Full Transcript and Key Takeaways of the Finance Ministry Press Conference
Key Takeaways of the Finance Ministry Press Conference
This morning, the Financial Ministry held a press conference to brief people about Incremental policy. During this week, I talked with some market insider about their expectations of this press conference, and many of them are expecting a huge pack of the stimulus plan; some even said a “10 trillion.“ However, as I expected, the conference didn’t give a specific number because that is not how the procedure works in China.
First, according to the budget law, all these budget-related changes and government bond issues need to be approved by the Standing Committee of the NPC. Since there’s no such meeting before the conference, they won’t be able to give any specific numbers today.
Second, even if a vast stimulus package is to come, it usually won’t be announced by the Finance Minister. The famous 4 Trillion economic stimulus plan in 2007 was announced by Premier Wen at the executive meeting of the State Council. It’s highly unrealistic to expect such a big package at the Financial Ministry press conference.
After watching the live, here are some of my takes:
About the countercyclical fiscal policy:
The Ministry of Finance has announced plans to substantially increase the debt limit, which will assist local governments in addressing their implicit debt.
About Housing:
It allows special-purpose bonds to be used for land reserves, supports the acquisition of existing housing stock, and increases the supply of affordable housing.
Shifting ways of infrastructure investment:
On the one hand, we will increase support for special-purpose bonds in economically significant provinces. The allocation of quotas will be tilted towards regions with well-prepared projects and higher investment efficiency, supporting the construction of major projects in economically important provinces.
I know some argue that China has overbuilt its infrastructure, but that’s not the case in coastal areas. For the next stage of China's development, the focus could be shifting towards improving the efficiency of infrastructure investments rather than simply pursuing broad-scale projects nationwide. This announcement indicates a commitment to continue investment in areas with the potential for high economic returns.
Communications ways:
Following the announcement of these measures, Finance Minister Lan emphasized that these actions were already part of the planned agenda. He then notably added:
“中央财政还有较大的举债空间和赤字提升空间。“
The central government still has considerable room for increasing debt and expanding the deficit.
Nice way to guide public expectations. This sentence has also been marked red on the official transcripts release (edit: by the official wechat account of China State Finance Journal, journal led by Ministry of Finance). It's encouraging to see progress in the communication strategy.
Below is the full transcript translated (made by myself with the help of Claude 3.5):
Source:https://mp.weixin.qq.com/s/ccKOdpw68cHMjRCfHHuAuw
Lan Fo'an:
Since the beginning of this year, the Ministry of Finance has earnestly implemented the requirements of the Central Economic Work Conference, adhering to a proactive fiscal policy that is appropriately strengthened and improved in quality and efficiency. They have used a combination of policy tools including deficit, special bonds, ultra-long-term special treasury bonds, tax and fee concessions, and fiscal subsidies. The fiscal policy has been intensified, support for key areas has been strengthened, and risks have been actively prevented and resolved, promoting sustained economic recovery and improvement. This mainly includes the following six aspects:
Expanding the scale of fiscal expenditure. In 2024, the fiscal deficit is arranged at 4.06 trillion yuan, an increase of 180 billion yuan from the initial budget of the previous year. The new local government special debt limit is 3.9 trillion yuan, an increase of 100 billion yuan from the previous year. 1 trillion yuan of ultra-long-term special treasury bonds will be issued, and the funds from additional treasury bonds issued in 2023 will be put to good use. The annual general public budget expenditure scale will reach 28.55 trillion yuan, maintaining a relatively high intensity of expenditure, providing strong support for high-quality development.
Optimizing tax and fee preferential policies. Implementing structural tax and fee reduction policies, continuing to implement policies such as additional pre-tax deductions for R&D expenses, additional VAT deductions for advanced manufacturing enterprises, and tax exemptions for technology transfer. The preferential tax policies for the technological transformation of manufacturing enterprises will be improved. From January to August, the main policies supporting technological innovation and manufacturing development resulted in tax and fee reductions and refunds exceeding 1.8 trillion yuan.
Actively expanding effective domestic demand. Supervising local governments to make good use of funds from additional treasury bonds, supporting post-disaster reconstruction and enhancing disaster prevention, mitigation, and relief capabilities. Managing the issuance and use of ultra-long-term special treasury bonds, supporting the construction of national major strategic and key areas' security capabilities, and actively promoting large-scale equipment renewal and trade-in of consumer goods. Continuously strengthening the management of local government special bonds, expanding the scope of investment areas and use as capital, supporting local efforts to strengthen weak areas in key fields. From January to September, 3.6 trillion yuan of new special bonds were issued, supporting over 30,000 projects, with over 260 billion yuan used as project capital.
