Central economic work conference, a proactive fiscal policy to mass efficiency, more sustainable, maintain moderate strength, strengthen the financial guarantee national major strategic task, in promoting scientific and technological innovation, accelerate economic restructuring, regulating the income distribution as actively, emphasizing dissolve the recessive debt risk of local government's work, party and government organs to stick to austerity.

To build a new development pattern in 2021, we need to take the first step and see a new outlook. How should we better play the role of public finance? The reporter interviewed Minister of Finance Liu Kun.

We will adopt precise and scientific policies, not make abrupt changes, and maintain certain levels of tax and fee cuts

Question: What is your understanding of the statement made at the Central Economic Work Conference that "proactive fiscal policy should be more quality, efficient and sustainable"?

Liu Kun: To improve the quality and efficiency of policies, we will focus on optimizing the structure and strengthening management, further improve the mechanism for implementing policies, and effectively raise the efficiency of policies and the efficiency of funds.

On the one hand, we need to establish and implement a regular direct mechanism for government funds to improve the efficiency of government expenditure. On the other hand, we should pay attention to economize and enrich our people, and implement the requirements of "tightening the belt". At the same time, we will move faster to put in place a performance-based budget management system that covers all aspects of the budget, and ensure that all expenditures are spent to ensure effectiveness and ineffectiveness are held accountable.

"More sustainable" means that the scale of spending and policy intensity should be kept basically stable, leaving room for policy operations to respond to new risks and challenges that may arise in the future.

Taking into account the need to maintain steady growth and guard against risks, we will set an appropriate deficit to GDP ratio and the amount of special bonds issued by local governments, maintain appropriate intensity of spending, and keep the macro leverage ratio basically stable. At the same time, we strengthened overall planning of budgets, increased financial support for major national strategic tasks, and supported local governments in ensuring solid progress in ensuring the stability of the six programs and in fully implementing the tasks of ensuring the six programs.

At present, the world economic situation is still complex and severe, the recovery is unstable and unbalanced, and the various derivative risks caused by the impact of the epidemic cannot be ignored. This requires that our macro policies should not be swerved.We should assess the situation, seize the opportunity, and adopt precise policies. We should maintain our strength, consolidate and expand the achievements in epidemic prevention and control and economic and social development, and take the first step in building a new pattern of development with a new outlook.

Question: The Central Economic Work Conference required us to improve the tax and fee reduction policies. How will the Ministry of Finance implement this requirement?

Liu Kun: In the face of the severe and complex situation and the difficult fiscal revenue and expenditure situation in 2020, China has issued and implemented 28 tax and fee reduction policies in seven successive groups. It is estimated that the tax and fee reduction will exceed 2.5 trillion yuan for the whole year.

Going forward, the Ministry of Finance will keep cutting taxes and fees to a certain extent and continue to implement the institutional policy of reducing taxes and fees, taking into account its fiscal capacity and the need to implement policies to help enterprises and rescue them.

It should be noted that many of the tax and fee reduction policies we have implemented in recent years are institutional and sustainable. The cumulative effect will be greater and the burden reduction on businesses will become more pronounced. The Ministry of Finance will resolutely cut taxes and fees to the full extent that they are due to be cut, so as to help enterprises go light and enjoy better development.

We will expand the scope of direct funds to meet the basic needs of people's livelihood

Reporter: The RMB 2 trillion direct fund in 2020 has achieved remarkable results in benefiting enterprises and people. Will we continue to use this model in 2021?

Liu Kun: Implement the direct fiscal fund mechanism is a major decision and deployment made by the CPC Central Committee and the State Council. It is also a major innovation in the way of fiscal macro-control. By December 29, 2020, 1.52 trillion yuan of direct funds had been put into use. The direct mechanism is "one step to the end". It only takes 20 days for financial funds to be transferred from the central government to the grassroots level of cities and counties, and the funds are invested more accurately and used to the urgently needed areas at the grassroots level.

