The Review Of The Proactive Financial Policy And Transformation Study

In 1998 drastic changes took place in the Chinese economy. The impact of the Asian financial crisis notably worsened. The deep-seated conflicts such as the irrational structure caused by years of unplanned development became increasingly clear due to drastic changes in the international economic environment and in the domestic market. As a result, the Chinese economy was faced with a severe trial: slower increase in consumption demand; feeble increase in investment demand; impact on foreign trade; continued drop in prices; irrational Economic structure; The Chinese government sized up the situation and made a comprehensive analysis of the factors restricting economic growth before it resolutely adjusted its macroeconomic policies by shifting from the original moderately tight fiscal policy to a proactive policy. The proactive financial policy of our country relies mainly on issuing national debt, and uses other financial means as well. It aims at expanding domestic demand. The proactive fiscal policy has brought about positive changes in the Chinese economy and even in the Asian economy and has attracted the attention of both Chinese and foreign people. In evaluating the achievements of the policy and in reviewing the experience and lessons gained through the policy, we not only want to acquire a correct understanding of this major event in the history of economic development in China but more importantly we want to be forward far-reaching historical significance for improving China's macroeconomic regulation system, accelerating transition of the economy structure and helping accomplish the goals for economic and social development. The proactive fiscal policy is a special policy for a special period of time. It is a successful trial made the Chinese government in countercyclical regulation in a market economy. It stands out as a significant landmark. Over the past six years, the positive financial policy has brought about positive changes in the Chinese economy. First, the direct effect of the proactive fiscal policy is that it effectively stimulates increase in investment, consumption and export and promotes the sustained, stable and rapid growth of the national economy. It is justifiable to say that should it not be for the proactive fiscal policy, the current favorable economic situation and environment would have been impossible and the course of China's reform and development would be affected. Second, the proactive fiscal policy improves the standard of living of the people. Stable economic growth and the adjustments in the income distribution policy designed to improve residents' lives notably improved the quality of the lives of urban and rural people. Third, the proactive fiscal policy made a point of combining short-term demand management with long-term supply management. While infrastructure development was strengthened, through the direct investment of treasury bonds and the regulation of the tax policy, high and new technology industries were developed, and traditional industries were upgraded. Finally, the implement of the proactive fiscal policy enriched our experience in macroeconomic regulation. This macroeconomic regulation discarded the traditional planning regulation and relied on the market mechanism. It used indirect regulation to fuel domestic demand. It also applied a package of policy tools such as the fiscal, monetary, tax, price and income distribution to carry out a comprehensive rectification of the national economy, focusing on demand and supply. The use of the notably different regulatory means marked the fundamental changes in the mode of macroeconomic regulation in China and also showed that an indirect macroeconomic regulatory system had been basically established under market economic conditions. Though the positive financial policy has brought about positive changes in the Chinese economy, there are many structural factors restricting sound economic operation: the increases of the investment and the consumption are not coordinated, the urban and rural structure is irrati...