Strengthening the "three guarantees" at the grassroots level and ensuring key areas. Conscientiously implementing the requirement for government agencies to maintain frugal practices, strictly controlling general expenditures, freeing up funds to ensure basic livelihood, wages, operations, and expenditures in key areas. In 2024, the central government will arrange over 10 trillion yuan in transfer payments to local governments. Of this, equalization transfer payments will increase by 8.8%, and rewards for the basic financial security mechanism at the county level will increase by 8.6%, allocating more funds to supplement local finances and support local governments in securing the "three guarantees" at the grassroots level. Meanwhile, support for science and technology, comprehensive rural revitalization, and ecological civilization construction has been increased. Central government science and technology expenditure will increase by 10%, 177 billion yuan will be arranged for rural revitalization, and 65.1 billion yuan will be allocated to support the fight against pollution. Fiscal and tax support policies for promoting coordinated regional development will be improved, and regional development strategies such as the coordinated development of Beijing-Tianjin-Hebei, the Yangtze River Economic Belt, and the integrated development of the Yangtze River Delta will be solidly implemented
Providing greater support for basic livelihood security. Since the beginning of this year, the central government has allocated 66.7 billion yuan in employment subsidies to support local efforts in employment for key groups such as college graduates and vocational skills training. From January to September, national education expenditure reached 3 trillion yuan. The basic pension for retirees has been increased by 3% nationwide, and the minimum standard for basic pensions for urban and rural residents has been significantly raised. The government subsidy standard for basic public health services has been increased to 94 yuan per person per year, and the government subsidy standard for basic medical insurance for urban and rural residents has been raised to 670 yuan per person per year. In the next step, we will respond to the changing situation of China's population development and the multi-level and diverse needs of the people, further increase expenditure in relevant areas, and better benefit people's livelihoods.
Effectively resolving local government debt risks. Implementing the main responsibility of local governments, adopting province-specific strategies to implement various debt resolution measures. On the basis of arranging over 2.2 trillion yuan of local government debt limits in 2023, the central government has arranged an additional 1.2 trillion yuan in 2024 to support local governments, especially high-risk areas, in resolving existing debt risks and clearing arrears owed to enterprises. Overall local debt risks have been mitigated, and debt resolution work has achieved phased results.
Overall, the implementation of proactive fiscal policy has shown significant effects, strongly ensuring the implementation of major national strategic tasks and promoting overall stability and progress in economic operations. Currently, the fundamentals of China's economy and favorable conditions such as a vast market, strong economic resilience, and great potential remain unchanged. At the same time, some new situations and problems have emerged in economic operations. It is expected that the growth rate of national general public budget revenue will fall short of expectations. There is concern about whether this year's budget targets can be achieved. I can responsibly tell everyone that China's finances have sufficient resilience. Through comprehensive measures, we can achieve a balance between revenue and expenditure and complete the annual budget targets. Please rest assured!
According to the deployment of the Central Political Bureau meeting held on September 26, the Ministry of Finance, based on accelerating the implementation of already determined policies, will successively introduce a package of targeted incremental policy measures in the near future, focusing on stabilizing growth, expanding domestic demand, and mitigating risks. These mainly include the following aspects:
Strengthening support for local governments to resolve government debt risks by significantly increasing debt limits. This will support local governments in resolving hidden debts, allowing them to devote more energy and financial resources to promoting development and ensuring people's livelihoods.
Issuing special treasury bonds to support large state-owned commercial banks in supplementing their core tier-1 capital. This will enhance these banks' ability to withstand risks and increase credit lending, better serving the development of the real economy.
Using a combination of tools such as local government special bonds, special funds, and tax policies to support and promote the stabilization of the real estate market.
Increasing support and protection for key groups. A one-time living subsidy was distributed to disadvantaged groups before the National Day holiday. The next step will be to increase efforts to reward excellence and assist those in need among student groups, enhancing overall consumption capacity.
Let me add one more point: countercyclical adjustment is certainly not limited to these four points. These four points are policies that have already entered the decision-making process. We are also studying other policy tools. For example, the central government still has considerable space for borrowing and increasing the deficit.
Q&A:
Xinhua:We've seen that the recent Central Political Bureau meeting proposed to ensure necessary fiscal expenditure. What specific measures will the Ministry of Finance take?
