According to the Securities Times, at the press conference on the economic theme of the National People’s Congress on March 6, Minister of Finance Lan Fuan stated that in the future, more “proactive” fiscal policies will be tried, “focusing on benefiting people’s livelihoods, promoting consumption, and increasing future momentum, and timely researching and introducing new incremental policies.” He further stated:
In one sentence, it is further expanding the fiscal deficit, issuing government bonds and bonds to enlarge debt relationships, and establishing long-term explicit debt relationships to replace short-term hidden debt relationships[1].
Actually, this is not new. During the 1997 Southeast Asian financial crisis, to cope with the serious overproduction crisis domestically and the impact on exports, the Chinese government adopted Keynesian policies—expanding debt relationships to increase money supply, lower interest rates, and most importantly, expand infrastructure construction—thus temporarily alleviating the relative surplus of commodities. By 2008, facing the international financial tsunami, the Chinese government launched the “Four Trillion Yuan Plan,” again expanding the money supply, increasing infrastructure such as railways, airports, and highways, and once again overcoming the economic crisis caused by overproduction. These policies do not eliminate the causes of economic crises—the contradiction between socialized production and private ownership—instead, they leave the productive forces that should have been eliminated by economic crises (thus temporarily easing the contradiction of overproduction) intact or even expand them, creating conditions for a more severe next economic crisis.
Now, faced with the complex debt relationships of local governments and the risk of chain collapse, and due to the contradiction between the infinite expansion trend of production caused by the basic contradictions of capitalism and the demand of the people with the ability to pay, the current social capital has greatly decreased, and the people have been drained by the vicious Keynesian policies, even burdened with heavy debts. The central government of the Chinese government has to rely on state power, issuing大量long-term national bonds, and expanding the scope of local government general bonds and专项债 (special bonds) borrowing[2], attempting to continue using national credit as a “guarantee” to implement Keynesian policies and further alleviate the economic crisis amid severe depression. However, contrary to expectations, “the originally planned issuance was 2 to 3 trillion yuan (long-term national bonds), but ultimately only 1.3 trillion yuan.” (VOA news), and both domestic and international markets are shrinking. The Chinese Ministry of Finance even still hopes to rely on past methods to get through the economic crisis, which clearly shows their helplessness. It can be foreseen that the reactionary rule of the Chinese bureaucratic monopoly bourgeoisie cannot be maintained as before, and this is not far off in the future.
Explicit debt refers to debts that are explicitly acknowledged and recorded, such as government bonds within the budget, with clear records of debtors, creditors, repayment deadlines, and amounts, and all related information documented through official channels. Hidden debt refers to debts outside the government budget, usually borrowed by local state-owned enterprises and urban investment companies. To “limit” the unchecked expansion of local government borrowing, the central government typically restricts the annual issuance cap of explicit debt. As local government fiscal deficits become more severe, local governments issue more and more hidden debt to make up for deficits. ↩︎
General bonds refer to government bonds issued for projects without revenue, managed through the general public budget, and can be used to alleviate temporary local government funding shortages.专项债 (special bonds) refer to government bonds issued for revenue-generating projects, used for specific engineering constructions. Both are explicit debts. ↩︎