Download ESCAP High-level Policy Dialogue

 ESCAP High-level Policy Dialogue
Ministry of Finance of the Republic of Indonesia International Economic Summit 2013
Eleventh Bank Indonesia Annual International Seminar
“Macroeconomic Policies for Sustainable Growth with Equity in East Asia”
15-17 May 2013, Yogyakarta, Indonesia
Jointly organized by
UN ESCAP, Ministry of Finance of the Republic of Indonesia and Bank Indonesia
Session 3 – Fiscal Policy for Development and its Budgetary Implications
Presentation
The Experience of China
by
Yide Qiao
Vice Chairman & Secretary General
Shanghai Development Research Foundation
May 2013
The views expressed in the paper are those of the author(s) and should not necessarily be considered as reflecting the
views or carrying the endorsement of the United Nations. This paper has been issued without formal editing.
Session 3 - Fiscal Policy for Development and its
Budgetary
Implications
The Experience of China
Yide Qiao
Vice Chairman & Secretary General
Shanghai Development Research Foundation
Yogyakarta, Indonesia
May 15, 2013
Ⅰ、The First Stimulus Package in
Global Financial Crisis
 Contents:
 4 trillion yuan in 2008-2010, 1.2 trillion yuan from
the central government, while the rest funded by
provincial and local government through banking
borrowing.
 Spending in 10 major aspects

a breakdown of spending
Ⅰ、The First Stimulus Package in
Global Financial Crisis
 Different from the proactive fiscal policy carried out
in Asia Financial Crisis which long term treasury
bonds were issued to raise funding for major
projects infrastructure.
 Contribution
 Stop declining of GDP growth to have Chinese
economy back to track.
Ⅰ、The First Stimulus Package in
Global Financial Crisis
 Side effects
 Inflation pressure built up
 Economic structural adjustments delayed
• Consumption continued to decline
• Investment ratio higher
• SOE more dominant
 Debts of local governments piled up
Ⅱ 、The Second Stimulus Package in
Global Financial Crisis
 Contents:
 1 trillion yuan stimulus package announced in
September of 2012
 NDRC approved 60 major projects in infrastructure
 Reason: economic slowdown in several quarters.
Ⅱ 、The Second Stimulus Package in
Global Financial Crisis
 Results:
 Credit growth went up in the first quarter of
2013(12%)
 GDP growth rate went up to 7.9% in the forth
quarter of 2012 but down to 7.7%, slower than
market expectation.
 HSBC PMI declined from 51.6 in March to 50.4 in
April
 Illustration:
 Marginal utility of fiscal stimulus has been
decreased
Ⅲ 、What Should Be Done Now?
 It has to be realized that the time of double digit
growth is gone while annual growth rate of 6%8% will become a new norm. Don’t expect that
the Chinese government will initiate another
stimulus package.
 An active fiscal policy still will play an important
role in keeping a reasonable growth rate and in
improving live hood. More government spending
should be shifted to raise people’s living standard
and human capital. e.g. 4% of GDP used in
education.
Ⅲ 、What Should Be Done Now?
 A reform on taxation system should be carried out.
 More balanced division of obligation between the
central and local government.
 The experience of business tax changed to value
added tax should be expanded to a whole nation
 A new tax on resources from tax on specific duties
to tax ad valorem and pollution should be
introduced.
Conclusions：
 Generally, Chinese fiscal policy in Global Financial
Crisis has been successful although it bring in some
side effects.
 The focus of the fiscal policy has started to shift to
make structural adjustment and improve people’s
living standard, which will be a great challenge to
Chinese government.