Lan Fo'an: Thank you for your question. Since the beginning of this year, we have been conscientiously implementing a proactive fiscal policy, maintaining appropriate strength while improving quality and efficiency. We have increased funding guarantees for basic livelihood and key areas, maintained fiscal expenditure intensity, and overall fiscal operations have remained stable and orderly, with key expenditures being well-guaranteed. Here are some figures:
From January to September, national general public budget expenditure was 20.18 trillion yuan, an increase of 2%. Of this, social security and employment expenditure increased by 4.3%, education expenditure by 1.1%, agriculture, forestry, and water expenditure by 6.4%, urban and rural community expenditure by 6.1%, and housing security expenditure by 2.5%. The execution of national general public budget revenue is lower than the target set in the initial budget. We will take multiple measures and comprehensive policies to ensure a balance between revenue and expenditure for the full year. As I mentioned earlier, in our work, we need to raise fiscal revenue in accordance with laws and regulations, while avoiding excessive taxation and effectively protecting the rights and interests of business entities. At the same time, we will maintain the necessary fiscal expenditure intensity, ensure that key expenditures are fully supported, play the role of fiscal counter-cyclical adjustment, and promote the completion of economic and social development goals for the full year. We have the following three measures:
Effectively supplement financial resources. The central government has arranged 400 billion yuan from the local government debt balance limit to supplement local government's comprehensive financial resources, supporting local governments in resolving existing government investment project debts and clearing arrears owed to enterprises. We encourage qualified localities to revitalize idle assets, strengthen the management of state-owned capital returns, and strive to increase fiscal revenue. We guide local governments to use existing funds such as budget stabilization adjustment funds in accordance with laws and regulations to ensure fiscal expenditure needs.
Ensure various key expenditures. We adhere to the requirement for government agencies to maintain frugal practices, strictly control general expenditures, and use more funds to address shortcomings, strengthen weak areas, and benefit people's livelihoods, ensuring that the intensity of key expenditures does not decrease. From the figures listed earlier, we can see that key expenditures have maintained relatively high growth rates. We strengthen the guarantee of key expenditures such as science and technology and education, implement policies to benefit people's livelihoods such as raising the standard of basic pensions for urban and rural residents and increasing government subsidies for basic public health services. We strongly support major strategies such as comprehensive rural revitalization, green development, and coordinated regional development, ensuring that various policies determined by the Central Committee are fully implemented.
Make full use of various debt funds. Currently, the use of additional treasury bonds is being accelerated, and ultra-long-term special treasury bonds are also being allocated and used successively. Regarding special bonds, including the remaining quota to be issued and the funds already issued but not yet used, local governments have a total of 2.3 trillion yuan in special bond funds available for use in the last three months. We will urge local governments to make good use of various bond funds, accelerate project implementation, disburse funds in a timely manner according to actual needs, quickly form physical workloads, and leverage their role in driving investment.
Southern Daily Southern+ reporter: Minister Lan just mentioned that the next step will be increased support for local governments in resolving hidden debts. Can you introduce the measures taken and the next policy arrangements? Additionally, there are market rumors about several trillion yuan in fiscal policy arrangements, and you also mentioned a significant increase in debt limits to support local debt resolution. Can you confirm this?
Lan Fo'an: Thank you for your question. Preventing and resolving local government debt risks is a major issue concerning development and security, as well as the sustainable development of public finance. Since 2015, the Central Committee has required the establishment of a standardized local government borrowing and financing mechanism, opening the "front door" while strictly closing the "back door," resolutely curbing the scale and increase of hidden debts, and prudently resolving existing debts to effectively prevent debt risks. The Ministry of Finance, together with relevant departments, has resolutely implemented this, taking a series of measures such as:
Issuing local government bonds to replace existing government debts
Establishing a "closed-loop" management system for local government debts
Promoting the elimination of existing hidden debts in low-risk areas like Beijing, Shanghai, and Guangdong
Conducting debt resolution pilots in high-risk counties and districts
Collaborating with relevant departments to prevent and resolve hidden debt risks of financing platforms and strengthen the management of government investment projects
Local party committees and governments at all levels have conscientiously fulfilled their main responsibilities, establishing multi-department collaborative mechanisms, comprehensively managing debt and risk prevention, and actively repaying debts through arrangements of fiscal funds and utilization of assets and resources. They have prudently resolved government debt risks and achieved phased results.
Since the second half of 2022, influenced by various factors, some localities have shown hidden debt risk signs. In July 2023, the Central Political Bureau meeting required effective prevention and resolution of local debt risks and the formulation and implementation of a comprehensive debt resolution plan. The State Council established a work coordination mechanism to guide each province in formulating specific debt resolution plans. All relevant departments and local party committees and governments at all levels have increased their efforts and taken more practical measures. The Ministry of Finance has arranged over 2.2 trillion yuan in local government bond quotas to support localities, especially high-risk areas, in resolving existing debt risks and clearing arrears owed to enterprises. Local government debt risks have been generally alleviated. By the end of 2023, the balance of hidden debts included in the government debt information platform had decreased by 50% compared to the 2018 baseline, with debt risks under control.
Since 2024, after following relevant procedures, the Ministry of Finance has already arranged a 1.2 trillion yuan debt limit to support local governments in resolving existing hidden debts and clearing arrears owed to enterprises. To alleviate the debt resolution pressure on local governments, in addition to continuing to arrange a certain scale of bonds within the new special bond limit each year to support the resolution of existing government investment project debts, we plan to increase the debt limit on a one-time basis by a relatively large scale to replace local governments' existing hidden debts. This will increase support for local governments to resolve debt risks. Detailed explanations of the relevant policies will be made public after completing the statutory procedures. It should be emphasized that this soon-to-be-implemented policy is the most substantial measure to support debt resolution in recent years. This is undoubtedly a timely policy rain that will greatly reduce local debt resolution pressure, free up more resources for economic development, boost the confidence of business entities, and consolidate the "three guarantees" at the grassroots level.
