On October 12, 2024, Finance Minister Lan Fo’an announced a new round of fiscal policies at a press conference held at the State Council Information Office of the People's Republic of China. These policies aim to utilise tools such as deficits, special bonds, and tax incentives to promote economic recovery and mitigate risks associated with local debt.
This initiative is part of the Finance Ministry's commitment to implementing the Central Economic Work Conference's directives, maintaining an active fiscal stance, enhancing spending efficiency, supporting manufacturing and technological innovation, safeguarding key sectors, managing economic risks, and promoting sustainable economic growth.
Six Core Measures
1 Expanding Fiscal Expenditure
The fiscal deficit for 2024 is set at 4.06 trillion yuan, with a new local government special debt limit of 3.9 trillion yuan and the issuance of 1 trillion yuan in special bonds. The total public budget expenditure will reach 28.55 trillion yuan, providing substantial financial backing for high-quality development.
2 Optimizing Tax Incentives
The government will continue to implement tax incentives such as R&D expense deductions and VAT credits. From January to August, tax reductions exceeded 1.8 trillion yuan, further alleviating the tax burden on businesses.
3 Boosting Domestic Demand
The government will utilize newly issued bond funds to support disaster recovery and consumer goods upgrades. From January to September, 3.6 trillion yuan in special bonds has been issued, supporting over 30,000 projects.
4 Strengthening Basic Guarantees
The central government has allocated over 10 trillion yuan in transfer payments to localities, focusing on supporting basic livelihood guarantees, technology, rural revitalization, and environmental protection.
5 Enhancing Social Security
The central government has allocated 66.7 billion yuan for employment support, with education spending reaching 3 trillion yuan and increases in pensions and medical insurance subsidies.
6 Mitigating Local Debt Risks
The central government has allocated 1.2 trillion yuan to address local debt issues, particularly in high-risk areas, and to clear overdue payments to enterprises.
Strategies to adopt to the new fiscal policies
In light of the new fiscal policies, enterprises can adopt the following strategies to seize opportunities and optimize operations:
1 Assess Fiscal Support Projects
Enterprises should actively identify applicable fiscal support projects, particularly those related to R&D and manufacturing. Evaluating potential subsidies and tax reductions can significantly lower costs and enhance competitiveness.
2 Optimize Fund Allocation
With increased fiscal spending, enterprises should consider financing through special bonds or long-term special bonds. This strategic funding allocation can accelerate project timelines and improve market resilience.
3 Identify Investment Opportunities
Enterprises should monitor investment opportunities in technology and manufacturing sectors benefiting from policy support. Conducting market research and data analysis can help uncover high-return projects, enriching the investment portfolio.
4 Utilize Tax Advisory Services
Engaging in comprehensive tax planning and compliance consultations can assist enterprises in understanding the nuances of the policies. This approach enables the development of tax optimization strategies that align with the regulations, ultimately leading to a reduction in tax liabilities.
5 Diversify Financing Channels
Enterprises should explore various financing avenues, including bank loans, government grants, and equity financing. Adjusting the financing structure in line with fiscal policy changes ensures timely capital availability to support enterprise strategies.
6 Adapt to Market Changes
In a rapidly evolving market, enterprises must remain agile in their strategies to fully capitalize on the opportunities arising from fiscal policies, maintaining a competitive edge.
Fidinam can help
The new fiscal policies present businesses with both challenges and opportunities. By adapting strategies in response to these changes, enterprises can achieve growth.
Fidinam, leveraging years of industry expertise, offers tailored financial planning and investment strategies to help enterprises navigate this new environment and seize opportunities for sustainable growth.
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