China’s newly released Government Work Report has made clear that governments at all levels must tighten their belts to lead a prudent fiscal year amid economic pressure caused by the coronavirus pandemic.
Although China had prepared for a prudent fiscal situation in previous years, now the critical aim is to achieve sustainable fiscal allocation and government operations while continuing to serve overall economic and social development, which will require a package of rational choices.
For starters, Chinese governments need contributive financial management with a clear perspective of the overall situation, as well as innovation and responsible consciousness. The imbalance of financial revenue and expenditure is a reflection of the various contradictions in the operations of the national economy. No matter how difficult, allocation needs to be focused on serving overall development. China needs to conquer the fallout of COVID-19, lead the new normal and achieve high-quality development despite challenges like the China-US trade war.
Secondly, a prudent fiscal arrangement needs practical financial management to increase incomes and reduce expenditure through reasonable management approaches. It is important to simultaneously promote a reasonable cultivation of financial resources in terms of expanding incomes and prudently planning expenditure with optimized structures.
Additionally, smart financial management with a reasonable implementation of policy instruments is also important amid a prudent fiscal year, in which fiscal deficits and the issuance of public debt need to be promoted particularly. These two measures used to be regarded as insufficient financial management but are now neutral policy instruments. The important question is how China can reasonably use the tools to cope with the imbalance of incomes and expenses.
A prudent fiscal policy requires innovation in financial management, strengthening institutional reform to gain multiplier effects during the implementation of the policy so as to achieve goals with lower investments.
Finally, the prudent fiscal arrangement needs to enhance coordinated financial management to roll out fiscal policies in line with monetary, industrial, regional and income allocation policies, speeding up overall collaboration to support high-quality development.
The report noted that governments have to overcome formalism and bureaucratism to cultivate new energy. On the basis of a prudent fiscal arrangement, it needs to root out formalism and bureaucratism, promote institutional reform and innovation, and boost personnel enthusiasm in administrative systems through deepened reforms. The report also stated that local administrative department employees should be encouraged to do practical work, take on responsibilities and make contributions, so as to improve the overall performance of the entire government management system.
The article was compiled based on an analysis written by Jia Kang, dean of the China Academy of New Supply-side Economics. [email protected]