In the next step, the Ministry of Finance will work with relevant departments to further solidify local governments' main responsibility for debt resolution, guide localities to prudently resolve hidden debt risks, and promote the transformation of financing platforms. At the same time, we will seriously investigate, hold accountable, and require time-limited rectification for illegal and irregular borrowing issues. We will discover, investigate, and hold accountable for each case, resolutely curbing the risk of new hidden debts.
Regarding the specific funding arrangements you mentioned, they will be made public in a timely manner after going through legal procedures.
TASS reporter: My question is about the real estate market. Could you please tell us what considerations fiscal policy has in supporting the development of the real estate market? Thank you.
Vice Minister of Finance Liao Min: Thank you for your question. Real estate is a topic of great concern to everyone. The Ministry of Finance is working in coordination with relevant departments, focusing on promoting supply and demand balance in the real estate market, continuously optimizing fiscal and tax policies, and pushing the real estate industry back onto a stable and healthy development track.
Let me introduce the policies that have been introduced, which include three aspects: demand-side, supply-side, and risk mitigation:
On the demand side, the main focus is on supporting the diverse housing needs of residents and reducing home-buying costs. This includes the introduction of a phased personal income tax rebate policy for "selling old and buying new" housing exchanges. For example, if an existing house is sold for 2 million yuan, with an original value of 1 million yuan, the personal income tax due would be about 200,000 yuan. However, if you purchase another house worth over 2 million yuan within a year, the 200,000 yuan tax paid can be fully refunded. Another example is our cooperation with relevant departments to reduce the housing provident fund loan interest rate by 0.25 percentage points. It is estimated that this will save about 20 billion yuan in personal loan interest payments nationwide each year. These two policies have played an important role in reducing the burden of home purchases for residents and increasing housing demand.
On the supply side, we mainly support optimizing the supply of affordable housing and securing the basic livelihood. In the past three years, the central government has allocated 212.4 billion yuan in subsidies for affordable housing projects and 280 billion yuan in central budget investments. Together with local government special bonds, this has supported the construction of 6.66 million affordable housing units to meet the basic housing needs of urban low and middle-income groups, new urban residents, and young people. At the same time, we have supported the active and steady renovation of 160,000 old residential communities, benefiting 27.25 million households, and supported the renovation of 4.2 million households in shantytowns, urban villages, and dilapidated urban housing. This has played an important role in stabilizing investment, promoting consumption, and benefiting people's livelihoods.
In terms of mitigating existing risks, the finance department has cooperated in introducing a special loan policy for "ensuring housing delivery," providing interest subsidies for 350 billion yuan in special loans. Since last year, 6.2 billion yuan in interest subsidies have been allocated in advance to support and protect the legal rights of homebuyers. We have also cooperated in promoting the campaign to ensure housing delivery, absorbing existing commercial housing inventory and idle land, preventing and resolving real estate risks, and stabilizing social expectations.
Regarding next steps, the third point in the measures introduced by Minister Lan earlier was about real estate policies. Moving forward, we will adhere to strictly controlling increases, optimizing existing stock, and improving quality, actively researching and introducing policy measures conducive to the stable development of real estate. Here, I would like to inform you that the Ministry of Finance has the following three main considerations:
First, allowing special bonds to be used for land reserves. This is mainly considering that there is currently a relatively large amount of idle undeveloped land in various regions. We support local governments in using special bonds to recover eligible idle land inventory, and regions with genuine needs can also use them for new land reserve projects. This policy can both adjust the supply and demand relationship in the land market, reduce idle land, enhance the ability to regulate land supply, and help alleviate the liquidity and debt pressure of local governments and real estate enterprises.
Second, supporting the acquisition of existing housing stock and optimizing the supply of affordable housing. Considering that there is currently a relatively large amount of built but unsold housing, we are taking two main support measures: One is to make good use of special bonds to acquire existing commercial housing for use as affordable housing in various regions. The other is to continue to make good use of affordable housing project subsidy funds. Previously, these funds were mainly used to support the collection of affordable housing sources through new construction. Now we are optimizing and adjusting the direction of support, appropriately reducing the scale of new construction, and supporting localities to collect affordable housing sources more through the absorption of existing housing stock. Through these two measures, we can both absorb existing commercial housing inventory, promote supply and demand balance in the real estate market, and optimize the supply of affordable housing to meet the housing needs of the broader low and middle-income groups.