In 2021, the Ministry of Finance will promote the formation of normalized institutional arrangements, will be directly used in the primary financial guarantee at the beginning of general transfer payments, can be directly allocated to the central transfer payments to local common financial powers, as well as the conditions of special transfer payments are included in the scope of direct, promote the whole process, the whole chain and all-round monitoring at the same time, promote direct mechanism embedded in the budget management process, and improve the efficient use of public funds.

Reporter: What measures will the financial authorities take in 2021 to ensure the basic livelihood of the people?

Liu Kun: People's livelihood is no small matter. No matter how severe the pressure on government revenues and expenditures becomes, we will resolutely ensure that spending on people's wellbeing is properly ensured. In 2021, the Ministry of Finance will continue to meet the basic needs of people's livelihood. We will use employment subsidies and other funds in a coordinated way, increase assistance to key groups in finding jobs, stabilize basic employment, and better guarantee that people who work for a living get what they earn. Increase financial investment in education, optimize the structure of expenditure, so that "learning to teach" to achieve higher quality development; We will promote national pooling of basic old-age insurance for enterprise employees, and improve the management of national social security funds to ensure that the elderly are provided for. We will appropriately increase per capita government subsidies for medical insurance for rural and non-working urban residents, strengthen our capacity to respond to and deal with major infectious diseases, and ensure that patients have access to medical care.

In the process of strengthening basic living standards, we will make vigorous efforts to ensure that spending on people's livelihood is in harmony with economic development and in line with the financial situation, so as to ensure that the basic living standards are extended into the future.

Reporter: In 2021, what will the Ministry of Finance do to consolidate the achievements of poverty alleviation and effectively link them with rural revitalization?

Liu Kun: General Secretary Xi Jinping has pointed out that poverty eradication is not the end, but the starting point of a new life and a new struggle. In 2021, the Ministry of Finance will not slack off and strive to write three articles on "stabilizing, consolidating and improving".

Stability -- During the transition period, we will maintain the overall stability of fiscal support policies and funds, and on this basis, appropriately arrange the scale of government input and improve the structure of expenditures to provide guarantee for better coordination work.

Consolidating -- Priority will be given to areas where poverty alleviation achievements are heavy and rural revitalization is weak. Priority will be given to supporting western regions in consolidating poverty alleviation achievements, and appropriate preferential support will be given to counties designated by the central government as priority for rural revitalization.

Improvement -- gradually increase the proportion of relevant fiscal funds related to agriculture used in industrial projects, stimulate the endogenous power of farmers' self-development.

We will put a constraint on local government bonds and better leverage the role of bond investment in driving growth

Reporter: What other policy measures will the Ministry of Finance take in 2021 to guard against and defuse local government debt risks?

Liu Kun: By the end of November 2020, the outstanding debt of local governments was 25.5595 trillion yuan, which was within the limit approved by the NPC. The risks of local government debt were generally under control.

At the same time, we have also noted that some regions are still adding hidden debts, and some regions are facing rising debt repayment risks. In this regard, the Ministry of Finance will take strict precautions against and actively respond to the situation to effectively cage the risk of debt.

First, open the "front door". We will keep the macro leverage ratio basically stable, appropriately set government debt and local government debt ceilings for different regions, and meet the need for counter-cyclical adjustment of fiscal policy and fiscal sustainability.

Second, blocking the "back door". We will strictly prohibit local governments from borrowing money in violation of laws and regulations or in any disguised form. We will work to effectively defuse the hidden debt risks of local governments, effectively move the threshold for risk prevention and control, and resolutely put a stop to illegal and illegal borrowing.

Third, improve management. In line with the principle of "funds follow projects wherever they go", we will guide local governments to accurately focus on key areas, make more effective use of bond funds, and better stimulate the economy.

Fourth, we will strengthen oversight. Illegal and irregular financing activities of local governments and financial institutions will be found, prosecuted, and held accountable, with lifelong accountability and backtracking investigation.

Fifth, we will promote openness. We will urge local governments to make steady progress in making local government debt more transparent, give better play to the oversight role of the public, and promote the formation of a market-based and law-based mechanism for self-restraint in financing.

By imposing an additional constraint on local government debt, we will create an additional safety valve for economic and social development. In this regard, we will be persistent, consistent, and leave no future problems.

Source: Ministry of Finance, PRC