Recently, Lou Jiwei, director of the Foreign Affairs Committee of Chinese People's Political Consultative Conference and former Minister of Finance of China, delivered a speech at the 5th Forum on Fiscal and State Governance and the 40th anniversary seminar of the publication of Fiscal Research, saying that the contradiction between fiscal revenue and expenditure in China is extremely acute and the financial pressure is increasing. In the medium and long term, due to the epidemic, the potential economic growth rate is declining, and the global economy is in a downturn. It is estimated that the total fiscal revenue in China will be at a low level in the next five years, while the pressure on fiscal expenditure is still relatively high. It can be said that financial difficulties are not only short-term and short-term, but also very difficult in the medium term. "

Regarding the debt problem of local governments, Lou Jiwei said in his speech that during the Tenth Five-Year Plan period, the debt sustainability of most provinces and cities was worrying. Roughly speaking, about a quarter of the provincial finance, more than 50% of the fiscal revenue will be used for debt repayment. The problem of local government debt not only affects the ability of local governments to provide public services, but also accumulates financial risks.

Lou Jiwei's remarks have aroused people's concerns about China's future financial sustainability.

According to data from the finance and taxation department, the growth rate of fiscal revenue in 2020 hit a new low in half a century. The growth rate of fiscal revenue in 2020 is -3.9%, which is the lowest growth rate since 1976; Tax revenue accounts for 84.4% of fiscal revenue, with a growth rate of -2.3%, which is the lowest growth rate since 1969, that is, in half a century. Among them, in 2020, more than 2 trillion yuan of social security income will come from the general public budget of subsidy income, accounting for 28% of social security income and 8.7% of fiscal expenditure.

How to further clarify the problems existing in the financial operation system? How to prevent and resolve risks in the financial sector? How far is the financial crisis from China? In order to find a permanent solution to the government debt problem, Caijing magazine recently invited Xu Shanda, an expert from the United Institute of Finance and Economics and former deputy director of State Taxation Administration of The People's Republic of China, Liu Yuanchun, vice president of Renmin University of China, Zhu Haibin, chief economist of China, JPMorgan Chase, and Cui Li, managing director and head of macro research of CCB International to discuss.

It is difficult to maintain the practice of subsidizing the social security gap by relying on general budget income.

Caijing: What are the outstanding contradictions and difficulties in the current financial field?

Liu Yuanchun: From a global perspective, the core issue in the financial field is the debt problem brought about by the proactive fiscal policy. As far as China is concerned, although the current government debt risk is not great, the structural risk of debt is more prominent, which is mainly reflected in two aspects: the explicit and implicit debt risk of local governments is higher, and the financial operation of grassroots governments is difficult. These two core issues are related to the whole fiscal and taxation system, which are mainly reflected in the following three aspects.

First, the growth rate of fiscal revenue declined; Second, financial power and administrative power do not match; Third, the functional orientation of finance needs to be improved. At present, the financial system is in an era of great transformation, great reform and great adjustment, and shoulders an unprecedented leading role, so there will be corresponding problems of efficiency and fairness. The reform of fiscal and taxation system is the focus of this year's reform, and it is also the focus of the 14 th Five-Year Plan. However, the financial sector has a wide range of interests and the reform is particularly difficult. What is more difficult is to have a basic and fundamental reform.

Xu Shanda: At present, various debts of the government are growing rapidly. Interest payment and repayment of principal after maturity will bring great pressure to the general budget revenue and expenditure, and the space for incremental adjustment of fiscal revenue is gradually narrowing. Utilizing the stock of state-owned capital is the only way to solve the problem. At the end of 20 17, the State Council issued the implementation plan for transferring some state-owned capital to enrich the social security fund, pointing out that the transfer ratio should be unified as state-owned capital 10%.

Judging from the current financial difficulties, it is difficult to maintain the practice of subsidizing the social security gap with general budget income. The social security gap must be solved with the stock of state-owned capital, but it is definitely not enough to withdraw only 10%. The biggest problem now is not to increase the allocation of state-owned capital, but to study how the allocated part can replace the general budget expenditure. At present, the rights and interests of state-owned capital are in a standby state and have not actually entered the social security revenue and expenditure system.