Third, timely optimization and improvement of relevant tax policies. In accordance with the decision-making and deployment of the Party Central Committee, we are urgently studying and clarifying the value-added tax and land value-added tax policies that are linked to the cancellation of standards for ordinary and non-ordinary housing. In the next step, we will further study increasing support, adjusting and optimizing relevant tax policies to promote the stable and healthy development of the real estate market.
Promoting the stable development of real estate is a systematic project that requires the coordinated efforts of various policies. In policy implementation, we will continue to strengthen the coordination of fiscal policies with other policies, enhance the linkage between central and local governments, strengthen the connection between new and old policies, implement a combination of measures, and unswervingly promote the stabilization and recovery of the real estate market.
Reporter from National Business Daily: We've noticed that some local areas are facing increased pressure on the "three guarantees" - guaranteeing basic livelihood, wages, and operations. Minister Lan also mentioned the "three guarantees" work earlier, which is of great concern to various parties. Could you please tell us what measures the finance department has taken since this year to support local areas in securing the "three guarantees" at the grassroots level?
Lan Fo'an: Thank you for your question. Ensuring the "three guarantees" - basic livelihood, wages, and operations - at the grassroots level is a fundamental requirement for safeguarding people's immediate interests and a basic function of finance. In 2024, the Ministry of Finance has been continuously improving the "three guarantees" management system covering budget preparation, budget execution, dynamic monitoring, and emergency response, promoting stable operation of the "three guarantees" at the grassroots level. We have four main measures:
Strengthening financial support for the "three guarantees" at the grassroots level. In 2024, the central government has arranged over 10 trillion yuan in transfer payments to local governments and urged local authorities to prioritize allocating sufficient funds for the "three guarantees" in their budgets. When we say grassroots here, we mainly refer to the county level.
Establishing and improving working mechanisms. We've implemented a layered responsibility system following the principle of "county-level focus, municipal support (and backup), provincial backup, and central government incentives," and developed detailed emergency response plans for "three guarantees" risks.
Enhancing treasury fund guarantee capabilities. We've strengthened the scheduling of treasury funds for counties and districts in difficulty to ensure payment needs for the "three guarantees."
Strengthening monitoring of local fiscal operations. Through the integrated budget management system, we can now monitor all budget units and grassroots fiscal operations nationwide, clearly understanding treasury fund levels and the progress of "three guarantees" implementation. We send monthly risk alerts to local areas and urge them to respond promptly.
Overall, the current situation of the grassroots "three guarantees" shows general stability with some local tightness. Based on calculations of the total grassroots financial resources nationwide, the bottom line of the "three guarantees" is secured. Taking 2023 as an example, spending on the "three guarantees" accounted for about 50% of available financial resources at the grassroots level. If we include other rigid expenditures, it's about 80% of available resources. The increased pressure on the "three guarantees" in some areas is mainly due to slowing fiscal revenue growth, declining land transfer income, and local government debt burdens.
Next, the Ministry of Finance will continue to take practical and effective measures, research and develop a "three guarantees" list, actively build long-term mechanisms, and firmly secure the bottom line of the "three guarantees" at the grassroots level. Specifically, we have five measures:
Reinforcing responsibilities of all parties. Local party committees and governments at all levels are primarily responsible for the "three guarantees" in their regions and should regularly study and improve safeguard measures. Each functional department is mainly responsible for implementing "three guarantees" policies in their respective fields and should establish horizontal collaboration mechanisms with finance departments.
Enhancing local financial resources. We will continue to increase central government financial transfer payments to local governments in conjunction with annual budget arrangements. As mentioned earlier, we've allocated 400 billion yuan in debt limits to local governments this year to supplement comprehensive financial resources, which is positive for securing the "three guarantees."
Strengthening treasury fund scheduling. We will continue to track local revenue and expenditure operations and treasury fund guarantee situations, providing appropriate support through early fund scheduling for areas with tight treasury funds.
Alleviating debt pressure. We will increase efforts to replace local government stock implicit debt and continue to arrange a certain amount in the annual new local government special debt limits to supplement government fund financial resources and support local debt risk resolution.
Enhancing dynamic monitoring. We will promote the establishment of an information-based, intelligent monitoring system covering the entire "three guarantees" process to dynamically capture potential risks, provide timely warnings and alerts, and address issues early.
Reuters reporter: How can China's proactive fiscal policy play a greater role in boosting consumption and preventing deflationary risks? Also, is there an approximate estimate of the scale of the fiscal policy package? How much room is there for the central government to increase leverage? Thank you.
