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The Current Economic Situation, China's Financial Risk Study

Posted on:2006-11-21Degree:MasterType:Thesis
Country:ChinaCandidate:W ChenFull Text:PDF
GTID:2206360152985796Subject:Public Finance
Abstract/Summary:PDF Full Text Request
The safety of the economy has become the core of the national safety and fiscal safety is the most important component of the safety of the macro-economy. Since 1998 China began to enforce active fiscal policies due to the Asian Financial Crisis and the insufficiency of domestic demands, which became the main drive of the economy. After 7-year's enforcement, negative effects of active fiscal policies came into being, which was reflected in long-term government deficits and the abnormal increase of debts. Negative effects of active fiscal policies finally resulted in accumulative fiscal risks in China. Statistics showed that in recent years fiscal deficits accounted over 2.9% of GDP which was close to the globally acknowledged 3% red line. Income from fiscal debts exceeded 600 billion RMB accounting for 5.3% of GDP which exceeded the red line. Furthermore, there still existed huge amount of implicit fiscal debts. If the economy grew steadily, this situation could sustain. But once the economy fluctuated greatly, fiscal risks would be exposed and would even result in a great crisis. Since 2004, the economy in China has shown a trend of heating up and expanding. The running of macro-economy has become more and more instable. First, with the great fluctuation in demands, economic overheating has become obvious and the pressure from inflation is increasing. Secondly, accumulative financial risks are exposed little by little. In addition, the employment environment is worsening and the distribution of income is unbalanced. Furthermore, Chinese government will enter a high-tide period of payments from year 2005 to 2009. The total amount of payments will range from 350 billion to 300 billion RMB of a fiscal year. Undoubtedly this will be the heaviest burden for the government in the next 4 years. 2005 is important for the economic reform in China. Economic issues include the stock market crisis, a new round of reforms on the fiscal system, the macro control on economic overheating, and the establishment of a harmonious society. The solving of these issues relates to the stability and the development of the economy, and needs supports from the government. Once these issues could not be soundly solved, conflicts would be exacerbated or would even result in a fiscal crisis. In summary, the internal and external economic environments for China have changed. Instable economic factors are accumulating. Thus it should pay more attention to fiscal risk problems under the new situation. This thesis tries to combine theories with practices. It has a systematic and in-depth research on fiscal problems in China. The thesis is organized as the following. Firstly, the definition and characteristics of fiscal risks are scientifically given for the objective purpose. Then fiscal risks are systematically categorized and the fiscal risk system is completely depicted. This thesis also provides a base for evaluating fiscal risks in China by describing the true situation of the fiscal deficit and the scale of the debt. Causes of fiscal risks are analyzed and various transmittal mechanisms of risk factors are explored. At the last part of this thesis, schemes of avoiding and controlling fiscal risks are presented. The logic structure of this thesis includes three parts. A theoreticaloverview of fiscal risks is given in the first part. In the second part, the representation and the cause of fiscal risks are analyzed. The trend that the exposure of fiscal risks is accelerating is also analyzed in this part. In the third part, measures to avoid fiscal risks are presented. Details of three parts in this thesis are as follows: The first part is the theoretical overview of fiscal risks. The definition and the characteristics of risks are the precondition to understand fiscal risks. Thus in the first chapter of this part, we give the definition and characteristics of risks. Different understandings of risks in academia are given and the writer of this thesis defines risk as the possibility of loss. The difference among private risk, corpor...
Keywords/Search Tags:Economic overheating, Fiscal risks, Fiscal crisis
PDF Full Text Request
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