To ensure a steady growth of the economy in the context of the global financial tsunami, the central government has chosen to resort to a proactive macroeconomic policy. Earlier, the world's fourth largest economy had adopted a prudent fiscal tool to prevent its sizzling economic growth from overheating and to contain plaguing inflation.
For a smooth and efficient implementation of the macroeconomic arrangement laid out by the central government, the financial ministry has also mapped out concrete directions for the country's enormous public expenditures in the days ahead.
A large portion of public budget will be used to step up construction of infrastructure projects closely related to people's livelihood, ranging from agriculture to education, medical care and ecological improvements.
At the same time, railway, road and airport construction, as the pivotal components of the country's transportation network construction, will be accelerated to offer solid support to the country's economy in the long run. Also, all-out efforts will be made to promote the upgrading of the country's industrial structure and economic development model from the previous extensive to an intensive one. The global financial crisis, originally induced by the US mortgage subprime crisis, continues to inflict negative impacts upon the world's economy and also to further deteriorate China's external economic environment.
To curb a possible further slide of the economy, the central government worked out a US$586 billion stimulus package to spur domestic demand early last month.
Farmers will be subsidized under such a colossal investment package. For example, the government will extend to farmers direct subsidies and adopt a bottom purchase price for their grains to offset the rising costs and increase their incomes. The central government will also go all out to step up the building of the socialist countryside, an aggressive plan to boost the development of rural areas, and push for a further reform of underdeveloped areas.
Also, it is determined to change the current unbalanced fiscal outlay structure and gradually increase spending on agriculture, farmers, and rural areas. To this end, the government is striving for a modern agricultural financial and taxation policy and a sound and steady financial framework to aid the construction of major rural infrastructure projects
How to improve the living conditions of urban low-income residents will also top government agenda. According to its macroeconomic layout, the government will raise pensions to urban retirees and increase allowances to the impoverished group. To coordinate and further push forward the country's efforts to improve people's living conditions, the minimum wage threshold is being planned to be raised among domestic enterprises.
A mechanism guaranteeing the normal income growth is also being explored. In the government's expenditure budget, underdeveloped western regions will gain more favors to narrow the galloping economic divide between different regions.
To pursue a sustained economy in the context of a gloomy world environment, the government has put on its top agenda the scientific and technological innovation and energy conservation. To increase the contribution of technological self-innovation to the economy and push for the upgrading of the country's industrial structure serve as a key to improving the competitiveness of Chinese products at the world's market.
For this purpose, the government will adopt a preferential tax policy for the innovative development of domestic enterprises and come to their aid to sharpen the edge over international counterparts. At the same time, a more flexible policy has been adopted to help struggling small- and medium-sized enterprises gain relaxed financing channels.
To ensure that the central government's proactive financial policy could bear expected effects, a scientific and reasonable financial system is badly needed to optimize public spending structures.
To consume the money of taxpayers in a more reasonable way, the government is scheduled to further deepen the reform of its administrative functions and has vowed to exert a rigid control on all of its public expenditures. A highly efficient government should be a services-oriented and conservative one and should try to reduce its administrative intervention into the market. This is the government's direction for our development.
With this aim in view, the government will try all means to increase input into public services and set up a sound and considerate mechanism to guarantee the improvement of ordinary people's livelihood. For a better fulfillment of such administrative functions, it should have a clear definition of public services and non-public services to mobilize possible resources to invest for the benefit of people.
It has long been an overwhelming government priority to find strategies for better management of the big economy and of its vast land and populations that lie at different development stages. To make the public budget accessible to all regions and groups throughout the country, the central government is actively pushing for reform of the financial spending system below the provincial level. The idea is to form a transparent financial distribution and spending system at different levels.
The author is the Minister of Finance. This is an edited version of his article which appeared in the latest issue of Qiushi magazine.
(China Daily December 10, 2008)