At present, it is still necessary to open this channel, so that idle state-owned capital equity funds can replace general budget expenditures and enter the actual income and expenditure of social security. Not enough, additional distribution ratio. If this reform can be promoted rapidly, it will greatly promote the adjustment of financial structure and help prevent financial risks.

In the future, the system of subsidizing social security from the general budget expenditures of the central and local governments cannot continue. It is necessary to intensify the reform of the social security system, realize national overall planning as soon as possible, and gradually reduce the general budget subsidies with the rights and interests of state-owned capital. At the same time, try our best to improve the income of social security funds.

Caijing: Under the current financial pressure, should we continue to reduce taxes and fees for enterprises?

Xu Shanda: The competitiveness of China's corporate tax system is lower than that of the United States, Europe and Japan, which is most fully demonstrated in high-tech and asset-heavy enterprises. In the future, the development of China will mainly rely on high-tech and heavy-asset enterprises to compete with foreign enterprises. Therefore, it is necessary to further reform the tax system to enhance the international competitiveness of these enterprises.

In this year's government work report, it is proposed that the advanced manufacturing enterprises should be fully refunded the value-added tax allowance on a monthly basis, which is an important decision to improve the competitiveness of China's enterprise tax system. In fact, this policy is not to reduce taxes, but to delay tax payment, reduce the financial burden of enterprises, reduce the asset-liability ratio and reduce interest expenses. The lower the asset-liability ratio of enterprises, the higher the share price of listed companies. Reducing interest expenses will reduce the cost of enterprises. The most typical enterprise is thunis's Wuhan Changjiang Warehouse. If the remaining taxes were changed to tax rebates, Ziguang Group may not default on its debts now.

Liu Yuanchun: The main body of tax reduction and fee reduction this year is small and medium-sized enterprises. For small taxpayers, the threshold has been further raised and the tax rate has been reduced. This year's tax reduction and fee reduction highlights the structural orientation and innovation orientation, and has shifted from last year's emergency to strategic orientation, gradually forming normalization.

A very important strategic direction during the Tenth Five-Year Plan period is how to expand effective demand. From this strategic point of view, under the tax system with turnover tax as the main factor in China, continuous and substantial tax reduction is more beneficial to the supply side and production side than to the consumption side. Therefore, it is necessary to shift from total tax reduction to structural tax reduction.

To prevent local debt risks, it is necessary to solve the problem of matching local financial power and administrative power.

Caijing: How to prevent and resolve government debt risks, including explicit debt risks and implicit debt risks?

Zhu Haibin: In 2020, China's economic recovery was very successful, but the debt level of non-financial sectors in the whole society increased very rapidly. Last year, China's debt level rose by about 25 percentage points, especially the government debt rose very quickly. Speaking of local government debt, it has deteriorated to some extent after the epidemic last year. In addition to the substantial increase in the scale of special debts within the budget, the borrowing of local government financing platforms outside the budget has also increased significantly.

Cui Li: The overall debt ratio of China's government is low, but the debt pressure of local governments is high. It is necessary to solve structural problems such as matching local financial affairs and expenditure responsibilities and revitalizing state-owned assets.

To solve the local debt risk, first, we must control the local debt ratio and ensure that the local debt matches the fiscal revenue and project revenue; The second is to promote the transformation of platform companies and reduce the hidden debt risk. Platforms that do not have financing and independent operation capabilities may gradually be merged, reorganized and cancelled; A platform with financing ability and good operation will conform to the development trend of urbanization and regionalization in the next stage, and continue to play the role of an important financing and state-owned assets operation platform for local development; The third is to improve the central-local transfer payment system and improve the ability of local finance to cope with risks.

