Core Viewpoint - Local government debt risks have become a significant concern, necessitating a dual challenge of resolving existing debt and restructuring financing models under the constraints of "preventing defaults" [1] Group 1: Project Selection Logic - Incremental projects by urban investment platforms must align with both "serving local functions" and "market-driven revenue generation" [2] - Projects should anchor on national strategic directions such as "Yellow River Basin ecological protection" and "rural revitalization," which attract policy resources and funding [2] - A closed-loop revenue model must be established during the feasibility study phase, exemplified by affordable housing projects that combine commercial space to cover construction costs [3] - Urban investment companies need to transition from "infrastructure builders" to "urban operators," integrating various public utility services to ensure stable revenue streams [4] Group 2: Funding Source Optimization - A mixed funding model of "policy funds as a base + market financing as a supplement" is essential under tight fiscal constraints [5] - Innovative debt instruments and capital raising strategies are necessary, such as leveraging special bonds and policy financial loans to achieve a leverage ratio of 1:5 [5] Group 3: Avoiding Hidden Debt - Breaking the "fiscal dependency inertia" is crucial to avoid new hidden debts, which involves redefining the responsibilities between government and enterprises [6] - Techniques such as market-driven decision-making and cash flow packaging can help mitigate direct fiscal support and reduce the risk of hidden debt recognition [7][8] - Utilizing gray areas in policies, such as indirect fiscal payments and transforming specific project subsidies into broader industry policies, can further reduce hidden debt risks [8] Group 4: Risks and Outlook - While current practices have shown some success, potential risks remain, including regulatory scrutiny and the sustainability of market-driven revenues [9] - Future reforms should focus on balancing risk prevention and growth stabilization, requiring both technical innovations and deeper fiscal reforms [9]

Fiscal Policy Overview - The fiscal policy for 2025 is more proactive, with a deficit rate reaching approximately 4%, the highest since the implementation of active fiscal policies in 2008, reflecting a strong commitment to economic recovery[2] - The total deficit scale is set at 5.66 trillion, significantly higher than last year's 1.6 trillion, indicating a substantial increase in fiscal spending[2] - Special bonds are planned at 4.4 trillion, exceeding last year's 500 billion, while the issuance of ultra-long special government bonds will increase to 1.3 trillion, up from 300 billion last year[2] Economic Impact - The increase in the deficit, special bonds, and ultra-long bonds collectively amounts to 11.86 trillion, surpassing last year's total of 8.96 trillion by 2.9 trillion, indicating a robust fiscal stimulus[2] - The 1.3 trillion ultra-long bonds, 500 billion special bonds, and 4.4 trillion special bonds correspond to an increase in the deficit rate by 0.9, 0.4, and 3.1 percentage points respectively, leading to an overall deficit rate of 8.4% for 2025, higher than last year's 6.6%[2] Policy Objectives - The proactive fiscal policy aims to expand total demand, optimize supply structure, stabilize expectations, and mitigate economic risks, particularly in real estate and finance[3] - The government emphasizes the importance of enhancing transfer payments to local governments, ensuring basic public services, and alleviating fiscal pressures at the grassroots level[12] Structural Reforms - The report highlights the need for deepening fiscal and tax reforms, including zero-based budgeting and consumption tax reforms, to improve fiscal efficiency and support high-quality development[16] - The focus on optimizing fiscal expenditure structure aims to increase efficiency and effectiveness, with a notable rise in spending on healthcare, education, and social security, which accounted for 39.7% of the general public budget in 2024, up 4.4 percentage points from 2013[14]