Lv Wei: Leveraging the Role of Public Finance to Serve and Support Medium- and Long-Term Planning
Guiding economic and social development through medium- and long-term planning is a vital method by which our Party governs the country and handles state affairs. General Secretary Xi Jinping has emphasized that in planning for the "15th Five-Year Plan" period [1], we must accurately grasp the specific requirements of this developmental stage. Drawing focus toward the great cause of building a strong nation and achieving national rejuvenation, and centering firmly on the goal of basically achieving socialist modernization [2], we must rationally determine targets and tasks and propose conceptual measures field by field.
Public finance forms the foundation and a crucial pillar of state governance. A scientific fiscal and tax system serves as the institutional guarantee for optimizing resource allocation, maintaining market unity, promoting social equity, and achieving long-term national peace and stability. This year marks the concluding year of the "14th Five-Year Plan" and the year for strategic mapping and layout of the "15th Five-Year Plan." To scientifically formulate and continuously implement five-year plans, we must fully leverage the foundational, institutional, and safeguarding roles of public finance in national governance. We must adhere to the principle that "planning sets the direction while finance provides the guarantee," ensuring various policies are harmonized to achieve a coordinated linkage between development plans and macroeconomic policy, thereby enabling public finance to effectively serve and support the realization of planned deployments.
Exerting the Foundational Role: Focusing on Promoting High-Quality Development
To effectively exert the foundational role of public finance, we must focus on promoting high-quality development. With an eye toward accumulating developmental momentum, transforming development modes, optimizing the development landscape, and improving developmental efficiency, we must deploy targeted and "traction-capable" fiscal policies [3].
In terms of accumulating developmental momentum, efforts must be focused on stimulating the potential for scientific and technological innovation. As China’s economy enters the stage of high-quality development, the old ways of combining production functions are no longer sustainable. Simultaneously, global S&T innovation has entered a period of unprecedented intensity and activity, with a new round of technological revolution and industrial transformation developing vigorously. Innovation, particularly in S&T, has become a vital driver for high-quality development. We must maintain the central position of innovation in the overall context of China’s modernization drive and reflect this in medium- and long-term plans. This requires fiscal policy to better promote the optimization of resource allocation and focus on stimulating the potential for S&T innovation. On one hand, focusing on long-term bottlenecks that restrict S&T self-reliance and self-strengthening, we must increase S&T investment in strategic and critical fields, encouraging and leading diverse actors to support innovation. This will achieve an effective linkage between the Strategy for Invigorating the Country through Science and Education, the Strategy on Developing a Quality Workforce, and the Innovation-Driven Development Strategy. Guided by forward-looking and strategic needs, we should steadily increase fiscal investment in basic research. Through various means such as tax incentives, we should motivate enterprises to increase investment, establish and improve an investment mechanism for basic research that combines competitive and stable support, and enhance the efficiency of S&T investment while deepening the reform of the allocation and utilization mechanism for fiscal S&T funds. On the other hand, focusing on the practical needs of developing new quality productive forces and supporting comprehensive innovation, we must promote the deep integration of the innovation chain, industrial chain, capital chain, and talent chain, accelerating the transformation of S&T achievements into actual productive forces. Aiming to build a modern industrial system, we should use special fiscal funds and government investment funds to support the transformation and upgrading of traditional industries, the development of strategic emerging industries, and the forward-looking layout of industries of the future, continuously enhancing core industrial competitiveness.
In terms of transforming development modes, we must actively promote a comprehensive green transition of economic and social development. Green transition is the new engine of economic and social development; promoting green and low-carbon development is a key link in achieving high-quality development. The breakthrough for promoting a comprehensive green transition lies in getting incentives right, while the difficulty lies in effective constraints. The goal is to weave the concept of green development throughout ecological protection, environmental construction, manufacturing, urban development, and people’s lives. To continuously transform ecological advantages into developmental advantages, we need to strengthen fiscal support and construct a corresponding fiscal and tax policy system. In particular, we must make progress in strengthening incentives, improving fiscal and tax policies for green transition, and promoting the formation of green production and lifestyles. We should actively construct a policy system conducive to promoting green, low-carbon development and efficient resource utilization, supporting work in areas such as new energy system construction, traditional industry upgrading, green/low-carbon S&T innovation, resource conservation and intensive use, and the promotion of green lifestyles. We must implement tax incentives for environmental protection, energy and water conservation, comprehensive resource utilization, and new energy/clean energy vehicles and vessels, while refining the green tax system. We should innovate and optimize investment mechanisms, encouraging various types of capital to increase their investment proportion in green and low-carbon fields, and guide and regulate private capital's participation in the investment, construction, and operation of green and low-carbon projects.
