FISCAL POLICY OF CONTEMPORARY CHINA: GLOBAL AND LOCAL CHALLENGES
DOI:
https://doi.org/10.15407/economyukr.2025.01.055Keywords:
fiscal policy; geoeconomic fragmentation; demographic transition; Chinese economy; public finances.Abstract
The fiscal policy of contemporary China is aimed at supporting the shift from "high-rate economic growth" to "high-quality economic growth", which involves the formation of new productive forces. However, the intensifying geoeconomic fragmentation, the decoupling of the Chinese and US economies, the demographic transition and the growth of the debt burden are becoming challenges to the country's public finances resilience.
The features and measures of China’s current fiscal policy in the context of the aggravation of global economic confrontation are identified, the need for fiscal adjustment to overcome internal macroeconomic and fiscal imbalances is argued. The dynamics and structure of revenues and expenditures of budgets of various levels in the PRC over the past decade are analyzed, the factors of their change are identified; the factors affecting the current state of PRC public finances are systematized and their analytical assessment is carried out. It is shown that the challenges of technological decoupling and macroeconomic imbalances cause the revenue pressure on budgets of various levels.
Demographic challenges caused by the increase in Chinese population’s longevity, the decline in the birth rate and population ageing put pressure on government expenditures and will cause its growth in the medium term. A significant challenge to China's public finances resilience is the increase in local debt, including due to the growth of implicit debts of local government financing vehicles. To stimulate "high-quality economic growth" in China, measures have been taken to impose a tax burden on business entities. The expansion of fiscal space is carried out by issuing ultra-long special treasury bonds, the proceeds of which will be used to finance projects, including in the field of high-tech production. It is concluded that China's fiscal policy is adapting to the new economic reality and ensuring the formation of a new type of economic growth. However, finding a balance between stimulating further growth of Chinese economy in the face of global and local challenges and maintaining fiscal resilience is becoming the main task of China's fiscal policy for the future.
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