SCIO briefing on 'high-quality achievements during the 14th Five-Year Plan period': Fiscal reform and development

Reuters:

I would like to ask, during the 14th Five-Year Plan period, how did fiscal policy supports economic growth while controlling government debt levels? Additionally, after the policy of allocating 10 trillion yuan to replace local government hidden debt was launched last year, what is the current situation of local government hidden debt? Also, what is the progress of the rectification of local financing platforms? Finally, given the current downward pressure on the economy, how will fiscal policies ensure the achievement of this year's growth targets? Thank you.

Lan Fo'an:

You have asked a question that is of great concern to all parties. In the fourth quarter of last year, following the decisions and deployments of the CPC Central Committee and the State Council, we launched a package of measures to tackle debt risks. Overall, the various measures have taken effect as planned and continue to deliver results. As of the end of August this year, the one-time increase of 6 trillion yuan in special debt quota has seen a cumulative allocation of 4 trillion yuan. After the debt swap in various regions, the average interest cost of debt has been reduced by more than 2.5 percentage points, saving over 450 billion yuan in interest expenses. Since the beginning of this year, 2.78 trillion yuan of new local government special bonds have been issued nationwide, of which 800 billion yuan has been allocated to supplement government fund financial resources, specifically for local government debt reduction.

These series of measures, combined with various policy measures adopted earlier, have driven the gradual reduction of local government debt risks. By the end of 2024,China's total government debts stood at 92.6 trillion yuan, including 34.6 trillion yuan in central government debts, 47.5 trillion yuan in statutory local government debts, and 10.5 trillion yuan in hidden local government debts. The government debt ratio stood at 68.7%. According to the report released by the IMF in April this year, the average government debt ratio of G20 countries is 118.2%, and that of G7 countries is 123.2%. At the same time, our government debt is backed by a substantial amount of high-quality assets. Overall, China's government debt ratio is within a reasonable range, and risks are manageable and under control.

Debt resolution is the means; development is the goal. We have adopted a two-pronged approach to debt resolution and development, effectively promoting a virtuous cycle of economic growth and sound debt management. First, we have strengthened local development momentum. Debt resolution has unblocked funding channels, allowing local governments to free up more financial resources, time, energy and policy space to tackle bottlenecks and obstacles in economic development. Second, we have accelerated the phasing out of local financing platforms. By the end of June 2025, more than 60% of local government financing platforms had completed their exit, meaning the implicit debt associated with over 60% of these platforms has been cleared. The transformation of these platforms is accelerating. Third, we have improved the financial environment. The asset quality of financial institutions has improved, with risks significantly reduced. At the same time, both their willingness and ability to extend credit to the real economy have been significantly enhanced.

During the 15th Five-Year Plan period, we will continue to coordinate development and security, accelerate the establishment of a government debt management mechanism suited to high-quality development, resolve debt issues through development, and promote development through debt resolution. These efforts will provide strong support for steady, long-term economic growth.

First, we will focus on reducing existing debt. We will continue to implement a package of debt resolution measures, issue part of the 2026 local government debt quota in advance, make early use of debt resolution allocations, and take multiple steps to address existing hidden debts.

Second, we will focus on strengthening management. We will strictly manage local government debt ceilings to ensure debt is well‑used, repayable, and sustainable. We will strengthen full lifecycle management of special bonds, covering borrowing, use, oversight and repayment. Additionally, we will promote the integrated management of both implicit and statutory debts and establish a unified long-term regulatory system. We will increase debt information disclosure in accordance with the law to enhance transparency in management.

Third, we will boost efficiency exponentially. We will scientifically arrange the scale and structure of bond issuance, reasonably manage the timing and pace of issuance, ensure funding for major projects and key areas, improve the performance of bond fund utilization, and better leverage the catalytic and multiplier effects of government bonds.

Fourth, we will focus on risk mitigation. We will strengthen risk monitoring and early warning, shifting the focus from post-hoc remediation to proactive prevention. We will improve the management of special bond repayment reserve funds to guard against redemption risks. We will maintain zero tolerance through rigorous oversight and strict accountability at every level. We will strictly enforce lifelong accountability for debt issuance and retroactive investigations of debt problems, and resolutely curb new implicit debt.

Regarding your question on how to ensure this year's economic growth target is met, I have already addressed this in outlining the next steps for fiscal policy, so I won't repeat those details here. Thank you.