Fiscal Policy and Fiscal Risks

Author: Chen Gong
Publisher:
Publish Date: 2003-09-01
Features: The development and changes in economic theory are closely linked with economic practice. As China continues to transition towards a socialist market economy system, practice is calling for the development and prosperity of economics; at the same time, practice is also creating conditions for economic growth. The book systematically analyzes and studies the background, connotation, ideology, measures, effectiveness, coordination, and basic experience of policy implementation. Since the second half of 1998, China has implemented an active fiscal policy, which has achieved remarkable achievements in more than five years. The implementation of the policy has been closely watched by all sectors of society. This book systematically analyzes and studies the background, connotation, ideology, measures, effectiveness, coordination, and basic experience of policy implementation. The main content and arguments of this book are as follows:
1. The term "active" in active fiscal policy can be understood in two ways: one refers to the comprehensive use of various fiscal measures to actively promote economic growth and the comprehensive development of the socio-economy; the other refers to the contrast with the passive and reactive nature of past fiscal policies.
2. Issuing additional government bonds is a major measure of active fiscal policy and has played a significant role in economic growth. Through analysis and calculation, it is found that there is still room for issuance even in the budgetary bonds, and there are no major risks in the short term. China's fiscal risks mainly exist in the large amount of direct implicit and contingent debts in both the central and local governments.
3. Regarding the current tax policy, this book believes that a comprehensive tax reduction policy is not feasible at the current time, but the rapid growth in tax revenue leading to an increase in the proportion of fiscal revenue in GDP should be moderately controlled. It is necessary to implement structural adjustments with both increases and reductions in the current tax system as soon as possible.
4. The coordination between active fiscal policy and sound monetary policy is a successful experience. When active fiscal policy gradually fades and is about to withdraw, monetary policy should not "cool down" but instead needs to "add fuel to the fire."
5. Active fiscal policy cannot be a long-term policy, hence the issues of gradual phasing out and withdrawal exist. However, the timing and steps of phasing out and withdrawal, as well as the methods or alternative measures for withdrawal, cannot be determined by subjective will but must be decided based on the development of domestic and international economic conditions.
6. The implementation of China's active fiscal policy has achieved successful experiences in the art of macroeconomic regulation. This book attempts to explore these experiences through the combination of theory and practice.