On March 13, the first session of the 14th National People's Congress (NPC) adopted a resolution on the implementation of the central and local budgets in 2022 and the central and local budgets in 2023, approving the central budget for 2023. The budget is also known as the "national ledger".

According to the 2023 government Work report, the fiscal deficit to GDP ratio will be held at 2.8% in 2022, with central government revenue and expenditure in line with the budget and a slight surplus. In 2023, we need to prioritize stability, seek progress while maintaining stability, maintain continuity and pertinency of policies, strengthen policy coordination and collaboration, and form synergy for high-quality development. We will increase the effectiveness of our proactive fiscal policy.

What is the national fiscal situation in 2022? As an important means of macro-control, how will this year's fiscal policy reflect the "step-up effect"?

The fiscal deficit in 2022 was 2.8 percent, the lowest in nearly three years

The central government's revenue and expenditure were in line with the budget, with a slight surplus.

According to the budget report, China's general public budget revenue will reach 20.37 trillion yuan in 2022, an increase of 0.6 percent over 2021. Expenditure in the general public budget nationwide was 26.06 trillion yuan, up 6.1%. Including the replenishment of the Central Budget Stabilization Fund and transfers from the budgets of government-managed funds, total expenditure was 26.19 trillion yuan. Total revenue exceeded total revenue, leaving a deficit of 3.37 trillion yuan, which is consistent with the budgeted figure.

Data show that from 2020 to 2022, the national general public budget revenue will be 18.29 trillion yuan, 20.25 trillion yuan and 20.37 trillion yuan, respectively, standing above 20 trillion yuan for two years in a row.

The budget report summarizes the implementation of eight fiscal and tax policies and fiscal work for 2022. The top three are: stabilizing the economic market, strengthening funding for epidemic prevention and control, supporting efficient coordination between epidemic prevention and control and economic and social development, and ensuring the smooth operation of public finances at the community level.

As for the implementation of fiscal and tax policies and fiscal work in the 2021 Budget report, the top three are: keeping economic performance within a reasonable range, strengthening innovation-driven growth, supporting the optimization and stability of industrial and supply chains, increasing input in people's livelihood and ensuring effective and effective basic livelihood.

"In the past year, we strengthened the coordination of fiscal resources and maintained the intensity of necessary expenditures, which not only expanded aggregate domestic demand but also kept the deficit-to-GDP ratio at a reasonable level." Liu Kun, Minister of Finance, at The State Council Information Office on March 1, 2018. In the past five years, the overall deficit-to-GDP ratio was kept within 3%, and policy space was reserved to address new difficulties and challenges. Strong and effective fiscal macro-control helped stabilize the macroeconomic market.

The deficit-to-GDP ratio is the ratio of the fiscal deficit to the gross domestic product. By adjusting the deficit-to-GDP ratio and the scale of the deficit, the intensity of the fiscal policy can be adjusted to some extent.

The fiscal deficit ratio in 2022 is 2.8 percent, the lowest in nearly three years. According to the data, the deficit ratio will be 3.7 percent in 2020 and 3.1 percent in 2021. In 2018 and 2019, the deficit ratio was 2.6 percent and 2.8 percent.

"The fiscal performance over the past year has not been easy." Liu Shangxi, president of the Chinese Academy of Fiscal Sciences, said that due to the complex situation at home and abroad, downward pressure on the Chinese economy has increased, and the government has been in a tight balance. Under such circumstances, the proactive fiscal policy has focused its efforts and taken the initiative to step up at the right time to stabilize the economic market and secure the bottom line of people's wellbeing.

We will increase the effectiveness of our proactive fiscal policy

The budget report said that from the perspective of fiscal revenue, the domestic economy is expected to pick up in 2023, coupled with a low base after the implementation of large-scale VAT rebates in 2022, laying the foundation for the recovery of fiscal revenue growth.

Earlier, the provinces released their 2022 budget implementation and 2023 budget, and many provinces are also optimistic about 2023. For example, Hainan is expected to grow its general public budget revenue by 15 percent in 2023, Jilin by 14.5 percent, Tianjin by 4 percent and Liaoning by around 5 percent. The Jilin Department of Finance predicted that GDP growth of 6% in 2023, fiscal revenue will be consistent with the economic situation, showing a recovery growth. Taxes deferred in 2022 will be paid in 2023. In addition, the amount of VAT rebate will be significantly reduced in 2023 compared with 2022.

