Although growth uncertainties abound home and abroad, China has plenty of policy options -- especially on the fiscal front -- to put the economy on track to deliver the around 7 percent annual target.
In its latest effort, the Ministry of Finance on Tuesday put forward multiple fiscal policies aimed at stabilizing growth, such as coordinating funds to accelerate project construction, activating idle money and widening tax breaks.
Other measures include guidance funds for small and emerging businesses, and promoting public-private-partnerships (PPP). China is battling a property downturn, industrial overcapacity, sluggish demand and struggling exports, which dragged growth down to 7 percent for the first half (H1) of the year.
On top of that, fresh pressures from capital market volatility, currency devaluation in emerging markets, and slumping global commodity prices are further muddying growth prospects.
To achieve the full year growth target, the ministry said it will closely monitor the changing dynamics in the economy and respond with more effective and targeted fiscal policies to support growth, an area where analysts say hold vast potential to shore up growth.
Fiscal surplus for the January-July period was 383 billion (60.22 billion U.S. dollars), leaving plenty room for expansionary policies to increase the budget deficit to 2.3 percent of GDP for 2015, up from last year's target of 2.1 percent.
Within annual budget, China could record a fiscal deficit of 2.1 trillion yuan for the August-December period, 200 billion yuan more than the same period last year, according to a recent report by China International Capital Corp. (CICC).
In addition, the government's ongoing drive to activate unspent fiscal funds will make the expansionary fiscal policy more sustainable. According to the finance ministry, some 13.1 billion yuan of idle fiscal funds have been retrieved and will be redistributed to growth-stabilizing sectors, and 243.8 billion yuan recovered to local budgets.
The more efficient use of idle fiscal funds is equivalent to increasing the government's disposable funds beyond the budget without raising the government sector's debt ratio, noted a CICC report. Meanwhile, to dissolve debt risks of local governments, China has allowed them to replace existing debts with new bonds.
The top legislature has approved the expansion of a debt swap program for local governments worth 3.2 trillion yuan in 2015. On the back of such fiscal support, China has stepped up spending on key infrastructure such as railways in the western regions, renovation of substandard housing and underground utilities, which have all helped boost economic activity already.
"We think infrastructure-investment growth will likely be revived from July's 16 percent year on year to 20 percent in the coming months, which in turn will provide, at the very least, a counterbalance against China's ongoing property and heavy industry downturn," noted a UBS report.
In an assuring message to the market, China's top economic planner on Monday said the world's second largest economy is stabilizing and turning for the better, citing stabilizing power use, rail freight and a warming property market as proof for the improvement.
"The economic operation is expected to maintain steady expansion to realize the full-year growth target," the National Development and Reform Commission said.
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