Lan Fo'an: Thank you for your questions. Since this year, we have focused more on leveraging the countercyclical adjustment role of proactive fiscal policy, maintaining fiscal spending intensity, and continuously working on expanding domestic demand, promoting consumption, and benefiting people's livelihoods. We are pushing to stimulate consumption potential and expand effective demand. There are mainly three aspects:
Multiple measures to increase residents' income. We've steadily raised social security levels. In 2024, we further increased the minimum standard for basic pensions for urban and rural residents, which is the largest increase to date. The overall pension level for retirees has increased by about 3%, and the per capita government subsidy standard for urban and rural residents' medical insurance has also significantly increased. In addition to providing layered and classified social assistance, we distributed a one-time living allowance to people in extreme poverty, orphans, and other groups facing financial difficulties before the National Day holiday this year, aiming to increase the income of struggling groups and enhance the consumption capacity and willingness of low-income groups.
Multiple channels to increase government investment. As mentioned earlier, in 2024, we issued 1 trillion yuan in ultra-long-term special treasury bonds, a 3.9 trillion yuan limit for new local government special bonds, and arranged 700 billion yuan for central budget investment. Together with the additional national debt funds from 2023, the actual funds available for increasing government investment have significantly increased compared to last year, driving effective investment and expanding domestic demand.
Vigorous implementation of the "Two New" policy. We've arranged about 300 billion yuan in ultra-long-term special treasury bond funds. Since late August and early September, various localities have successively introduced specific operational measures, mainly to support equipment updates in key areas, further enhance local capacity for trading in old consumer goods for new ones, effectively driving investment growth, releasing consumption potential, and promoting industrial development.
Next, the Ministry of Finance will continue to adhere to precise and targeted measures, optimize basic policy mechanism arrangements, improve residents' income expectations, and stimulate consumption potential. We will make good use of special funds, loan interest subsidies, and other tools to improve the commercial circulation system and consumption environment. We will leverage the role of government bonds to drive effective investment and expand domestic demand.
Regarding your second question about the central government's room for increasing leverage, as I mentioned in the opening remarks, the central government has considerable space for borrowing and increasing the deficit. Going forward, we will follow the decisions and deployments of the Party Central Committee, coordinate development and security, and reasonably utilize debt policy tools in conjunction with economic conditions, macroeconomic regulation needs, and fiscal revenue and expenditure situations to promote sustained economic improvement.
Yicai Reporter: Recently, the Ministry of Finance has been studying and introducing new measures for managing special bonds. Could you please tell us about the issuance and use of special bonds so far this year? In what aspects will management be strengthened in the future? Thank you.
Wang Dongwei (Vice Minister of Finance): Thank you for your question. In recent years, the Ministry of Finance, together with relevant departments, has established and improved policy systems for managing special bonds, guiding local governments to enhance the quality of special bond projects, and continuously leveraging the important role of special bonds in driving effective investment expansion and stabilizing the macroeconomic situation. Since 2020, a cumulative 18.7 trillion yuan of new special bonds have been arranged, supporting about 130,000 government investment projects. In 2024, 3.9 trillion yuan of new special bonds have been arranged, which, as Minister Lan mentioned earlier, is the largest scale ever.
We focus on better leveraging the role of government investment and carefully organizing the allocation, issuance, and use of special bonds. On one hand, we've increased support for special bonds in major economic provinces, with quota allocations tilted towards regions with well-prepared projects and higher investment efficiency, supporting major project construction in these provinces. On the other hand, we've reasonably arranged special bond quotas for other regions, promoting the continuation and completion of ongoing projects and the implementation of national strategic projects. We've also guided local governments to accelerate the issuance and use of special bonds, strengthening scheduling and reporting progress on a ten-day basis. As of the end of September, local governments have issued 3.6 trillion yuan of new special bonds, accounting for 92.5% of the annual quota.
Building on this work, next steps will include researching the expansion of special bond usage scope, improving management mechanisms, maintaining the intensity and pace of government investment, reasonably reducing financing costs, and effectively promoting high-quality development. Specifically, there are three points:
Expanding scope: Mainly three aspects: First, researching and improving the management of the special bond investment direction list, increasing areas where bonds can be used as project capital, and maximizing the scope of use. Second, making good use of special bonds to support the acquisition of existing commercial housing for use as affordable housing, supporting healthy real estate market development. Third, reasonably supporting forward-looking, strategic emerging industry infrastructure, promoting the rapid development of new productive forces.
Strengthening mechanisms: Researching and improving project management mechanisms, opening up "green channels" for ongoing projects, promoting effective linkage between project planning, reserve, and implementation, accelerating the issuance and use of special bonds and project construction progress, quickly forming tangible work volume, and effectively playing the guiding role of government investment.
Strict management: Mainly three aspects: First, improving the whole life-cycle management of special bonds from "borrowing, using, managing, to repaying", strengthening supervision of bond fund expenditure, and implementing the responsibilities of project supervisory departments and project units. Second, the asset ledger of special bond projects should be improved, project assets should be managed by category, and the balance between government liabilities and project assets should be ensured. Third, exploring early repayment of special bonds, researching and establishing a sound debt service reserve system to guarantee repayment sources for special bonds.
