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The Development of China's Fiscal Policy

The Development of China's Fiscal Policy

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The Development of China's Fiscal Policy

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  1. The Development of China's Fiscal Policy --since reforming and opening up 商管1202班 第三组 朱静、陈家宝、佘晓璇、胡亚旻、徐慧莹

  2. Content • Introduction to Fiscal Policy -- Ring • Development History of China’s Fiscal Policy: 1979~1982 -- Kalbee 1988~1993 -- Jane 1998~2004 -- Perilla 2008~2010 -- Serene • Conclusion -- Ring

  3. Introduction to Fiscal Policy • Definition: principles set in favor of political, economic and social development to guide the fiscal tasks in a certain period. • Ultimate purpose: to balance the total demand and requirement of society through financial expenditure and tax policy.

  4. Fiscal Policy in China • An important tool for government’s macro-control. • Include taxation, subsidies(补贴), deficit(赤字), national debt, etc • To maintain efficient allocation of the public resources, equal distribution of the social wealth & steady development of the national economy.

  5. Development History of China’s Fiscal Policy --since reform and opening up

  6. -- Kalbee

  7. Background

  8. Eight-Character Policy 1.Adjust the structure of imports and exports, balance the international payment. 2.Reform the financial system, “serving meals to different diners from different pots” ,promote the fiscal balance at all levels. 3.Rectify: reducethe expenditure, control the demand of invest- ment and consumption, stabilize the market, control the prices. 4.Improvethe supply capacity of consumer goods by increasing the investment on agriculture and light industry.

  9. Effect • After the macro-control, the expectant goal of fiscal balance, price stablity and credit balance was basically achieved. • However, there are so much austerity policies in the economic adjustment that the economic growth rate was decreased from 7.8% in 1980 to 5.2% in 1981.

  10. Background:The national economy declined

  11. Loose Fiscal Policy and Monetary Policy(1982) 1. ease monetary, deepen reform of the financial system; 2. replacement of enterprise profit by tax; 3. increase effective supply. 【Effect】 The gross domestic product (GDP) growth rate gradually picked upto 9.1%, which are 3.9% higher than last year and quickened to 10.9% in 1983.

  12. 1988 -- Jane

  13. Background Overheating economy in late 1984: • Expanding differences between social aggregate demand and aggregate supply • Rapidly increasing investment and consumption • Sharply increasing general price level • Government continuously enlarged financial deficit • Banks excessively issued currency

  14. Severe inflation in 1988: 1.Retail price of commodities increased by 18.5% 2.Consumer price increased by 18.8%

  15. “Govern economic environment, rectify economic order and comprehensively deepen reform ” in 1988: • Reducing the scale of investment in fixed assets • Having strong control of consumption demand • Tightening central fiscal expenditure • Conducting taxes reform

  16. Effects The prices quickly backed to normal level. The demand expansions were addressed. The unreasonable industrial structures were changed. Companies failed to remain manufacture. The resident incomes decreased.

  17. 1993

  18. Background Deng Xiaoping’s southern tour Fourteen CPC National Congress A new round of economic construction:

  19. Moderately Tight Fiscal Policy “Deepen the reform, strengthen and improve macro-control”: • Reform the fiscal system. • Standardize the relations of distribution among the government and enterprises. • Conduct a large scale of tax reform. Have a positive effect on the economy.

  20. 1998 -- Perilla

  21. Background • 1.The financial crisis in Southeast Asia caused significantly slow economic growth and deflation(通货紧缩). • 2. The market-oriented reform(市场化改革) surplus economy(过剩经济) • 3. The strategic reorganization of state-owned enterprises (国有企业战略重组) laid-off workers and stress of unemployment • 4. Monetary policy

  22. Proactive Fiscal Policy • 1. Issue additional long-term treasury bonds & strengthen the infrastructure investment. • 2. Adjust the tax policy, support exports, attract foreign investment and lighten the burden on the enterprises. • 3. Increase government spending • 4. Increase wages, reform the distribution system(分配制度)and give households more spending power. • 5.Start a wide range of state-owned enterprises bankruptcy • 6.“The change of debts into shares”(“债转股”)

  23. Effects • 1. made remarkable achievements • 2. the Asian financial crisis Macro economic operation • 3. the continuous rapid increase of the national economy

  24. 2004

  25. Background • The investment demand expansion appeared in the operation of the economy • The increasing inflation pressures • under-investment of small and medium-sized enterprises and service industry

  26. Prudent Fiscal Policy • Reduced national bonds scale(国债规模) • Reduced the construction project. • Carried out structural adjustments under moderate control • Deepened the reform of the tax system • Reformed the resource tax and consumptiontax • Reformed the export tax rebate system actively (出口退税机制改革)

  27. Effects • The price level stability & inflation expectations • The problems among the three major industries nearly solved • The relationship between investment and consumption be congruent

  28. 2008 -- Serene

  29. Background In 2008 , The global Financial Crisis broke out the speed of economic development in China slowed down *result: 1. property investment , foreign investment, purchase of vehicles decreased; 2. unemployment rate increased

  30. Proactive / Steady Fiscal Policy (积极财政政策) · Several methods: Promote agricultural development, adjust economic structure ,deepen reform, maintain social stability, etc. · Plans : 1.Ten key Industrial RevitalizationPlan 十大重点产业重振计划 2. RegionalIndustrial Upgrading Investment Stimulus Plan地区性的产业升级投资刺激计划 Effect: 1. Hindered遏制 the economy rapid decline 2. Stabled the confidence of investors &consumers 3. Stimulated the marketing economy in China

  31. 2010

  32. Background In 2010, the GDP of China overcame that of Japan China had become the world’s 2ndlargest economic entity *Problems: 1. the gap between the rich& poor still exists, and it’s getting more serious. 2. per capita GDP , the quality of life are still low. 3. the industrial structure in China need to keep pace with the western countries…

  33. Continue the Proactive Fiscal Policy (继续实行积极财政政策) 1.Adjust productive structure, economic growth basing on structure optimization,regional coordinated development. 2. Expanddomestic demand, particularly consumer demand. 3. Guaranteethe people‘s livelihood, create more job opportunities. 4.Deepenthe reform of the fiscal and taxation, strengthen the intrinsic motivation of the economic development. 5. Strengthenfiscal management ,improve financial performance. Effect: 1. Maintain steady and rapid economic growth. 2. Keep a harmonious & stable atmosphere in society. 3. Maybe our GDP could overcome America in 20 years.

  34. Think & Reflect Q:ARE you really sure the definition of fiscal policies? DO you know what kind of fiscal policy did China take after 2010? Please ENJOY VIDEOS to FIND ANSWERS O(∩_∩)O~ VIDEO1: CHINA’S FISCAL & MONETARY POLICY REVIEWS http://english.cntv.cn/program/bizasia/20111213/109683.shtml VIDEO2: Introduction of fiscal policy roles in China http://english.cntv.cn/program/newshour/20111212/114902.shtml VIDEO3: Chinese fiscal policy in the future http://english.cntv.cn/program/bizasia/20101213/106600.shtml

  35. Conclusion • Different periods, different fiscal policies • Main progress: 1.more equal 2.more flexible 3.more normative • In a word, all the efforts are made for the interests of the public.

  36. Thank you very muchfor your attention!