantly support ongoing economic stabilization and recovery, driving further progress in high-quality development.
