China's special fiscal-financial coordination fund of 100 billion yuan (around 17.8 billion U.S. dollars) aimed at boosting domestic demand will focus more on unlocking consumption and investment potential with limited resources to stabilize growth in the second half of this year, according to an economic expert.
The central government has rolled out a six-part policy package under this special fund. Among the six measures, four are designed to support private investment. They include interest subsidies on loans to micro, small and medium-sized enterprises and on loans for equipment renewal, a special guarantee program for private investment, and a risk-sharing mechanism for corporate bonds issued by private enterprises.
In addition, two interest subsidy schemes are being implemented to stimulate consumption -- one for personal consumption loans and the other for loans to service-sector businesses.
According to Luo Zhiheng, chief economist at Yuekai Securities, the policies have gradually yielded results over the first half of this year.
"The policies have further boosted related consumption, with culture, tourism and health services seeing relatively high growth rates. In the first half of this year, the growth rate of service-sector consumption was significantly higher than that of retail sales of goods. The policies have also optimized the investment structure. In the first half of the year, investment in equipment and instruments, which is a sub-category of fixed-asset investment, grew by 8.1 percent. Much of this is attributed to the interest subsidy support for loans to micro, small and medium-sized enterprises and for equipment renewal," Luo said.
The Political Bureau of the Communist Party of China (CPC) Central Committee held a meeting in Beijing on Thursday to analyze and study the current economic situation and make arrangements for economic work in the second half of this year.
The meeting called for optimizing the implementation of fiscal-financial coordination policies to boost domestic demand.
Luo said the meeting's call clearly signals efforts to expand domestic demand and stabilize economic growth, and that policy optimization will help sustain the release of consumption potential and investment vitality.
"We need to focus more on the systematic integration of policies and their multiplier effect, so that limited policy resources can deliver greater outcomes and better stabilize the economy. In the implementation process, policies serve as a catalyst. Ultimately, what they are meant to unleash is the vitality of social capital," Luo said.
China's fiscal fund to spur consumption, investment potential in H2: expert
