the development of china's fiscal policy

商管 1202班

第三组朱静、陈家宝、佘晓璇、胡亚旻、徐慧莹

--since reforming and opening up

Content

Introduction to Fiscal Policy -- Ring

Development History of China’s Fiscal Policy:

1979~1982 -- Kalbee

1988~1993 -- Jane

1998~2004 -- Perilla

2008~2010 -- Serene

Conclusion -- Ring

Introduction to Fiscal Policy

Definition:

principles set in favor of political, economic and social development to guide the fiscal tasks in a certain period.

Ultimate purpose:

to balance the total demand and requirement of society through financial expenditure and tax policy.

Fiscal Policy in China

An important tool for government’s macro-control.

Include taxation, subsidies( 补贴 ), deficit( 赤字 ), national debt, etc

To maintain efficient allocation of the public resources, equal distribution of the social wealth & steady development of the national economy.

Development History of China’s Fiscal Policy

--since reform and opening up

-- Kalbee

Overheating Economy

Financial deficit

InflationForeign trade

deficit increased

Background

Eight-Character Policy

1.Adjust the structure of imports and exports, balance the international payment.

2.Reform the financial system, “serving meals to different diners from different pots” ,promote the fiscal balance at all levels.

3.Rectify: reduce the expenditure, control the demand of invest-ment and consumption, stabilize the market, control the prices.

4.Improve the supply capacity of consumer goods by increasing the investment on agriculture and light industry.

Effect

After the macro-control, the expectant goal of fiscal balance, price stablity and credit balance was basically achieved.

However, there are so much austerity policies in the economic adjustment that the economic growth rate was decreased from 7.8% in 1980 to 5.2% in 1981.

Background ：The national economy declined

【 Effect 】

The gross domestic product (GDP) growth rate gradually picked up to 9.1%, which are 3.9% higher than last year and quickened to 10.9% in 1983.

Loose Fiscal Policy and M onetary Policy (1982)

1. ease monetary, deepen reform of the financial system; 2. replacement of enterprise profit by tax; 3. increase effective supply.

-- Jane

Background

Overheating economy in late 1984:

Expanding differences between social aggregate demand and aggregate supply

Rapidly increasing investment and consumption

Sharply increasing general price level

Government continuously enlarged financial deficit

Banks excessively issued currency

Severe inflation in 1988:1.Retail price of commodities increased by 18.5%

2.Consumer price increased by 18.8%

“Govern economic environment, rectify

economic order and comprehensively

deepen reform ” in 1988:

Reducing the scale of investment in fixed assets

Having strong control of consumption demand

Tightening central fiscal expenditure

Conducting taxes reform

Effects

The prices quickly backed to normal level.

The demand expansions were addressed.

The unreasonable industrial structures were changed.

Companies failed to remain manufacture.

The resident incomes decreased.

Background

Deng Xiaoping’s southern tour

Fourteen CPC National Congress

A new round of economic construction:

Social fixed investment 61.8%

Retail price 13.2%

Consumer price 14.7%

Moderately Tight Fiscal Policy

“Deepen the reform, strengthen

and improve macro-control”:

Reform the fiscal system.

Standardize the relations of distribution

among the government and enterprises.

Conduct a large scale of tax reform.

Have a positive effect on the economy.

-- Perilla

Background

1.The financial crisis in Southeast Asia caused

significantly slow economic growth and deflation （通货紧缩） .

2. The market-oriented reform （市场化改革） surplus economy （过剩经济） 3. The strategic reorganization of state-owned enterprises

（国有企业战略重组） laid-off workers and stress of unemployment

4. Monetary policy

Proactive Fiscal Policy

1. Issue additional long-term treasury bonds & strengthen the infrastructure investment.

2. Adjust the tax policy, support exports, attract foreign investment and lighten the burden on the enterprises.

3. Increase government spending

4. Increase wages, reform the distribution system（分配制度） and give households more spending power.

5.Start a wide range of state-owned enterprises bankruptcy

6.“The change of debts into shares” （“债转股”）

Effects

1. made remarkable achievements

2. the Asian financial crisis Macro economic operation

3. the continuous rapid increase of the national economy

Background

The investment demand expansion appeared in the operation of the economy

The increasing inflation pressures

under-investment of small and medium-sized enterprises and service industry

Prudent Fiscal Policy

Reduced national bonds scale （国债规模） Reduced the construction project.

Carried out structural adjustments under moderate control

Deepened the reform of the tax system

Reformed the resource tax and consumption tax

Reformed the export tax rebate system actively

（出口退税机制改革）

Effects

The price level stability & inflation expectations

The problems among the three major industries nearly solved

The relationship between investment and consumption be congruent

-- Serene

In 2008 , The global Financial Crisis broke out

Background

the speed of economic

development in China slowed down

*result:

1. property investment , foreign investment, purchase of vehicles decreased;

2. unemployment rate increased

· Several methods:

Promote agricultural development, adjust economic structure ,deepen reform, maintain social stability, etc.

· Plans :

1.Ten key Industrial Revitalization Plan 十大重点产业重振计划2. Regional Industrial Upgrading Investment Stimulus Plan 地区性的产业升级投资刺激计划

Proactive / Steady Fiscal Policy

( 积极财政政策）

Effect:

1. Hindered 遏制 the economy rapid decline 2. Stabled the confidence of investors &consumers 3. Stimulated the marketing economy in China

In 2010, the GDP of China overcame that of Japan

Background

China had become the world’s 2nd largest economic entity

*Problems:

1. the gap between the rich& poor still exists, and it’s getting more serious.

2. per capita GDP , the quality of life are still low.

3. the industrial structure in China need to keep pace with the western countries…

1. Adjust productive structure, economic growth basing on structure optimization, regional coordinated development.

2. Expand domestic demand, particularly consumer demand.

3. Guarantee the people‘s livelihood, create more job opportunities.

4. Deepen the reform of the fiscal and taxation, strengthen the intrinsic motivation of the economic development. 5. Strengthen fiscal management ,improve financial performance.

Continue the Proactive Fiscal Policy

( 继续实行积极财政政策）

Effect ： 1. Maintain steady and rapid economic growth.

2. Keep a harmonious & stable atmosphere

in society.

3. Maybe our GDP could overcome America

in 20 years.

Please ENJOY VIDEOS to FIND ANSWERS O(∩_∩)O~

Q ： ARE you really sure the definition of fiscal policies?

DO you know what kind of fiscal policy did China take after 2010?

Think & Reflect

VIDEO1: CHINA’S FISCAL & MONETARY POLICY REVIEWS

http://english.cntv.cn/program/bizasia/20111213/109683.shtml

VIDEO2: Introduction of fiscal policy roles in China

http://english.cntv.cn/program/newshour/20111212/114902.shtml

VIDEO3: Chinese fiscal policy in the future

http://english.cntv.cn/program/bizasia/20101213/106600.shtml

Conclusion

Different periods, different fiscal policies

Main progress:

1.more equal

2.more flexible

3.more normative

In a word, all the efforts are made for

the interests of the public.

Thank you very much

for your attention!