Beijing News Reporter: I have a question about student financial aid policies. We noticed that as an important part of incremental policies, the Ministry of Finance is currently studying and improving the student financial aid system for higher education institutions. We'd like to know what new policy deployments are coming soon.
Guo Tingting (Vice Minister of Finance): Thank you for your question. In recent years, the Ministry of Finance, along with the Ministry of Education and other relevant departments, has continuously improved the student financial aid system covering all educational stages, steadily increased investment, gradually raised aid standards, and supported students to focus on their studies and personal development. Currently, China has established a comprehensive aid system led by the government with active participation from schools and society, mainly including national scholarships and grants, national student loans, tuition waivers, living allowances, work-study programs, and other policies. In 2023, national finance invested 93.2 billion yuan, benefiting over 31 million college students; through policies such as interest subsidies, we supported banks in issuing 70 billion yuan in national student loans.
As Minister Lan mentioned earlier, in the next step, we will work with relevant departments to adjust and improve financial aid policies for college students in two aspects - rewarding excellence and assisting those in need - in two phases. The first phase, to be implemented in 2024, includes the following policy measures:
Doubling the number of National Scholarship recipients. For undergraduates, the number will increase from 60,000 to 120,000 annually; for master's students, from 35,000 to 70,000; and for doctoral students, from 10,000 to 20,000.
Increasing the National Scholarship standards for undergraduates. The amount will increase from 8,000 yuan to 10,000 yuan per student annually; the National Inspirational Scholarship will increase from 5,000 yuan to 6,000 yuan per student annually.
Raising the National Grant standards for undergraduates. Starting from the fall semester of 2024, the average grant will increase from 3,300 yuan to 3,700 yuan per student annually.
Enhancing support for National Student Loans. The maximum loan amount for undergraduates will increase from 16,000 yuan to 20,000 yuan per student annually, and for graduate students from 20,000 yuan to 25,000 yuan. The interest rate will be reduced to the loan prime rate for the same period and grade minus 70 basis points.
The second phase, to be implemented in 2025, will increase the Academic Scholarship standards for graduate students. Additionally, we will raise the National Grant standards for regular high school students and increase both the standards and coverage of National Grants for secondary vocational school students.
Moving forward, we will work with relevant departments to promptly introduce these policies and ensure their implementation, making sure funds reach students in a timely manner so that policies can take effect early and students can benefit soon.
21st Century Business Herald Reporter: In 2024, 1 trillion yuan of ultra-long-term special treasury bonds were issued specifically for building security capabilities in national major strategic and key areas. How will these ultra-long-term special treasury bond funds be managed and utilized effectively?
Wang Dongwei (Vice Minister of Finance): Thank you for your question. Issuing ultra-long-term special treasury bonds to support security capacity building in national major strategic and key areas is an important fiscal policy this year. To ensure the effective implementation of this major policy, the Ministry of Finance immediately established a dedicated task force to ensure effective coordination and orderly progress of all work.
First, we are ensuring proper fund raising. Considering project construction cycles and treasury bond market demand, we scientifically design bond types and reasonably control the issuance pace to meet project construction needs while preventing fund stagnation and saving funding costs. As of the end of September, a cumulative 752 billion yuan of ultra-long-term special treasury bonds have been issued, with overall stable issuance rates.
Second, we are accelerating fund allocation. We are promptly allocating budgets and disbursing funds according to the project list.
Third, we are strengthening fund supervision. Recently, the Ministry of Finance issued interim measures for supervising ultra-long-term special treasury bond funds, proposing a series of specific requirements such as establishing a whole life-cycle management system, implementing special account management, establishing a debt service reserve system, and strengthening performance management. We are adopting stricter, more practical, and more detailed measures to manage and utilize the ultra-long-term special treasury bond funds effectively.
Next, we will complete the annual task of issuing 1 trillion yuan of ultra-long-term special treasury bonds as planned and promptly allocate budgets and transfer funds. Meanwhile, we will strictly supervise the funds, establish a horizontal collaborative and vertically linked supervision mechanism with industry management departments and local finance departments, strengthen tracking and monitoring, strictly prohibit misappropriation of funds, promptly correct violations of regulations and laws, and ensure the safe, standardized, and efficient use of ultra-long-term special treasury bond funds.
CCTV Reporter: We just heard Minister Lan mention that special treasury bonds will be issued to supplement the core Tier 1 capital of large state-owned commercial banks. Could you explain the specific policy considerations and how this will be implemented in the next steps?
Liao Min (Vice Minister of Finance): Thank you for your question. Large state-owned commercial banks are the main force in serving the real economy and the ballast for maintaining financial stability. Currently, the six large state-owned commercial banks - Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China - are operating steadily overall, with stable asset quality and sufficient provisions. According to international best practice standards, their main indicators are all within the "healthy range". Their owners' equity has continued to increase, reaching 15.1 trillion yuan by the end of June 2024, a 2.9% increase from the beginning of the year. Their capital strength is relatively sufficient, with an average core Tier 1 capital adequacy ratio of 12.3% as of the end of June 2024.
