Study Of Fiscal Policy In The Context Of International Economic Cooperation

Since the beginning of opening to the outside world, China, the largest developing country, has accepted the market economy of the developed countries and built its own socialist market economy. Chinese policymakers still focus on domestic or unilateral effects of fiscal and monetary policies. From 1990s, especially from the Asia financial crisis in 1997, China has grown stronger. The external effects of China macro-control policies have been noticed as China participated in more and more international affairs. At present, China fiscal policies and other macro-control policies not only have positive effects to China economy operations, but also to the countries around China and the whole world. The research about China fiscal policies is entering a new field and faces a new challenge which is never met by Chinese government and policymakers. Because the current China macroeconomics is still in the frame of traditional macroeconomics, it has two difficulties when it faces the current economy situation. The first is that it can not give an overall analysis about the trend of globalization an regionalization, and the second is that if ignore the research on the international policies coordination at the inter-country level.China takes an active part in different level regional cooperation when it meets the challenge brought by economy globalization. China is forming it own economics theories, including macro-control policies after the Peaceful Rising strategy was given by China government. What future path of development will China take? What responsibilities will China assume for the international economy stability? Will China become an engine for world economy? Answering these questions is one the most important duty of the research of fiscal policies. As a part of the strategy of Peaceful Rising, the future fiscal policies will meet a series of tremendous changes on government purchase, social securities, transition payment, taxes and government debt. This thesis will play eyes on the effects of fiscal policies when China participates in the different international coordination. It also gives commendations about fiscal policies to the rapid growth of globalization and regionalization.In Chapter 1, the thesis gives its comments on the public finance founded by Adam Smith and other public finance theories, such as macro-control theory, globalization and regionalization theory, cooperation of fiscal and monetary policies in opening-up economy given by Robert Mudell, international public finance and other fiscal theories emerging Germany in 18th century. The latest research about China fiscal theory and polices is going to the outside world step by step. The Peaceful Rising strategy and the Harmonious World notion require that the research of fiscal policies of China must be placed in the trend of globalization.In Chapter 2, a model of game theory is used to analysis the situation of international coordination. Under the background of international coordination, the policymakers of any country can not make decision according to the traditional macroeconomics because it is influenced by other countries. It is a result of game played by many countries. According to the a game theory of two countries, there are many conflicts during many countries take part in the international cooperation. Both the big country and the small country can receive benefit by inter-countries cooperative game. This chapter also gives examples of NAFTA, EU, APEC and ASEAN. All of these organizations take effort to promote the coordination at the level of international fiscal policies.Chapter 3 discusses the effect fiscal policy effects of Japan in 1970s. China can study following Japan because Japan is the biggest developed country in Asia. The chapter also gives the comments on EU's fiscal policies and tax policies. China also can learn form EU during it promote the coordination of China-ASEAN because EU is a good example of region integrality organization. At the end of this chapter, the tax policies adjustment and new trend of international economic policy coordination are discussed. At the beginning of Chapter 4, the difference between China and other Asian countries and regions when they arise is discussed. China brings many chances, as well as many shacks to the growth of world economy. The path embarked upon by China is one of peaceful rising. China will enjoy closer economic links with world economy through trade and investment. The enlargement of domestic market will bring more and more chances when China buys sources which are short. Then the thesis discussed the relationship between the Peaceful Rising and fiscal policies when China participates in the international cooperation at different levels. The fiscal control and adjustment has been stronger since 1978 and the practices of fiscal theory bring a positive influence to the countries around China and world economy.In chapter 5, the thesis introduces three main principles of World Trade Organization (WTO) and the situation of game within the frame of WTO rules. It also discusses the position of China in WTO and positive and negative influence to China public finance brought by entering WTO in 2001. Then the thesis gives the path of adjustment of public finance. The average tariff of china has fallen after joining the WTO. China is actively involved in building an equitable and free international trading regime by a series of tax polices and government purchase policies. Finally, the thesis recalls some key steps of China which are related to agriculture during Doha Round.Chapter 6 discusses the transition and creation of China fiscal policies with the frame of Asia integration. On the basis of recalling the cooperation between China-ASEAN, China-SOUTH KOREA and Shanghai Cooperation Organization, the thesis gives the fiscal arrangement about participating in Asia regional coordination. China and other Asia countries should enjoy respective strengths and complement each other. They also should deepen policy dialogue and coordination, further open market to each other, share experience of regional integration by demonstrating greater flexibility in cutting subsidies and tariff in order to create condition for the cooperation of Asia countries. China calls on all Asia countries to fight protectionism, properly handle trade disputes, refrain from politicizing trade issues, improve trade and investment environment, enhance economic coordination and realize common development in Asia. Finally, this thesis discusses the possible influences to China fiscal operations of further FTA built by China, Korea and Japan.Chapter 7 recalls the practices of China fiscal policies and the development of fiscal theory since Chinese reform and opening-up program. First, operation of deficit and fiscal balance has changed. The government built many infrastructures by using public investment, promoted to build the system of social securities, and used more government expenditure on improving education, health care, helping poverty and public service. Second, the comprehension on government debt has changed. The debt of government can play an important role in the operations of macro-control and adjustment. The functions of government debt not only meet the shortage of government expenditures, but also is a method to collect fund and support domestic economic operation. The thesis also recalls the key adjustment on selling government debt from 1981 to present. Third, China takes efforts to realize the international balance of revenue and expenditure by using tax polices. Four, Using a series of fiscal and tax arrangements alleviate the press of RMB appreciation. These arrangements include enlarging the public expenditure and domestic demand, adjusting current tax polices, FDI policies and promoting the balance of foreign trading.Chapter 8 focuses on the coordination of fiscal policy, monetary policy, trading policy and other macro-control policies. The final aim of fiscal policy and monetary policy is internal and external balance. The transition of current path of foreign trading can be realized by using fiscal policy, monetary policy and trading policy. As to the coordination of fiscal policy and monetary, the arrangement about coordination of two policies must meet the requirement of economy operating. The arrangement must consider to the reform of foreign exchange rate, the independency of monetary. A regime must be built by the Ministry of Finance and the People's Bank of China at macro- and micro- level gradually. The government must improve the regime in order to meet the requirement of entering WTO.Considering the uncertainness of world economy development, Chapter 9 discusses the China economy security under the background of international coordination. There are many internal and external factors to influence China economy security. The development of globalization will bring press on expenditure of local government. In order to maintain the security of China, The thesis gives five commendations about fiscal policies. First, the government must improve the power of fiscal policy and monetary policy to control and adjust economy operations. Second, using fiscal policies urges the creativeness of Chinese enterprises. Third, using government purchase to help and encourage the creative enterprises. Four, using tax policy and other methods to resolve the difficulties coming from trading protection of other countries. And finally, the government must play an eye on the influence of zero-tariff in the future.