Liu Yuanchun: To solve hidden debts, we should strengthen supervision, and be sunny, legal and transparent. At the same time, we should adjust the fiscal and taxation system. In the past, due to the mismatch between administrative power and financial power, local governments made up for it through land transfer fees and confiscated income, so land finance became the core source of local finance. But now, after the land revenue has shrunk, the traditional tax base cannot be improved, the transfer payment control has been strengthened, and the new asset management regulations and investment and financing platforms have been strictly controlled, it is finally found that local governments must evade supervision through some so-called "innovations" and complete a large number of rigid payment functions undertaken by themselves.

Under such an interest system, many reforms have turned good reforms into bad tricks, such as the emergence of fake PPP and REITs, which can be said to be impossible to prevent, because under the financial pressure, the endogenous impulse of local governments to "innovate" according to law is hard to suppress. The solutions include changing the functions of local governments, carrying out major reforms in the fiscal and tax systems, improving the evaluation of local officials, and strengthening digital supervision.

At the same time, the local government system itself is also facing great reforms. First, the problem of redundant staff in grass-roots administrative institutions. Second, the problem of public institutions eating empty salaries. Therefore, the local administrative system needs further slimming and fitness.

There is still a certain phenomenon of interest blending between local governments and local state-owned enterprises, which has given birth to local closure, market segmentation and interest transfer. It is necessary to break the interest relationship between local government and local state-owned enterprises through the reform of local state-owned enterprises and the transformation of local government functions. China should be a strong and internationally competitive central enterprise, but not every county should have state-owned enterprises. This is not conducive to dredging the domestic cycle and breaking the interest pattern of the government and state-owned enterprises.

Hardening the budget constraints of local state-owned enterprises is also the key. It is necessary to adjust the business planning of local state-owned enterprises. Enterprises that do not conform to the strategic development direction and have no market competitiveness must be eliminated. The problem of debt default is concentrated in local state-owned enterprises, and some local zombie state-owned enterprises have become gold-sucking black holes, which should be highly valued.

Caijing: How to save financial costs and improve expenditure efficiency?

Xu Shanda: Some direct poverty alleviation funds are directly allocated from the central government to counties without going through provincial and municipal finance, which reduces the detention of provinces and cities on the central poverty alleviation funds and improves financial efficiency. There is still much room for improvement in financial revenue and expenditure management technology. Government departments, finance bureaus, etc. Using network and information technology, improve management efficiency, reduce costs and save financial expenses.

Zhu Haibin: First, the expenditure should be adjusted from extra-budgetary to budgetary. In recent years, the scale of China's special debt has been expanding every year, which is actually a good thing, reflecting that some extra-budgetary projects have been transferred to the budget and become more transparent. The second is to strengthen the openness and transparency of expenditure information and increase external supervision. In the future, government functions will change, from more participation in production and investment activities to service-oriented government. In addition, the government's information disclosure, subject to the supervision of all parties inside and outside the system, is also an area to be improved.

The land revenue of the current year should match the expenditure for many years to come.

Caijing: Some people are worried about the financial crisis. How can we avoid obvious financial difficulties in some parts of China?

Liu Yuanchun: It is too early to talk about the financial crisis. It won't happen in China. As long as financial supervision can be carried out according to scientific laws, risks can be effectively controlled. China's political system determines that the government's self-regulation ability is very strong, and the transformation of the whole system is very fast. China's economic system determines the whole country's chess game, and the central government has huge assets. It is necessary to further strengthen the good financial control and supervision system.

Caijing: What do you think is the main force point of future fiscal policy?

Zhu Haibin: This year's fiscal policy should not only echo the economic recovery and normalization after the epidemic, but also be combined with the medium and long-term economic restructuring in the future. A very important part of the direction of financial support is the special debt of local governments, which is related to the project. Finance is very important for investment in specific fields. For example, public investment can provide strong support for the future digital economy, technological innovation, 5G and new infrastructure.

