Core viewpoints:

1. The economy has inertia; without force, there is no change. In the face of insufficient effective demand, fiscal policy is one of the standardized measures. However, since the beginning of the year, the slow progress of special bond issuance, the significant increase in non-tax revenue, and the moderate strength of consumer subsidies may all reflect characteristics different from the past. The power of fiscal resources not only affects the annual economic growth target but also concerns whether it can reverse the predicament of negative price growth.

2. Recently, the strength of local consumer subsidies and infrastructure investment has been significantly constrained by the fiscal revenue and expenditure gap. The continuous widening of this gap is mainly due to the sharp decline in real estate-related income in the past few years, and partly due to the significant increase in expenditures such as health and hygiene. Even considering the increase in central government transfer payments and the rise in non-tax revenue, it is still difficult to make up for the gap in the short term. Local "three guarantees" and other livelihood expenditures are indeed rigid.

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3. The early issuance of local bonds, especially special bonds, is often an important way to alleviate the fiscal revenue and expenditure gap. However, stricter accountability systems and debt issue tracing mechanisms have indeed constrained the progress of related borrowing in the short term. In addition, the cooperation of monetary policy, especially interest rate policy, is an important support for fiscal efforts, but the current interest rate reduction is also subject to many constraints of internal and external balance.

Looking forward, although external demand has short-term resilience, internal demand such as real estate and consumption is still slowing down. If the GDP target of around 5% is to be achieved, additional policy tools may be needed in the second half of the year. Moreover, from international experience, to completely get rid of low prices, it seems that economic growth needs to "overshoot" upwards for a period of time to fill the accumulated gap caused by exogenous shocks in recent years.

正文：

Throughout history and across the world, fiscal policy is one of the standardized measures in the face of insufficient effective demand. However, since the beginning of the year, the slow progress of special bond issuance, the significant increase in non-tax revenue, and the moderate strength of consumer subsidies may all reflect characteristics different from the past.

1. Where is the constraint on fiscal policy?

The continuous widening of the local fiscal revenue and expenditure gap is mainly due to the sharp decline in real estate-related income in the past few years, and partly due to the significant increase in expenditures such as health and hygiene. Even considering the increase in central government transfer payments and the rise in non-tax revenue, it is still difficult to make up for the gap in the short term. Local "three guarantees" and other livelihood expenditures are indeed rigid.

The early issuance of local bonds, especially special bonds, is often an important way to alleviate the fiscal revenue and expenditure gap. However, stricter accountability systems and debt issue tracing mechanisms have indeed constrained the progress of related borrowing in the short term. In addition, the cooperation of monetary policy, especially interest rate policy, is an important support for fiscal efforts, but the current interest rate reduction is also subject to many constraints of internal and external balance.II. Will Fiscal Policy Take Action?

Although external demand shows short-term resilience, domestic demand such as real estate and consumption continues to slow down. To achieve the annual GDP target, additional policy tools like fiscal measures may be needed in the second half of the year. In accordance with the requirement to "ensure timely repayment and no risks," the probability of expanding and intensifying local debt tools is also increasing. Moreover, from international experience, it seems that to completely escape low prices, the economy may need to continuously "overshoot" upwards for a period to fill the cumulative gap caused by exogenous shocks over the years.

III. Basic Conclusions

Firstly, the economy has inertia and will not change without force. Recently, local consumer subsidies and infrastructure investment have been significantly constrained by fiscal revenue and expenditure gaps. The continuous widening of this gap is mainly due to the sharp decline in real estate-related revenues in previous years. Even considering the increase in central government transfers and the rise in non-tax revenues, it is still difficult to fully compensate for the gap in the short term. Local "three guarantees" and other livelihood expenditures are indeed rigid.

Secondly, the early issuance of local debt, especially special-purpose bonds, is often an important way to alleviate fiscal revenue and expenditure gaps. However, stricter accountability systems and debt issue tracing mechanisms do indeed constrain the progress of related borrowing in the short term. In addition, the cooperation of monetary policy, especially interest rate policy, is also an important support for fiscal policy, but the current interest rate reduction is also subject to many constraints of internal and external balance.

Thirdly, looking to the future, although external demand has short-term resilience, domestic demand such as real estate and consumption continues to slow down. To achieve a GDP target of around 5%, additional policy tools may be needed in the second half of the year. Moreover, from international experience, to completely escape low prices, it seems that the economy may need to continuously "overshoot" upwards for a period to fill the cumulative gap caused by exogenous shocks over the years.