Review And Reflection Of The Proactive Fiscal Policy

The expansive fiscal policy, carried out from the next half of 1 998, plays an important role in promoting economic growth and alleviating the fluctuation of economy; however, as a result of that, the large scale of, the domestic public debt has accumulated and the public worry about it and come to pay more attention to the direction of the policy.Compared with the contractive macroeconomic policy having been carried out since 1 993, the implementation of the expansive fiscal policy was a great turning point in macroeconomic management. It was triggered by such a fact that the macroeconomic structure and the mode of macroeconomic management have changed radically since 1 996 (The soft landing of economy came true in 1 996 in China.). After reviewing the factors of the transition period, the background under which the policy was planned and the problems that restrict the effect of the policy could be more clearly understood.In Chapter 1, the background under which the policy was conducted is studied and the reasons that the policy direction was changed from 1993 are found. Due to contractive factors emerging after 1 996, the contraction policy having been carried out since 1993 was bound to fail to work and the expansive fiscal policy to be implemented and Asian financial crisis, once considered as an accidental event, is thought to play a role in accelerating the issue of the policy. Then, the main points of the policy from 1 998 to 2001 are summarized.In Chapter 2, the effects and the restrictive factors of the policy are demonstrated. It is made clear that the policy did play a great role in promoting economic growth and alleviating the fluctuation of the economy, however, it did not solve the social and economic problems in transition period and only made them less fierce. As a result of that, the policy is not as effective as expected. Furthermore, the utility of the domestic public debt is diminishing and the policy is in a dilemma.In Chapter 3, the dilemma is examined and the time when the policy could be given up is taken into consideration. It is concluded that although there is a dilemma, the policy is not to be given up.In Chapter 4, resolution is found. The policy should be continually carried out so as to keep the economy growing stably; on the other hand, both macroeconomic and microeconomic measures should be taken so that a sound institutional environment will be created. Only after the problems of the transition period were solved, could the good cycle of the economy come true and the expansive fiscal policy be cancelled then.