Challenges tackled with financial innovation

Innovative mechanism

In addition to the deepened tax and fee reductions, a special transfer payment mechanism, which ensures fiscal funds go straight to prefecture－and county-level governments and also directly benefit businesses and the public, has been key to institutional innovation in China's fiscal spending since COVID-19 emerged.

The mechanism removes the review and approval procedures at provincial and city government level, meaning that businesses receive funding more quickly.

Last year, when the economic impact of COVID-19 was most pronounced in China, some 2 trillion yuan in special transfer payments were issued under this direct mechanism. These payments arrived in county－and district-level government accounts and with millions of smaller businesses much faster than in previous years.

Wei Ping, head of the fiscal department in Luyang district, Hefei, Anhui province, said the most innovative features of the newly devised special transfer payment mechanism are full transparency of fund flows and a much quicker allocation of funds.

"The overall scale of funds we receive from the central government has not changed, but the amount of money coming directly to us through the special transfer payment mechanism has risen. Such funds effectively assisted us to address urgent needs early last year and helped many businesses stay afloat," she said.

This year's Government Work Report confirmed that the central authorities would make it normal practice to directly allocate budgetary funds to prefecture－and county-level governments, and allocate more funds under this mechanism.