According to the 2023 government Work report, the main development target for this year is to increase GDP by around 5%. We will increase the effectiveness of our proactive fiscal policy. The deficit-to-GDP ratio will be set at 3%.

The deficit-to-GDP ratio is 3 percent, an increase of 0.2 percentage points over 2022.

The budget report also pointed out that the proactive fiscal policy should be more effective, and we should make more efforts to increase and optimize expenditure in a reasonable way. We should coordinate our efforts with monetary, industrial, scientific and technological, and social policies, so that the proactive fiscal policy can play its role more directly and effectively. We will strengthen overall coordination of government funds, optimize the combination of government deficits, special bonds, discount interest and other instruments, increase the scale of government spending, and maintain the necessary intensity of spending. We will appropriately raise the deficit to GDP ratio, appropriately increase the amount of special bonds issued by local governments, and increase transfer payments from the central government to local governments.

This policy is based on the fact that the current economic recovery is not yet firmly based. There are still three pressures -- contraction of demand, supply shock and weakening of expectations -- and the external environment is volatile.

"In response to these challenges, we need to step up fiscal macro-control, optimize the mix of policy tools, and ensure that fiscal sustainability and local government debt risks are under control while effectively supporting high-quality development." "Liu Kun said.

Increase the effect. Where is the increase point?

Among the three points Liu Kun replied to the media, "increase the intensity of fiscal expenditure" ranked the first. General public budget expenditure in 2022 reached 26.06 trillion yuan, an increase of 6.1%, providing necessary financial support for effective coordination of epidemic prevention and control and economic and social development. On the basis of 2022, government revenue, deficit, interest discount and other policy tools will be coordinated to appropriately increase government spending this year.

According to the budget report, national expenditure in the general public budget will reach 27.51 trillion yuan this year, an increase of 5.6%.

Data show that in recent years, the national general public budget expenditure continues to increase. In 2019, 2020 and 2021, the national general public budget expenditure is 23.89 trillion yuan, 24.56 trillion yuan and 24.63 trillion yuan respectively.

Liu Kun also said that "improving efficiency" means improving the effectiveness of policies. We will improve preferential tax and fee policies, make them more precise and targeted, and focus on helping enterprises to bail them out. We also need to improve the structure of government spending, make better use of government funds to boost investment and consumption. At the same time, we will strengthen coordination and cooperation with monetary, industrial, scientific and technological, and social policies to form policy synergy and promote overall economic improvement.

"Extra force means moderately increasing fiscal policy expansion. To improve policy effectiveness means to improve policy effectiveness. The proactive fiscal policy has increased its effectiveness, reflecting the general principle of seeking progress while maintaining stability, and balancing needs with possibilities, the immediate and long-term, and development with security." Liu Shangxi said.

Focus on expanding domestic demand

According to the budget report, leading the list of major expenditure and expenditure policies in 2023 is to give full play to the role of fiscal policy in stabilizing investment and promoting consumption, and focus on expanding domestic demand.

Major revenue and expenditure policies for 2021 and 2022 are "promoting innovative development and industrial upgrading" and "strengthening support for market entities to stabilize enterprises and ensure employment".

Also at a press conference on March 1, Xu Hongcai, vice minister of Finance, answered a question about how the Ministry of Finance will use fiscal policy resources to boost consumption.

Xu Hongcai said that the Ministry of Finance will "enhance the adjustment of social security and transfer payments, improve the consumption power of low - and middle-income residents, and improve tax preferential policies to stimulate the potential of social consumption." "We will encourage the local conditions to support the 'old for new' home appliances and the delivery of green smart home appliances to rural areas through the existing fund channels. New energy vehicles purchased in 2023 will continue to be exempt from vehicle purchase tax. We will reduce import tariffs on some quality consumer goods. Support the construction of a number of national comprehensive freight hubs, and promote logistics cost reduction and efficiency ".

Source: Ministry of Finance of the People's Republic of China