Three characteristics make fiscal policy more effective

The two rounds of proactive fiscal policies carried out in 1998 and 2008 are major macro-control measures to tackle financial crisis and prevent economy from further declining. Thanks to government's resolute decisions and prompt actions, these measures expand social demand through raising government expenditure to boost social investment and economic growth.

However, the 1998 policy was aimed at coping with regional crisis in Asia, particularly in financial field. The current global economic recession, comparatively more serious and more complicated, is spreading from western industrialized nations to emerging economies and developing countries and from financial field to national economy.

The CPC Central Committee is more confident and rational in dealing with the crisis in light of the experiences drawn from 1998 Asia economic meltdown. The State Council urges prompt measures, forceful implementation, correct actions and substantial work to expand investment, a thorough interpretation of the new fiscal policy.

Three characteristics make the new and proactive fiscal policy more effective:

First, the policy issued this time to facilitate economy with investment focuses more on people's livelihood. Although investment remains the key method to expand domestic economy, the policy this time attaches more importance to people's livelihood, with at least five measures out of ten concerning that or low-income group, for instance, building more economically affordable houses, speeding up infrastructure construction in rural areas, accelerating poverty alleviation effort, boosting the development of medical care, culture and education, speeding up ecological construction, sewage and garbage treatment, pollution prevention and post-quake relief and reconstruction.

Secondly, income raise for urban and rural residents and reform of tax system are included in the measures to expand domestic demand for the first time. All regions and trades will comprehensively forge ahead with the reform of value-added tax, encourage technical reform in enterprises and alleviate the loan burden of some 120 billion yuan for enterprises. It is regarded as a great leap forward. In the future, it will also lower the income tax for wage-earners, the self-employed and SMEs, enlarge the circle of consumption subsidies for urban and rural residents and put more effort on enhancing consumer credit so as to stimulate consumer demand.

Thirdly, the new policy combines short-term goal with long-term one. It will help to boost economic growth and structural adjustment, encourage independent innovation, support high-tech, technical progress and the development of service sector. Furthermore, the new policy also combines investment expansion with consumption stimulation and puts forward measures such as establishing a grass-root medical care system, speeding up schoolhouse renovation in middle schools in mid and west China, pushing forward the construction of special education school and cultural centers in rural areas, accelerating the construction of economically affordable houses and low-rent houses, renovation of dangerous dwelling houses and settlement of herdsmen, as well as speeding up infrastructure construction in countryside. These measures will help boost consumption and economic growth, and build up a harmonious and well-off society.

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Author: None listed
Original Source: People's Daily Online
Date Published: November 18, 2008
Web Source: http://english.people.com.cn/90001/90780/6536000_txt.html
Date Accessed Online: 2008-11-21