Chinese President Xi Jinping, second from left, and his delegation including Foreign Minister Wang Yi, left, attends a meeting with Vanuatu Prime Minister Charlot Salwai, unseen at the Great Hall of the People on July 12, 2024 in Beijing, China. Vincent Thian - Pool/Getty Images
President Xi Jinping laid out comprehensive strategies to strengthen the finances of China's heavily indebted local governments, which will be part of the Communist Party's long-term strategy to boost the world's second-largest economy.
This strategy is crucial as local governments struggle with a massive 66 trillion yuan ($9.1 trillion) debt. Last year, these local authorities recorded a combined budget deficit of 15 trillion yuan ($2.1 trillion).
In a detailed document shared by Yahoo Finance, Xi outlined a gradual shift of more consumption tax revenue from the central government to regional authorities, aiming to provide them with greater financial autonomy.
This follows the recent 400 senior officials in Beijing endorsing President Xi Jinping's economic strategy, which emphasizes advanced manufacturing to boost China's $17 trillion economy amid slowing growth and rising geopolitical tensions.
Xi's new fiscal policy framework seeks to clearly define the roles of central and local governments to better coordinate and balance fiscal resources across regions. It aims to increase local governments' tax sources and financial independence.
The policy also includes opening the infrastructure sector to private enterprises and improving their access to financing to boost their involvement in national construction and technology projects.
However, the document was vague on specific strategies to boost domestic demand. It mentioned the intention to use government investment to drive private investment and to establish a "long-term mechanism" to expand consumption.
The government also plans to reduce restrictive measures on spending and moderately increase public consumption.
In his address to senior party officials, Xi emphasized the need for deepening reform as global conflicts and external pressures escalated after VCPost reported that his policies were blamed for investors not choosing China.
The plan outlines over 300 more measures across economic, political, and social sectors.
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