China will work to expand the coverage of the directly funneled funds and improve the management of such funds as an effort to enable more efficient use of fiscal funds through reform to better serve the needs of economic and social development, the State Council's executive meeting chaired by Premier Li Keqiang decided on Wednesday.
The special transfer payment mechanism, designed to channel this year's increased fiscal funds straight to the prefecture and county-level governments, is an extraordinary measure in an extraordinary time and an important innovative step in macro regulation.
Li has underscored that the newly increased funds must be utilized in a more targeted way. Practices and experiences gained must be timely reviewed for policy improvement.
It was reviewed at the Wednesday meeting that by the end of September, among the two trillion yuan (about 299 billion U.S. dollars) of additional fiscal funds, 1.57 trillion of the 1.7 trillion yuan designated for localities had been delivered to primary-level government departments. With the replenishment of fiscal resources, local governments have been in a better position to deliver tax and fee cuts, secure jobs, protect market entities and people's livelihood, support major projects and poverty reduction, and perform their functions. In the first three quarters, new tax and fee cuts exceeded two trillion yuan.
The implementation of the sizeable-scale business support policies and the special transfer payment mechanism has secured more than 100 million market entities and nearly nine million new urban jobs, playing a critical role in promoting steady economic recovery.
"The special transfer payment mechanism has played a critical role in enacting our relief policies of a sizeable scale. The highly effective approach shall continue to be well applied," Li said.
To meet the main development goals and tasks set for 2020, greater efforts will be made to maintain the consistency and effectiveness of macro policies and ensure sound implementation of the special transfer payment mechanism to put the funds to more effective use.
It is also important to explore, building on this year's experience, the establishment of a regular special transfer payment mechanism and enable more efficient use of fiscal funds by advancing reform to better serve the needs of economic and social development.
"Normally, funding from treasury bond is spent on designated projects. Yet this year we are facing a special situation. Funds raised from the special bond for COVID-19 control shall cover more areas, including current expenditure programs," Li said, "But primary-level governments must ensure that their spending is well-calculated."
Coverage of the directly funneled funds will be expanded. Transfer payments that can be directly distributed under fiscal responsibilities shared by central and local governments, eligible special transfer payments, and general transfer payments of subsidy funding to guarantee basic fiscal capacity at the county-level can be included in the special mechanism.
This will essentially ensure full coverage of livelihood subsidies supported by the central government budget, on-time and in-full payment of teachers' wages for compulsory education, and greater support for the functioning of the primary-level governments.
"The mechanism shall be further improved. The COVID-19 bond is a special step amid unusual times, and primary-level governments are responsible for principal repayment," Li said.
The directly funneled funds will be better managed. Funding to be channeled through transfer payment can be allocated in advance as appropriate. Government departments nationwide need to step up efforts to ensure that the funds are distributed in a better calibrated, better regulated and more effective way. The meeting required accelerating data opening and sharing among government departments, and enforcing rigorous monitoring over the whole-process movements of the directly funneled funds.
"Auditing and monitoring must be stepped up to ensure that the funds are channeled to the most needed areas and are put into effective use," Li said. "No muddying the waters or fishing for profit is allowed."
