The Chinese central government delivered more than 2.5 trillion yuan ($389 billion) of directly funneled fiscal funds to primary-level governments in the first four months through a normalized transfer mechanism to support employment, people's basic needs, and market entities, officials said on May 21.

The funds account for about 92 percent of the total scale planned for this year channeled through the direct fiscal funds transfer mechanism launched in May 2020 after the outbreak of the COVID-19 pandemic.

The mechanism was expanded in 2021 to include more funds through 27 types of transfer payments, up by 1.1 trillion yuan from last year, and covering all subsidies from the central government to benefit people's livelihoods, Vice-Minister of Finance Xu Hongcai said at a news conference.

The new fund arrangement also considered the needs of provincial-level governments. According to local conditions, if provincial-level governments genuinely need to utilize funds, they can reserve part of the funds, while fund flows should serve grassroots needs as much as possible, Xu said.

The fund transfer procedure was normalized this year. In 2020, it was delivered in just one week to ease suddenly tightened financial conditions among local governments and market entities during the early stages of the pandemic, the vice-minister added.

The central government directly channeled 1.7 trillion yuan of much-needed fiscal funds to the prefecture and county-level governments in 2020 through the innovative fund-transfer system, which has supported the country's tax and fee reduction policy to mitigate the impact of COVID-19.

Establishment of the system has served as an important means of keeping economic fundamentals stable and won extensive support from market entities, said officials, and experts.

The total amount of funds under the mechanism will reach 2.8 trillion yuan this year, and the central government's subsidies for public wellbeing will all be included in the mechanism, according to the Government Work Report issued in March.

After the release of the budget targets, actual government expenditure under the mechanism stood at 1 trillion yuan from January to April. Figures indicate that the direct funds have shored up key areas, including stabilizing employment, improving infrastructure construction, and ensuring the operation of local government departments, said Liu Jinyun, director of the treasury payment center at the Ministry of Finance.

On the whole, the direct fund mechanism has played a significant role in the first four months and has been effective and safe. It also offset the effects of the withdrawal of some temporary fiscal stimulus measures and stabilized economic growth, Liu said.

At an executive meeting of the State Council on April 21, Premier Li Keqiang reiterated the need to normalize the usage of the mechanism for directly allocating fiscal funds. Li said that past practices have shown that the mechanism is a major creative step in exercising macro regulation.

But there has been some misuse of the direct funds. For instance, some of the funds collected from special COVID-19 Treasury bonds were used for repaying debts, attracting investment, or other projects not related to anti-pandemic efforts. So the nation's auditing body will further tighten supervision over direct fund usage this year, said Wei Qiang with the fiscal auditing department of the National Audit Office.

The Ministry of Finance is building a unified nationwide real-time supervisory system. This can warn about the misuse of direct funds in real time to ensure the funds can be used legally and in a targeted fashion, Xu added.