China's Political Season: Fiscal policy highlights

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China's Finance Ministry is facing questions about the first budget deficit cut since 2012. Can China achieve tax cuts and a lower deficit? What can the private sector make out of the policies? Xia Cheng went to find out at today's finance ministry press conference on the sidelines of the NPC sessions in Beijing.

China's finance ministry is keeping its proactive fiscal policy in place. Tax cuts will continue in 2018.

Value Added Tax reform is ongoing--The three current tax brackets will be reduced to two. That should help the manufacturing and transportation sectors.

More SMEs will be eligible for tax relief. China's entrepreneurial boom will be kept up with a tax incentive for venture capital and angel investors.

China's property tax is likely to come before 2020. The finance ministry says it will start with a simpler version, combining some property tax categories common in other countries. The ministry will also reduce some of the construction expenses and transaction costs involving property.

The threshold for the personal income tax will be raised. Deputies have proposed to push the cut-off point from 3,500 yuan to 7,000 yuan, or even higher. The finance ministry explains that it will be based on a person's overall cost of living. What would make a bigger difference to wage-earners is tax deductions for personal healthcare and kids' education.

XIAO JIE CHINESE FINANCE MINISTER "We estimate the implementation of the tax reduction policy. The annual tax reduction is expected to exceed 800 billion yuan. At the same time, we need to further the cleaning up movement of government funds, administrative fees, and business service charges this year. We are expecting to reduce more than 300 billion yuan in burdens throughout the whole year."

XIA CHENG BEIJING "It will be a challenging year for fiscal policymakers. They want to cut taxes, raise spending and reduce the deficit. And they want to do all of that against the backdrop of a slowing economy. There have to be ways to boost finances."

And that's where special purpose bonds come into play. Special purpose bonds are issued by local governments to finance infrastructure projects. They aren't backed by tax revenues but returns on the projects. The issuance of such special bonds will jump to 1.35 trillion yuan this year. That's 70 percent higher than in 2017. XIA CHENG CGTN BEIJING