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E-mail China.org.cn, November 25, 2024
National Business Daily:
We've noticed that some localities are facing increased pressure to ensure the "Three Guarantees" (guaranteeing basic living needs, payment of salaries and government functioning). Mr. Lan also mentioned the "Three Guarantees" earlier and they're something that people pay close attention to. What measures has the MOF taken this year to support local governments to ensure that, at the primary level, the "Three Guarantees" are met?"
Lan Fo'an:
Thank you for your question. Ensuring basic welfare, wages and government functioning, referred to as the "Three Guarantees," is a basic requirement for safeguarding the fundamental interests of the people and is also a core function of fiscal policy. In 2024, the MOF has continued to improve the management system for the "Three Guarantees," covering budget formulation, budget execution, dynamic monitoring and emergency response, and ensuring the stable operation of the "Three Guarantees" at the primary level. We have mainly taken the following four measures: First, we are strengthening fiscal support for the "Three Guarantees" at the primary level. In 2024, the central government has planned to allocate more than 10 trillion yuan in budgets for transfer payments to local governments and has urged local authorities to direct these funds to the primary level, prioritizing and fully funding budgets for the "Three Guarantees." Here, the term "primary" mainly refers to the county level. Second, we are establishing and improving work mechanisms. We follow the principle of "county-level responsibility, city-level assistance (as a safety net), provincial-level safety net and central-level incentives," ensuring that responsibilities are fulfilled at every level and that detailed emergency response plans for risks related to the "Three Guarantees" are in place. Third, we are enhancing treasury fund security. We have strengthened treasury management in financially struggling counties to ensure that funds for the "Three Guarantees" are available when needed. Fourth, we are strengthening monitoring of local fiscal operations. Leveraging an integrated budget management system, we now have real-time monitoring of all budget units and primary-level fiscal operations nationwide. We can clearly see how much treasury funds are available and track progress with the "Three Guarantees." We issue monthly risk alerts to local governments and urge them to take timely action when addressing any issues.
Overall, the "Three Guarantees" at the primary level are generally stable, although some areas are facing increasing fiscal pressures. Based on national estimates of financial resources at the primary level, the foundation for supporting the "Three Guarantees" is secure. For example, in 2023, around 50% of available local fiscal resources were allocated to the "Three Guarantees." When factoring in other mandatory expenditures, this figure rises to around 80%. The increased pressure in some regions is largely due to slower fiscal revenue growth, declining land transfer income, and the burden of local government debt.
Looking ahead, the MOF will continue to take practical and effective measures, establish a "Three Guarantees" checklist, and build a long-term mechanism to secure the bottom line at the primary level. The following five specific measures will be implemented:
First, clarifying responsibilities. Local Party committees and governments at all levels are the primary entities responsible for ensuring the "Three Guarantees" in their areas and they should regularly review and improve their support mechanisms. Functional departments are accountable for implementing policies within their fields and will work closely with financial departments to coordinate their efforts.
Second, boosting local financial resources. The central government will continue to increase general transfer payments to local governments through the annual budget. As mentioned earlier, this year, 400 billion yuan in debt limits were allocated to local governments to supplement their comprehensive financial resources, which is important for ensuring the "Three Guarantees." We will also streamline and standardize special transfer payments, optimize their structure, increase the share of general transfer payments, expand local tax bases, and moderately increase local tax management authority to enhance local financial autonomy.
Third, improving fund allocation. We will closely monitor local revenue, expenditure and cash balances. For areas facing tight cash flow, the central government will provide support by advancing fund allocations. Provincial financial departments will be urged to strengthen monitoring and ensure sufficient funds at the primary level, prioritizing the meeting of basic living needs, payment of salaries, and smooth functioning of governments.
Fourth, easing debt pressure. We will intensify efforts to restructure the hidden debt of local governments. As previously mentioned, we plan to implement a sizable debt limit, details of which will be released to the public once the legal procedures are completed. Additionally, we will allocate part of the annual local government special bond quota to supplement government funds, helping local governments manage debt risks.
Fifth, enhancing dynamic monitoring. We will establish an information-driven, intelligent monitoring system that covers the entire process of the "Three Guarantees." This system will track potential risks in real time, issue early warnings, and ensure problems are detected and addressed promptly. Thank you.
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