In terms of optimizing the development landscape, we must effectively expand the coverage of the domestic cycle [4]. The characteristic of a large-power economy is that internal demand is the main driver and the cycle is internally sustainable. To better coordinate the domestic and international cycles and focus on key issues and weak links restricting the economic cycle, we must leverage the role of public finance in effectively guiding investment, optimizing resource allocation, and promoting structural adjustment. This ensures the domestic cycle is built on a foundation where domestic demand is the primary driver, shifting the focus of fiscal policy more toward improving people's livelihoods and promoting consumption. In the short term, we can reduce consumer costs and stimulate vitality through consumption vouchers and fiscal interest subsidies; in the long term, we should focus on enhancing residents' consumption capacity, creating new products, scenarios, and hotspots, optimizing the consumption environment, and tapping into consumption potential. At the same time, we must effectively support the rational cross-regional flow and optimized allocation of various factors of production, breaking down local protectionism, market fragmentation, and "involutionary" competition [5]. We should strengthen the construction of rural infrastructure and public service systems and promote the deep integration of the coordinated regional development strategy, major regional strategies, and the functional zone strategy.
In terms of improving developmental efficiency, we must promote joint contribution, shared benefits, and common prosperity. Chinese-path modernization is the socialist modernization of common prosperity for all people. Taking the realization of the people’s aspiration for a better life as the starting point and foothold of modernization necessarily means letting the fruits of modernization benefit all people more extensively and fairly. Public finance is an important policy tool for improving economic efficiency and promoting social equity. We need to strengthen inclusive, foundational, and "safety-net" livelihood guarantees [6], focusing on solving problems in employment, distribution, education, medical care, housing, elderly care, and childcare. On one hand, we must focus on "joint contribution," using public finance to create more inclusive and equitable conditions for people to improve their education and developmental capacity, improving the income distribution system and wealth accumulation regulation mechanisms, adhering to the principle of "more pay for more work," and orderly increasing the weight of factors such as labor, skills, and knowledge in income distribution. On the other hand, we must focus on "shared benefits," performing the function of redistributive regulation, enhancing the equalization and accessibility of basic public services, and building basic institutional arrangements where primary distribution, redistribution, and tertiary distribution [7] are coordinated. We must increase the intensity and precision of regulation through taxation, social security, and transfer payments, strengthen the standardized management of public welfare and charity, and refine tax incentive policies.
Exerting the Institutional Role: Further Deepening Reform of the Fiscal and Tax System
Medium- and long-term planning involves complex relationships between political, economic, and social systems. Public finance plays a unique role in this; it is becoming increasingly important to use fiscal policy as traction and fiscal/tax reform as a breakthrough point to solve problems in key fields. To enable public finance to effectively serve and support the implementation of planned deployments and better play its institutional role, deepening reform of the fiscal and tax system is the key measure.
Continuously deepen the reform of the budget management system. The budget embodies national strategies and policies, reflects the scope and direction of government activities, serves as a vital support for modernizing the state governance system and capacity, and acts as an important tool for macroeconomic regulation. Improving the budget management system can lay the foundation for a modern fiscal system compatible with Chinese-path modernization and provide a guarantee for achieving medium- and long-term planning goals. To enhance the budget’s ability to guarantee the implementation of major Party and state policies, we must properly handle the relationship between overall advancement and breakthroughs in key areas—using key breakthroughs to drive the whole and achieving breakthroughs within the context of overall advancement. In particular, we must grasp important fields and key links that play a decisive role, have a wide impact, and attract high attention. We must start by addressing the principal contradiction and the principal aspect of the contradiction [8], ensuring that the overall and local aspects are matched, that "treating the root cause" is combined with "treating the symptoms," and that incremental progress is linked with major breakthroughs. To this end, we must establish a budget system that is comprehensive, standardized, transparent, scientifically standardized, and subject to hard constraints. We should deepen zero-based budgeting reform, fully implement performance-based budget management, and raise the levels of systematization, refinement, standardization, and rule-of-law. This will solve problems such as low efficiency, idling funds, and waste, gradually shifting the mindset in some localities and departments away from "emphasizing input over management" and "emphasizing expenditure over performance."
Straighten out the fiscal relationship between the central and local governments. Medium- and long-term planning is a strategic arrangement made by the central and local levels through preliminary research, consultation, pilot experiments, scientific evaluation, and dynamic adjustment; it reflects a two-way interactive process of "top-down" and "bottom-up." Governing a country as large as China involves high complexity. Further straightening out central-local fiscal relations can ensure both a focus on the big picture to implement unified central deployments and an adaptation to local conditions to fully mobilize local initiative and creativity, thus better leveraging the enthusiasm of both the central and local levels. To this end, we must properly handle the relationship between vitality and order, solidifying the foundation for the efficient operation of mid-to-long-term planning. We must establish a central-local fiscal relationship characterized by clear powers and responsibilities, coordinated financial resources, and regional balance. We should appropriately strengthen central fiscal powers (事权 - shìquán) [9], increase the proportion of central fiscal expenditure, reduce central powers delegated to local authorities, and refrain from illegally requiring local governments to provide matching funds. We should increase local independent financial resources, expand local tax sources, appropriately expand local tax management authority, and optimize the sharing ratios of shared taxes. Based on a rational division of fiscal powers and expenditure responsibilities, we should further refine the fiscal transfer payment system, clean up and standardize special transfer payments, increase general transfer payments, improve the match between financial resources and powers at the city and county levels, and establish incentive and constraint mechanisms for transfer payments that promote high-quality development.
