Fiscal policy is a long-term and short-term fiscal strategy to achieve certain macroeconomic goals such as economic and social development through taxation and public expenditure, and it is an important means for the government to regulate the economy. In 2005, China realized the transformation from a proactive fiscal policy to a prudent fiscal policy. This paper analyzes the implementation background and function of these two fiscal policies, and looks forward to the orientation and countermeasures of future fiscal policies.
[Keywords:] fiscal policy; China
Fiscal policy is a long-term and short-term fiscal strategy to achieve certain macroeconomic goals such as economic and social development through taxation and public expenditure, and it is an important means for the government to regulate the economy. According to the role of fiscal policy in regulating the total national economy, fiscal policy can be divided into expansionary policy, contractive policy and neutral policy.
What kind of fiscal policy a country should implement at a certain stage of economic development depends on the macroeconomic operation. Macro-economy operates in various ways, but it can be summarized into three types. One is that the total social supply is greater than the total social demand, that is, "deflation", which is manifested in the decline of the overall price level. In response to deflation, expansionary fiscal policy and expansionary monetary policy should be adopted. The second is that the total social supply is less than the total social demand, that is, "inflation", which is manifested in rising prices. In this case, we should adopt a tight fiscal policy and a tight monetary policy. The third is that the total social supply and total social demand are basically balanced, but there are contradictions in the structure, cold and heat coexist and the development is unbalanced. At this time, we should adopt a prudent fiscal policy, that is, we should not do too much in total, maintain pressure in structure, strengthen weak links, and reduce investment in overheated industries.
The proactive fiscal policy implemented in China since 1998 is essentially an expansionary fiscal policy. In 2005, according to the national conditions of China and the development of domestic and international economic situation, China implemented a prudent fiscal policy. The implementation background and functions of the two fiscal policies are summarized as follows.
I. Proactive fiscal policy
1, implementation background
In the middle and late 1990s, the outbreak of the Asian financial crisis directly led to the shrinking demand in the international market, and then it turned into a global economic recession, leading to widespread overproduction and deflation in the world economy. As the largest trading partner of Asian countries, the Asian financial crisis has undoubtedly had a great impact on China's economic operation. Judging from the domestic economic situation at that time, the price level continued to fall, the economic growth slowed down, the domestic investment and consumption demand were insufficient, the income growth of residents slowed down, and the unemployment pressure increased; At the same time, the sluggish demand in the international market leads to the sluggish export of China, and the promotion of export to economic growth is greatly reduced, which fully shows that China's economy has entered the stage of deflation and economic recession. Faced with such a complicated economic situation, the CPC Central Committee and the State Council have timely and decisively formulated and implemented a proactive fiscal policy with the main contents of issuing additional treasury bonds, expanding domestic demand, increasing infrastructure investment, stimulating consumption and expanding exports. The main measures include: first, issuing long-term construction bonds to promote the investment in fixed assets of the whole society. The second is to adjust tax policies to stimulate demand growth. The third is to adjust the income distribution policy and improve residents' consumption psychological expectations. The fourth is to standardize the charging system, reduce the social burden and promote the expansion of consumption. Fifth, support the strategic adjustment of the national economy and promote the reform of state-owned enterprises and the optimization of industrial structure.
2. Positive role
Over the past seven years, the proactive fiscal policy has achieved remarkable results in promoting economic growth, regulating the relationship between supply and demand, and overcoming stagflation.
(1) Promote steady economic development. Large-scale investment in government bonds not only effectively curbed the decline of economic growth, but also curbed deflation. 1998-2006, the national debt construction funds promoted economic growth by an average of 1.5-2.5 percentage points, GDP increased by 8.56% annually, and the price level was generally stable.
(2) Optimize the economic structure. The active fiscal policy pays attention to the organic combination of short-term demand management and long-term supply management. While strengthening infrastructure construction, we will develop high-tech industries, transform traditional industries, support some key industries and key enterprises to carry out technological transformation in line with the development direction of industrial structure, and promote economic restructuring and industrial upgrading.