A considerable part of government investment may encourage social capital participation through PPP, and the government will play a guiding role and participate in cooperation. In infrastructure investment, environmental protection and green investment, there is a huge demand for medium and long-term investment, but it cannot be met by public investment alone, and the efficiency of public investment is problematic. Therefore, there is still room for improvement in how to better combine public and private sector investment through government guidance and support and private sector efficiency and commercial feasibility assessment.

The reality is that the private sector is willing to invest in profitable projects that don't need government to start. Most of the projects entering PPP are projects with long investment cycle and relatively low rate of return. If the government has the ability to give support, such as government purchases and some income guarantees, social capital may be willing to participate. However, if local governments have limited financial resources, the private sector's willingness to invest is still insufficient. In addition, in PPP, risk taking is often a problem. In some cases, local governments take too many risks. Therefore, further operational specifications are needed in the future.

In addition, the aspects that finance has not done enough in the past are social services and security, and the people's livelihood security and social security system in the process of new urbanization are insufficient and need to be strengthened. For example, in 2020, the unemployment relief and various forms of financial support for vulnerable groups after the epidemic will be significantly less than those in other countries. The government should continue to increase financial expenditure on people's livelihood, social security, medical care and education.

Xu Shanda: The local government in China is much like the board of directors. Its main responsibility is to attract investment. The responsibility of local governments in China to develop the economy is the most prominent in the world, and its role in promoting the economy is irreplaceable. The development of China is largely driven by investment, which is the main channel for local governments to increase their income, and only investment can generate tax revenue and employment. Many local leaders are responsible for grabbing projects and investment, but they may also encounter fake projects. Some people use the investment impulse of local governments to defraud resources, land and equipment. Therefore, in China's investment-driven economic development model, project risks need to be highly vigilant.

Caijing: How to reduce the dependence of local governments on land finance?

Zhu Haibin: Speaking of land finance, we must first admit that in the past 20 years, it has played a positive role in the real estate market, infrastructure improvement, urbanization and industrialization, but some negative effects have become increasingly prominent. Last year, the land revenue of local governments exceeded 8 trillion yuan. Now many discussions focus on how to find alternative sources of income for land finance, such as property tax, which has been hotly debated for many years. However, these discussions pay too much attention to the revenue sources of local governments, and relatively ignore the need for substantial improvement in government expenditures.

The land transfer fee corresponds to the land rental income in the next 70 years, and the land fiscal income in one year should match the expenditure in many years to come, instead of using up all the income in that year. The reality is that the income from land transfer is often the expenditure of the current year, which has formed a continuous rigid expenditure demand. Once the land revenue drops sharply in a certain year, local financial problems will immediately appear. Land financial reform should strictly regulate the use and supervision of land transfer fees (as well as broader financial expenditures), earmarking funds, transparent expenditures, and introducing internal and external supervision.

Xu Shanda: The dependence of local governments on land finance will continue. At present, China is in the process of urbanization, and the population is highly mobile to cities, so the demand for urban housing will be high, and the housing price will not fall if the demand is high. However, there will be a surplus of housing in rural areas and towns, and sooner or later, a number of housing will be eliminated. Residents' demand for housing continues to grow, and some local governments cannot curb housing prices through administrative means such as price limits. In the future, it is still necessary to adjust the relationship between supply and demand, increase the supply of housing, especially the supply of affordable housing, and the pressure on housing prices will be reduced accordingly. As long as there is room for rising house prices, there is room for rising land prices.

Financial system reform needs to conform to the trend of the times.

Caijing: What breakthroughs should be made in China's fiscal and taxation system reform in the future?

Xu Shanda: Regarding the transfer of state-owned capital to enrich the social security fund, the leadership of China has made clear the direction of reform. Now it is necessary to speed up the design of specific implementation plans, which is also the fundamental way to resolve financial risks. At present, the general budget pressure is high, and if the tax burden is further reduced for enterprises, the debt risk is even greater. After replacing the increment of national wealth with the stock of national wealth (state-owned capital), the general budget will have more room for adjustment, and the adjusted financial subsidies can be used to reduce corporate tax burden, repay government debts and reallocate resources.

