| Sumario: | China's current fiscal situation is marked by a huge gap between the available resources and the inevitable fiscal needs of the Chinese government. Beijing has been unable to significantly improve its fiscal position by adopting new fiscal systems because of the strong opposition of local governments. As a result, the Chinese government heavily relies on debt to sustain the fiscal function. Consequently, the fiscal solvency of the Chinese government is gravely threatened in the future. Specifically, on the one hand, it is imperative for Beijing to continue its proactive fiscal policy to maintain necessary and vital rapid economic growth; on the other hand, the Chinese fiscal expansion needs to be reduced as soon as possible because of the concerns of mounting deficit and debts. This poses a serious dilemma for China. In addition, China's current tax system does not moderate, but exacerbates, regional inequalities. China needs to install an adequately funded system of equalization grants in order to balance regional inequalities. Moreover, China must change the basis of rural taxation in order to prevent deteriorating social instability in its rural areas.
|
|---|