The just closed Central Economic Working Conference underlined the need to implement a prudent fiscal and monetary policy next year. This is an important policy decision made by the Party Central Committee and the State Council in light of the new change in the current economic situation and the new macro-control requirement. In response to this, Finance Minister Jin Renqing wrote an article for People's Daily (Overseas Edition), elaborating on implementation of this prudent fiscal policy.
In his article titled "Carrying out a prudent fiscal policy to promote steady and rapid economic development", Jin Renqing pointed out that choosing an opportune time to institute an appropriate fiscal policy is the soul and linchpin of financial macro-control. The decision made by the central authorities to implement a prudent fiscal policy next year conforms to the development and change of China's economic situation at the present stage and to the objective need of macro-control, it is another scientific opportune choice and very wise and correct, demonstrating that the central authorities' art of controlling the overall economic situation is approaching maturity day by day.
Implementation of a prudent fiscal policy (also a neutral financial policy in economics term), is subordinated mainly to and serves the general situation of reform and development, is subordinated to and serves the central authorities' overall macro-control situation, from a macroscopic perspective, it is necessary to prevent both the continued expansion of the symptom of the trend of inflation and the re-emergence of the trend of deflation; it is necessary both to firmly control the swelling of investment demand and strive to expand consumption demands; it is necessary to impose a tight control on industries with overheated investment and to provide special support to weak links in economic and social development. The core of policy is an appropriate degree of tightness, an emphasis on coordination and a long-term point of view. Specifically, it is necessary to emphasize grasping the following words: "Controlling deficit, adjusting structure, promoting reform, increasing revenue and reducing expenditure".
Controlling deficit means appropriately reducing financial deficits and appropriately cutting down the scale of the issuance of national bonds for long-term construction, Near-term central financial deficit scale is kept at around 300 billion yuan. Meanwhile, along with the steady enlargement of GDP (gross domestic product), the proportion of financial deficit to GDP will continually decline, the figure is expected to drop to about 2 percent next year.
Adjusting structure means the need to further stress adjusting the structure of financial expenditure and the structure of national bond capital supply in compliance with the requirement of the scientific development concept and public finance. In the allocation of funds, it is necessary to treat different cases in different ways, that is, while some sectors are maintained and promoted, some other sectors have to be reduced and controlled according to circumstances.
Promoting reform means changing the method of economic growth propelled mainly by national bond project investment, In line with the principle of basing ourselves on the present circumstance and having a long-term point of view, and on the basis of continuing to earmark some national bond capital for project investment, integrating budgeted investment for capital construction and ensuring a specified scale of central financial investment, we should appropriately adjust and reduce the scale of national bond project investment, divert part of financial resources to be used in the gigantic endeavor to advance structural and systemic reform and innovation, create a relatively relaxed financial and taxation environment for the market mainstay and economic development and establish a long-acting mechanism conducive to automatic economic growth. The contents of promoting reform can be summed up as two categories:
Firstly, in terms of finance per se, on the basis of maintaining sustained, stable and relatively rapid growth of financial revenue, we should energetically push ahead reform of the structural tax system featuring both increase and decrease.
Secondly, we should continue to unswervingly and vigorously support and press ahead with the four-aspect reform of education, social security, medical and health service and income distribution, so as to further encourage and expand consumption.
Increasing revenue and reducing expenditure means that on the basis of not increasing or slightly reducing general tax burdens, we levy taxes strictly according to law, ensure a steady growth of financial revenue, at the same time we strictly control the growth of expenditure, make painstaking efforts to earnestly improve the efficiency of the utilization of financial funds. To this end, we must, first of all, strengthen the collection and management of tax income according to law, plug all kinds of loopholes, ensuring that taxes receivable must be collected. Secondly, we should strictly control general expenditure, guarantee the need of expenditure in key areas, various financial expenditures must be based on careful calculations. Thirdly, on the basis of continuing to deepen reform of the budgetary management system, we should actively explore ways for the establishment of a system for evaluation of achievement and efficiency made in the use of financial funds, we should try to replace the incremental need of a certain amount of financial funds by improving the utilization efficiency of financial funds. And fourth, we should scientifically use the excess income earned in implementation of the budget, which generally cannot be used as rigid expenditure and investment allocation.
By People's Daily Online