Fiscal steps cushioning growth blows

China will come up with temporary and targeted fiscal measures to cushion the blow to economic growth caused by the novel coronavirus outbreak, with the focus largely on optimizing government spending and enhancing support from central authorities, officials from the Ministry of Finance said on Thursday.

Owing to the virus outbreak, fiscal income of local governments has fallen due to the additional spending and increased fiscal balance pressures. "But we need to guarantee the basic standards of people's livelihood, salary and entities' operation," said Xu Hongcai, vice-minister of finance.

There is still enough room to adjust the fiscal spending structure, so that the funds can be used to support epidemic control and production resumption efforts, he said. "As the epidemic is gradually easing, the economy will rebound and the discrepancy between government revenue and expenditure will be narrowed."

Local governments in the country will remain under pressure this year. The coronavirus impact has been severe in Hubei, Henan, Hunan, Zhejiang, and Guangdong provinces, according to research from Moody's Investors Service, a global ratings firm.

Given the slower economic growth (6.1 percent) and the more than 2 trillion yuan ($288 billion) in tax and fee cuts last year, the government's revenue growth fell to 3.2 percent－the lowest in a decade, and missed the annual target. Most of the Chinese regions have lowered their GDP growth targets for this year, according to news reports.

Owing to the virus outbreak, the annual meeting of the National People's Congress, the country's legislature, which usually opens in the first week of March, has been postponed. Authorities are yet to disclose the annual fiscal budget and the deficit ratio target, but many experts support a higher rate than ever－up to 3.5 percent because of the financial pressure of most local governments. The deficit level needs to be discussed by the NPC before it is officially fixed.

"We expect the coronavirus outbreak will result in lower local government revenue growth, although policy measures by the central government should support local governments through higher fund transfers and bond quotas," said Jack Yuan, a Moody's analyst.

The ministry disclosed on Thursday that during the first two months of this year, local governments' new bond issuances totaled 1.22 trillion yuan, accounting for 66.2 percent of the full-year quota, and 78 percent of those were special bonds－mainly debt instruments used to fund infrastructure projects.

The central government has accelerated budgeted fund transfers to local governments, and the same has reached 183.9 billion yuan, mainly to support healthcare, employment and investment projects. The total amount spent by the central government on infrastructure investment reached 43.9 billion yuan, said Hao Lei, head of the budget department of the Ministry of Finance.

By Wednesday, funds to the tune of 110.48 billion yuan have been set aside by all levels of governments to prevent and control the coronavirus epidemic spread and 71.43 billion yuan of the same has already been used, the Ministry of Finance said.