Well-targeted govt spending can drive growth

Fiscal work plays a major and responsible role in stabilizing the macro economy.

The news conference the Ministry of Finance held on Tuesday in Beijing has therefore attracted much attention as people want to know how the central government will adjust its spending to deal with the uncertainties and risks confronting the country due to the mounting downward pressure on the economy.

Over the past few years, in addition to its regular expenditures, the government has assumed the additional responsibilities of promoting scientific and technological breakthroughs, pursuing rural vitalization, strengthening environmental protection and maintaining the basic living standards of low-income people. Additional expenditures have also been required in areas such as carbon neutrality and balanced regional development.

To give full play to its financial policy, the Ministry of Finance issued 1.46 trillion yuan ($231.1 billion) of local government special bonds in advance at the end of last year for transportation, industrial park, infrastructure, affordable housing projects and municipal administration. And the ministry has vowed there will be more fee and tax reductions this year to relieve the financial burden on market entities.

At the same time, the ministry should increase the central government's transfer payments to local governments to help them maintain and improve the quality of their public services. And the central government should maintain its input into the research and development of core technologies, ecological conservation, people's basic livelihoods and agricultural modernization.

China has the ability to stabilize the economy by increasing spending, but it must ensure the efficiency and sustainability of its spending by ensuring that the funds are used to cultivate new growth drivers, support people's livelihoods and invigorate market entities.

How big a role government funds can play not only depends on how much it spends but also on how well it is spent. While reducing taxes and fees will subtract from government revenues that will be in exchange for the addition of corporate benefits and the multiplication of market vitality.