Liu Yuanchun: First, on the basis of controllable overall debt ratio, there are structural risks. At present, structural risks are mainly reflected in the financial relationship between the central and local governments after the tax-sharing reform. The problems existing in the current system and mechanism are obvious. The Third Plenary Session of the 18th CPC Central Committee has pointed out that there is a conflict between the central and local governments in the distribution of financial power and administrative power. At present, we can only increase the transfer payment, but it is difficult to adapt to the high-quality development and new development pattern of China in the future by relying on the transfer payment system.

Second, the transfer payment method needs to be improved. For example, whether the special transfer payment plan is reasonable, whether the general transfer payment amount is large enough, and the connection between provincial finance and grassroots finance. Provincial finance is the hub of regional overall planning in transfer payment. There are many uncertainties about whether resources can be allocated according to the requirements of high-quality development and adjusted according to the requirements of local government operation in the new era. The normalization of the financial direct subsidy mechanism established during the epidemic last year was a major institutional adjustment, which strengthened the penetration of transfer payments and ensured the stability and continuity of grassroots governments.

Thirdly, whether the regional financial planning is carried out in strict accordance with the administrative sector involves the function and positioning. The current regional planning is carried out in accordance with the administrative plate, which conflicts with the regional function and orientation, that is, the structural problems are fully highlighted.

Fourth, the financial system cannot fully adapt to the development of the new era. From the perspective of income, the tax model with turnover tax as the main body is unsustainable, so we should consider introducing property tax and inheritance tax in due course. A large number of new formats, models and departments have emerged in an all-round way. The tax base should be transferred from traditional industries to emerging industries, the most obvious being the platform economy, which has even become the hub of tax avoidance and wealth transfer. The establishment of some large multinational companies has led to the weakening of the tax base.

Fifth, the tax cost in China is very high, but in the information age, the modern tax system does not need so many people and costs.

At present, the financial reform must seize the window period, especially the window period when the grass-roots government's financial operation is difficult. At present, the core problem is that the fiscal and taxation reform has not found a breakthrough and has not constructed an implementable scientific path. We should seize the systemic problems highlighted in current finance and find the path of reform.

Caijing: How to make better use of special debt to support economic development?

Cui Li: First, adhere to the project-oriented issuance of special bonds: special bonds require projects to balance themselves according to their own income and financing. According to the data in 2020, Guangdong, Shandong and Jiangsu are the provinces with the most issuance, all exceeding 200 billion yuan. In the future, it is expected that special bonds will continue to tend to areas with many key projects and low risks. In developed provinces, there is more room for issuing special bonds and investing in the future, which is more sustainable from the perspective of income.

The second is to appropriately expand the scope of use of special bonds: the government work report requires that the scope of use of special bonds will be "reasonably expanded" this year. Relaxing industry sectors, creating new varieties and increasing local autonomy in issuing bonds can reduce capital precipitation, improve investment efficiency and promote local investment.

Third, improve the marketization level of special bond issuance: improve the information disclosure system, promote the diversification of bond investors, and make bond interest rates reasonably reflect regional differences and project differences, which is conducive to improving bond liquidity and supporting local government financing.

Fourth, strengthen debt management: manage the assets and debts of local governments as a whole, and at the same time strengthen the full-cycle supervision of special debt projects to maintain the sustainability of local debts.

Liu Yuanchun: If the construction debt funds of large-scale projects can't keep up, they may become unfinished projects. Therefore, we must ensure financial stability, continuity and sustainability. In terms of investment, the investment profitability of basic and industrial projects is not bad. However, we should be alert to the emergence of a new round of local economic bubbles and infrastructure bubbles, not over-expanding special debts, and at the same time ensuring the original strategic project layout.

From the perspective of government investment, the core point is to improve the enthusiasm of private investment. Private investment accounts for 60% of the total investment every year. The government should do some basic, pioneering and strategic work to reduce the distortion of resource allocation, enhance the endogenous power of economic development and help small and medium-sized private enterprises tide over the difficulties.