(3) increase employment. In the past seven years, the construction of a large number of new projects and their supporting projects supported by national debt has increased 8 million-120,000 jobs, which has played a very good role in promoting the development of related industries.
(4) Promote the balanced development of regional economy. Through the inclined financial arrangements for the central and western regions, infrastructure construction and ecological construction such as power transmission from west to east, Qinghai-Tibet railway, returning farmland to forests and grasslands, and six small projects, the investment and business environment in these regions has been improved, the development pace of the central and western regions has been accelerated, and the unbalanced economic and social development pattern between the east and the west has been improved to some extent.
In short, as a countercyclical macro policy, a proactive fiscal policy is basically appropriate and has played an important role in the relatively balanced development of China's economy and society.
3. Negative effects
However, a proactive fiscal policy is, after all, a macro "counter-cyclical" operation and a policy suitable for economic downturn. Since the second half of 2002, China's economy has gradually emerged from the shadow of deflation, showing a trend of accelerated development. In 2003, the national economy finally passed the turning point from a relatively low level to a stable high level, and the GDP growth rate jumped to over 9%. At this time, the implementation of the proactive fiscal policy has brought some negative effects, but also some noteworthy problems, mainly the tendency of blind investment and low-level redundant construction in some industries and regions, the rapid growth of money and credit, and the increasingly obvious constraint of resources on economic growth, which has brought about a tight supply of raw materials for coal, electricity and oil transportation.
Second, a prudent fiscal policy.
1, implementation background
From the second half of 2003, China's economy began to emerge from the shadow of deflation, and its economic growth entered the rising stage of a new cycle. First, economic growth is close to the potential level. The GDP increased by 9.3% in 2003 and 9.5% in 2004. Some industries have bottlenecks or resource constraints, indicating that GDP growth is close to the potential output level. Second, prices tend to rise. In 2003, consumer price and commodity retail price index rose by 65,438 0.2% and 0.65,438 0% respectively, and in 2004 they rose by 3.9% and 2.8% respectively. Third, the unemployment rate has slowed down. In 2003, there were 8.59 million new jobs in cities and towns, and the registered unemployment rate in cities and towns was 4.3%. In 2004, 9.8 million people were newly employed in cities and towns, and the registered unemployment rate in cities and towns was 4.2%, down 0. 1% from the previous year. Fourth, local investment is overheated. In 2003, the growth rate of investment in fixed assets was higher than that of total retail sales of social consumer goods 17.6%. In that year, the investment rate rose to 42.3%, which was 3. 1 percentage point higher than that in 2002, and was close to the level of 1993 when the economy was seriously overheated (the investment rate at that time was 43.5%). To this end, the state has taken a series of measures, including monetary means (such as raising the deposit reserve ratio and raising interest rates) and administrative means, to gradually control the signs of local overheating. Under the influence of macro-control, the growth rate of investment in fixed assets dropped significantly from May to June in 2004, but there were obvious signs of rebound from July to June in 2004, with growth rates of 3 1.4%, 26.3%, 27.9% and 26.4% respectively. In the situation of economic cycle transition and local overheating in the national economy, if we continue to implement a proactive fiscal policy, it will not be conducive to controlling the excessive growth of fixed assets investment and alleviating inflationary pressure.
At the same time, the deep-seated problems in economic operation are also highlighted. First, the contradiction between economic growth mode and resource and environment constraints is more acute. At present, China's per capita reserves of important mineral resources such as oil, natural gas, coal, iron ore, copper and aluminum are equivalent to the world average1%,4.5%, 79%, 42%, 18% and 7.3% respectively, especially in 2003, China's GDP accounted for the world. The proportion of investment in GDP is too high, and the contribution of consumer demand to GDP growth rate decreases. In addition, the income gap between urban and rural residents in China is still widening.