World Economy

China Sees Benefit in Prudence, Proactive Fiscal Policy

China Sees Benefit in Prudence, Proactive Fiscal Policy China Sees Benefit in Prudence, Proactive Fiscal Policy

China will be “more proactive and effective” in implementing a pro-growth fiscal policy, the country’s two powerful economic ministers said, sending a strong signal that Beijing will loosen its purse strings to offset the impact on growth from its financial crackdown.

He Lifeng, the chairman of China’s National Development and Reform Commission, the economic planning agency, told the country’s lawmakers that China was on track to achieve its economic growth, employment, inflation, fiscal revenue as well as imports and exports targets, but the country was falling behind in its goals for investment and wooing foreign investors, Xinhua reported.

“China’s fiscal policies must be more proactive and effective ... while monetary policy must stay prudent and neutral,” He told the National People’s Congress Standing Committee.

Xiao Jie, the finance minister, told the lawmakers his ministry would urge local governments to accelerate spending on approved projects to “release effects of fiscal funding support and policy support”. Xiao also said fiscal authorities would try to woo more investment into public-private partnerships and raise funds for “new infrastructure and utilities”.

He, who worked with Chinese President Xi Jinping earlier in his career in Fujian province in 1980s and 1990s, was promoted as the chairman of the development commission in February. Xiao became finance minister in November last year. The two economic ministers are expected to be key figures in Xi’s team in running the world’s second biggest economy over the next five years and beyond.

“China must expand reasonable and effective investment and quicken the pace of 165 key projects outlined in the 2016 to 2020 national development plan,” said He.

China’s government has been relying on state-backed spending, including infrastructure and real estate investment, to keep growth on track.

Fixed-asset investment, together with improving exports, helped drive the Chinese economy to expand 6.9% in the first half of this year.

National fixed-asset investment rose 8.3% in the first seven months, 0.3 percentage points lower than a month earlier. The growth of real estate investment dropped by 0.6 percentage points to 7.9% in the same period, due to a series of policies to cool the market across the country.

China’s fiscal revenues proved “better than expected” in the first seven months of this year, said Xiao. These rose 10% in the first seven months to 11 trillion yuan ($1.66 trillion) partly thanks to improved industrial prices and corporate profitability, Xiao said.

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