China has actively used fiscal policy as macro-economic leverage
to sustain and increase healthy economic growth and maintain social
stability over the past five years, Minister of Finance Xiang Huaicheng
He told reporter that the active fiscal policy that China adopted
over the past three years has helped secure an annual economic growth
higher than 7 percent in China, while many other economies grew
The active fiscal policy has been effective to push up economic
growth and increase the fiscal revenue of the government, according
He noted that thanks to the active fiscal policy, the economy has
shown important signs that it had improved for the better earlier
In contrast to the tight fiscal policy that China used to effectively
curb inflation in the early 1990s, the adoption of an active fiscal
policy has added new experience to China's management of the macro-economy,
according to Xiang.
Noting that the United States has sustained long-term growth with
its technological power and that some Asian economies are quickly
coming back through restructuring, he said that China's economic
reform still lacks the impetus of system and technological innovations.
Therefore, he said that China has to maintain the scale of the
active fiscal policy in the near future so that it will not be in
a disadvantaged position in the resurgence of the world economy
and intensified international competition.
During the ninth Five-Year Plan period that extends from 1996 to
2000, the Chinese government has strengthened its macro-economic
control muscles by reversing the trend of dwindling share of fiscal
revenue in the gross domestic product (GDP).
During 1996 to 1999, fiscal revenue of the government increased
at an average rate of 128.4 billion yuan every year. The share of
fiscal revenue in GDP rose from 10.7 percent in 1995 to 13.9 percent
in 1999. The ratio is expected to rise further to 14 percent in
According to Xiang, the Chinese government has also improved the
effectiveness of its fiscal policy by optimizing budget expenditures.
During the ninth five-year plan period, the Chinese government
increased spending on infrastructure construction, reform of state-owned
enterprises, the development of a social security system, science
and technology, education, agriculture, reform of the purchase and
sale of grain, the army, armed police, law enforcement organs and
Xiang said that the increased expenditures have made important
contributions to promote reform, development and social stability.
He said that over the period, the Chinese treasury has increased
transfer payment to local governments in the central and western
parts of the country.
In 1999, the central government made 35.8 billion yuan of transfer
payment to central and western areas. The figure is expected to
grow to 60 billion yuan and remain at the same level in the next
few years. This will be the largest amount of transfer payment that
the central government has made to this area since 1994.
The money was aimed to narrow the gap of development between the
eastern and western parts of China.