Large state-owned commercial banks, along with other types of financial institutions, share the important task of supporting high-quality economic development and implementing the "five major articles" of finance. Capital is the "foundation" for commercial banks' continuous operation and the basis for banks to promote real economic growth, facilitate economic structure adjustment, and prevent various risks. As we all know, in the past few years, some local small and medium-sized banks have already supplemented their capital. Under the current circumstances, we believe it is necessary to support large state-owned commercial banks in further increasing their core Tier 1 capital through appropriate means. This will not only enhance banks' ability to operate steadily but also leverage capital to increase credit supply capacity, further strengthen support for real economic development, and provide stronger support for promoting sustained macroeconomic recovery and boosting market confidence.
As authorized by the State Council, the Ministry of Finance is responsible for centrally and uniformly fulfilling the duties of the state-owned financial capital contributor, which includes establishing a capital replenishment and dynamic adjustment mechanism for state-owned financial institutions. The Ministry of Finance will adhere to market-oriented and law-based principles, following the approach of "overall planning, phased implementation, and tailored policies for each bank". We will actively raise funds through channels such as issuing special treasury bonds to support large state-owned commercial banks in steadily and orderly increasing their core Tier 1 capital. We believe that through this measure, we can enhance the operational and profitability capabilities of large state-owned commercial banks, which will also benefit the long-term stability of the national economy.
To update you on the latest progress, this work has already begun. The Ministry of Finance has established a cross-departmental working mechanism with relevant financial management departments to provide efficient services for each large state-owned commercial bank to expedite the completion of related work. Currently, we are waiting for each bank to submit specific capital replenishment plans, and all related work is progressing in an orderly manner. Additionally, I'd like to inform you that as listed banks, the specific capital replenishment plans of large state-owned commercial banks will be disclosed in a timely and lawful manner according to relevant regulations.
China Daily Reporter: The Third Plenary Session of the 20th CPC Central Committee made important arrangements for deepening the reform of the fiscal and tax system. What specific reform measures will the Ministry of Finance introduce next?
Lan Fo'an: Thank you for your question. Everyone is quite concerned about reform issues, especially since the Third Plenary Session of the 20th CPC Central Committee made important arrangements for deepening the reform of the fiscal and tax system. It clearly proposed reform requirements such as "improving the budget system," "improving the tax system conducive to high-quality development, social equity, and market unity," "establishing a clear division of responsibilities, coordinated financial resources, and regionally balanced central and local fiscal relations," and "improving the government debt management system."
The Ministry of Finance has carefully studied and understood the spirit of the Third Plenary Session of the 20th CPC Central Committee, making the implementation of reform tasks a top priority for the current and coming period, and will push forward unswervingly. In the entire implementation process of the reform, we will focus on grasping the major relationships between government and market, central and local, efficiency and fairness, overall and partial, long-term and current, striving to transform the strategic deployment of comprehensively deepening reform into a powerful force for advancing Chinese-style modernization. Specifically, there are three points:
Promptly issuing reform implementation plans. We will adhere to problem-oriented and goal-oriented approaches, focus on organically combining accelerating reform with promoting scientific fiscal management, actively respond to social and grassroots concerns, and formulate detailed task lists for each reform task deployed by the plenary session, clarifying timelines and priorities. We have initially formed an implementation plan for deepening the fiscal and tax system reform, which will serve as the "overall roadmap" for future reforms.
Promptly promoting the implementation of reform measures. We adhere to steadily advancing reforms in stages and steps, coordinating the implementation timelines of various reform measures. We plan to introduce a batch of mature and tangible reform measures in the next two years, especially some fundamental systems related to top-level design, such as improving the budget system, perfecting the fiscal transfer payment system, and establishing a Chinese-style government debt management system adapted to high-quality development. We will gradually form a system of reform achievements led by fundamental systems and followed up by reform measures in subdivided areas.
Emphasizing the combination of top-level design and grassroots exploration. While clarifying reform principles and directions, we encourage and support relevant parties to advance reform and innovation according to local conditions. We have organized pilot projects for zero-based budgeting reform in central departments and plan to conduct pilot projects for scientific fiscal management in some areas. We will assign different reform pilot contents based on the characteristics of different regions and departments, fully respecting the spirit of innovation, promptly refining and replicating reform experiences, and advancing reforms in depth with the times.
Next, the Ministry of Finance will continue to implement reforms with a spirit of driving nails, actively and steadily promoting the formation of a good pattern where fiscal macro-control is more precise, the budget system is more sound, the tax system is more optimized, the fiscal system is more improved, and fiscal development is more sustainable. We will strive to provide more solid fiscal guarantees for the construction of a modern socialist country with Chinese characteristics.