Improve the modern tax system. Taxation is the main source of state revenue and an important tool for macroeconomic regulation. Continuously improving the modern tax system plays a vital role in implementing the strategic deployments of mid-to-long-term planning and promoting the modernization of the state governance system and capacity. We need to refine the tax system such that it is conducive to high-quality development, social equity, and market unity. We must implement the principle of "taxation by law," closely integrating tax reform with tax legislation to enhance the scientific nature, stability, and authority of the tax system. We must organize tax and fee revenue according to laws and regulations, optimize tax collection and management, and guide market entities and individuals to develop an awareness of and commitment to paying taxes according to the law, thereby improving tax compliance and providing a solid financial guarantee for medium- and long-term planning.
Exerting the Safeguarding Role: Grasping Key Focus Areas for Plan Implementation
Scientifically formulating and continuously implementing mid-to-long-term plans requires both an accurate grasp of the stage-specific requirements of economic and social development—to rationally determine targets and tasks—and the strengthening of implementation safeguards and policy synergy. Following the goals and tasks of the plan and considering the economic development situation, we must rationally determine the orientation of macroeconomic policies. In particular, we must leverage the safeguarding role of public finance to enhance financial support for major national strategic tasks.
Strengthen fiscal resource management to ensure planned goals are realized. The development goals determined by mid-to-long-term plans embody the fundamental and long-term interests of the people and the national strategic intent of consolidating the people's will. The quantitative indicators therein are divided into two categories: "anticipatory" (yùqīxìng) and "binding" (yuēshùxìng). Anticipatory indicators represent the development goals the state expects to achieve, which primarily rely on the autonomous behavior of market entities. The government’s role is to create a favorable macroeconomic, institutional, and market environment, adjust the direction and intensity of macro-regulation at the right time, and comprehensively use various policies to guide the allocation of social resources and stimulate the initiative and creativity of all parties. Binding indicators further clarify and strengthen government responsibilities; they are requirements placed by the central government on local governments and relevant central departments in the fields of public services and public interests. The government must ensure these goals are achieved through the rational allocation of public resources and the effective use of administrative power. This requires, from a strategic level, using limited resources to strengthen the financial guarantee for major national strategic tasks and basic livelihoods, while scientifically planning the arrangement and management of fiscal funds. We must both improve the mechanism for coordinating fiscal resources to strengthen financial support for major projects, public services, ecological protection, and security, and leverage the "leveraging" role of fiscal funds (sì liǎng bō qiān jīn) [10]. By strengthening the implementation of fiscal and tax support policies, we can fully stimulate the endogenous drive and innovation vitality of various market entities, guiding financial resources and social capital toward key fields.
Optimize the interaction between fiscal and financial policies to improve the overall effectiveness of plan implementation. To leverage the strategic guiding role of mid- and long-term planning, efforts must be focused on resolving issues such as the lack of coordination between planning objectives and policy instruments. Overall, it is necessary to closely integrate the phased and mid-to-long-term goals of the plan; coordinate the formulation and execution of fiscal and financial policies; enhance the alignment of policy objectives, tools, timing, intensity, and rhythm; and improve mechanisms for effective inter-departmental communication, consultation, and feedback. Specifically, fiscal and financial policies must work in the same direction to promote the effective implementation of mid- and long-term planning. Fiscal and financial policies need to complement one another's positions to enhance the target-specificity and timeliness of macroeconomic policy, working together to stimulate the initiative and creativity of market entities. We must prevent the transmission of fiscal and financial risks, strengthen the construction of the fiscal and financial stability guarantee system, and coordinate efforts in finance, taxation, and auditing. We must manage and utilize funds from all sectors well and effectively guard against financial risks.
Improve fiscal-related systems and mechanisms to remove bottlenecks and obstacles [11] in plan implementation. Mid- and long-term planning is a systemic deployment involving multiple fields and diverse actors. The formulation of plans requires foresight and predictability, while the implementation of plans depends more on the government's ability to correctly handle the adjustment of interest relationships among different actors and their spillover effects during the policy transmission process. This requires adopting various effective methods and strategies to fully incentivize all types of entities to act proactively and in an orderly manner. Fiscal policy is an important policy tool for adjusting the interest relationships of different actors. Improving fiscal-related systems and mechanisms can promote the transformation of government functions and management styles, providing stable expectations for market entities. Concretely, it is necessary to improve a tax system conducive to building a unified national market [12], optimize the methods of tax and fee policy support and the tax business environment, accurately and efficiently implement structural tax and fee reduction [13] policies, and continuously improve the quality and efficiency of tax and fee services. We must establish and improve long-term mechanisms for fiscal support of the private economy, optimize the direction of enterprise-related fund investment, earnestly reduce the tax and fee burden on private enterprises, and promote their improvement in quality and efficiency.