China s Recent Experiences for Fiscal Policy Under Demographic Changes and Uncertainties
1. Since the latest world financial crisis, Chinese government has been implementing expansionary active fiscal policies in response to declining economy along with increased tensions and uncertainties.
Chart 1: China GDP (1/10 bn) and GDP Growth Rate after the year of 2000 图 1 2000 GDP 800000.00 16.0% 14.2% 700000.00 12.7% 14.0% 600000.00 11.3% 12.0% 500000.00 9.1% 10.0% 10.1% 9.6% 9.2% 10.4% 9.3% 10.0% 8.4% 8.3% 400000.00 7.7% 7.7% 7.4% 6.9% 6.7% 8.0% 300000.00 6.0% 200000.00 4.0% 100000.00 2.0% 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0.0% 计
Figure 1: Deficit (1/10 bn) and Rate of Deficit of China after the Year of 2012 Deficit (bn) Deficit Ratio (%)
Chart 2 : China s Deficit (1/10 bn) and Rate of Deficit after the Year of 2012
2.In the process to upgrade economy and to guide the New Normal, Chinese society also experienced aging of population, burdening the government with larger fiscal expenditure on pensions and medical care, and driving China for innovation.
Figure 2: The Population and Proportion of people over the age of 65 during 2000-2016 (100 million) (%)
Chart 3: The Population and Proportion of people over the age of 65 during 2000-2016
Chart 4: The trends for aging Chinese population over the age of 65 during 1950-2100 ppt)
Fiscal Subsidy on Pension Fund Figure 3: The employee s basic pension fund of China during 2003-2015
Chart 5: The proportion for China s fiscal subsidies over the employee s basic pension fund during 2003-2015
Figure 4: Chinese residents social pension fund during 2011-2015 年份 2011 年 2012 年 2013 年 2014 年 2015 年 财政补贴收入及利 息收入 ( 亿元 ) 857 1356 1526 1661 2171 居民社会养老保险 基金 ( 亿元 ) 1342 1996 2173 2343 2879 财政补贴收入占比 63.86% 67.94% 70.23% 70.89% 75.41%
Chart 6: The Proportion for China s fiscal subsidies over the resident s social pension fund during 2011-2015
Consequently, China has relieved its population control policybyselectively(oneoftheparentsisanonlychild) and then universally legalizing second child birth.
3.Essentials of China s Fiscal Policy under Supply-Side Structure Reform Assist monetary policies to expand gross demands, and help overall deleveraging through intensified fiscal leveraging. Carry out budget management reforms (increase transparency, construct budget system with four primary budgets, optimize transfer payments, improve supervision, etc.) and tax reform; emphasize key expenditures also give consideration to supplementary disbursements; improve funds performance.
Promote innovative public-private partnerships, extend such model over public works, infrastructure projects, industrial towns, and continuous regional development; so that can Improve performance, speed and effects of public projects constructions, so as to render the outcome of cooperation between governments, corporations and professional organizations to surpass the performance sum of each. In fact, a number of PPP projects are pension industry or healthcare-related programs.
Assist actively restructuring affairs and reform of energy prices, state-owned enterprises, and social security, judicial and household registration systems;etc.
Assist localization of migrants by equalizing public services for urbanization and integration of towns and countryside. Support the growth of primary and new sectors with industrial funds and interest subsidiaries; secure the goal of reaching at an overall well-off society and skipping the middle-income trap out of uncertainties.
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