Issuance of special government bonds makes fiscal policy more proactive
At the critical moment when the epidemic situation overlaps with economic transformation and upgrading, the use of active fiscal policies such as special government bonds to expand tax and fee reduction and expenditure space can offset the downward economic energy and stimulate economic vitality.
After a lapse of 13 years, "special government bonds" reappeared in high-level decision-making. The meeting of the Political Bureau of the Central Committee of the Communist Party of China held on March 27 pointed out that it is necessary to strengthen the adjustment and implementation of macro policies, and to study and propose a package of macro policies and measures that are actively responded to. More flexible and appropriate, appropriately increase the fiscal deficit rate, issue special government bonds, increase the scale of local government special bonds, guide the decline in interest rates on the loan market, and maintain reasonable and sufficient liquidity.
For a while, the expression "issue of special government bonds" became a hot topic that attracted much attention. This is the third time that China has issued special government bonds. The first two occurred in 1998 and 2007 respectively.
In fact, whether it is issuing special treasury bonds, issuing special bonds, or a modest increase in the fiscal deficit rate, they are all powerful tools for active fiscal policy. This is of great significance not only to the Chinese economy but also to the stability of the world economy. On March 26, President Xi Jinping stated at the special summit meeting of the leaders of the Group of Twenty for New Crown Pneumonia that he would continue to implement a proactive fiscal policy to contribute to world economic stability.
From the time of the first two special government bonds issuance, it can be seen that it is special: As a positive fiscal measure to deal with economic fluctuations and the financial crisis, during the global economic crisis in 1998 and the financial crisis in 2008, special government bonds stimulated domestic demand and stimulated consumption. It has played a huge role in maintaining the relatively stable and rapid development of the domestic economy.
Thirteen years later, in order to deal with the economic shutdown and financial revenue pressure caused by the global epidemic crisis, special government bonds will once again become a special means of stabilizing the economy at this special moment.
The direct background of the special treasury bonds is that medical and health expenditures, as an important part of financial expenditures, will inevitably increase during the epidemic period. In addition, there is still great uncertainty in the development of the global epidemic situation. In this case, adequate financial preparation is needed "Grass and grass" to win the protracted battle for epidemic prevention and control. In addition, accelerating the construction of new infrastructure such as 5G networks and data centers also requires more funding.
At the moment of the epidemic, in order to deal with economic shocks, governments in various countries have adopted monetary easing as the first choice. The continuous heavyweight move from zero interest rate to unlimited quantitative easing in the United States can be said to have led the global central bank to rescue the market. But as the President of the European Central Bank judges, fiscal policy should be the first and most important tool to respond to the crisis. Now that the epidemic has become the main obstacle to economic growth, fiscal stimulus is the most necessary.
Compared with the general government bonds that are included in the central government treasury balance management, the quota is confirmed and included in the fiscal deficit at the beginning of the year; the special government bonds are included in the central government treasury balance management. This, in fact, has left considerable room for "proper increase of the fiscal deficit rate".
The market's call for a proper increase in the fiscal deficit has a long history, and this proposal is in line with market expectations. The fiscal deficit rate is generally defined as the ratio of fiscal deficit to GDP. Previously, international reference was to use the EU's 3% as a warning line to measure fiscal risk. China also basically uses this standard to control the deficit rate at 3% for a long time. But this red line is not indestructible. In fact, European and American countries are not sticking to it. Since the international financial crisis in 2008, the fiscal deficit rates of most European and American countries in most years have been above 3%, and some even exceeded 10%.
Under the global epidemic crisis that hasn't happened in a century, the downward pressure on the economy has increased, which will inevitably require the financial sector to undertake more onerous tasks and play a more active role. Issuing special government bonds and appropriately increasing the fiscal deficit rate can expand the space for tax cuts, fees and expenditures, offset the downward energy of the economy, stimulate consumption, and then stimulate economic vitality and ensure growth. At the same time, it can also stabilize market expectations, drive social investment, and enhance corporate vitality and innovation momentum.
In the context of China's deleveraging, the space for monetary policy is shrinking, and it is time to give play to the positive effects of active fiscal policy on the economy. The soldiers and horses have to move ahead, and at the critical moment of the economic transformation and upgrading of the epidemic situation, more decision-making courage is needed to plan ahead and carry out counter-cyclical adjustments. And issuing special government bonds and appropriately increasing the fiscal deficit rate will make fiscal policy more active and help the economy return to a new cycle of growth.