Social Sciences in China (Chinese Edition)

No. 2, 2023

 

Proactive Fiscal Policy: The New Logic of China’s Practice

(Abstract)

 

Xing Li and Chen Long

 

China’s proactive fiscal policy, which implements the people-centered development philosophy, is different from traditional Western macro-fiscal policy logic and has distinctive Chinese characteristics. It is a major macroeconomic governance policy innovation in the course of the Chinese path to modernization. Although the viewpoints of the “Keynesian tradition” and “non-Keynesian tradition” in Western theory are quite different, their basic policy objectives and methodological foundations are broadly the same, constituting the traditional Western macro-fiscal policy logic. Currently, this logic faces more and more real-world dilemmas. While restoring the balance between supply and demand and potential growth levels, China’s proactive fiscal policy pays more attention to improving the potential future growth rate, thus realizing the transformation from traditional Western logic to new logic. It should be emphasized that, under the new logic, the formation of a new paradigm of fiscal policy requires a new understanding of the basic categories of the nature and reasonable size of fiscal deficits; the role of government debt and risk evaluation standards; the space and role of reductions in taxes and fees; the methods and focus of demand management; the costs of policies and their efficiency, etc.