Researchers foresee stable fiscal spending, better resource allocation in 2022

China's decision to allocate more funds next year to businesses and individuals who need them the most, is expected to alleviate burdens on certain struggling businesses and energize the wider market while keeping the scale of aggregate fiscal spending stable, researchers said.

Liu Kun, China's finance minister, said in a signed article published on Tuesday that the central government will strengthen budget management and also improve the efficacy of fiscal resource allocation and spending.

Liu's article underlined that use of funds will be more effective and transparent, and the government will scrutinize fiscal expenditure.

The annual meeting of the Ministry of Finance on Monday said the government will scale up tax and fee cuts next year to support struggling businesses.

Liu said during the meeting the government will work next year to sustain the current level of intensity in fiscal spending and make it more targeted.

Su Jingchun, associate professor at the Chinese Academy of Fiscal Sciences, said the government moves should signal stability and security to the market.

"Overall, China's economic recovery from COVID-19 has been impressive. Yet, an ever-improving recovery still requires continued policy underpinning from both fiscal and monetary policy fronts," said Su.

She also said a tighter budget should put more pressure on the government side to improve efficiency in spending, as the overall intensity of spending will remain unchanged, yet more funds will be channeled to businesses through deeper cuts in taxes and fees.

Such a policy stance incorporates the spirit of the recent Central Economic Work Conference, which emphasized maintaining stability of growth while pursuing progress.

Well-targeted fiscal spending will improve structural adjustment for better allocations to the needy sectors via fiscal spending, she said. "Given the fresh COVID-19 cases, most businesses now face evolving market uncertainties. Notable tax and fee cuts are a direct way to cut their operational costs and help them stay afloat."

Data from the State Taxation Administration showed in November that newly introduced tax and fee cuts amounted to 910.1 billion yuan ($142 billion) for the first three quarters of this year.

Li Keaobo, deputy director of the Tsinghua University Academic Center for Chinese Economic Practice and Thinking, said the government has been displaying a strong resolve to tighten spending.

"This means more funding will be channeled to energize market entities," he said. "We expect a proper mix of fiscal and monetary policies next year to anchor business expectations and keep employment stable next year."