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China’s Fiscal Expenditure Structure: Features and Ways for Further Optimization (No.65, 2019)

Jun 11,2019

By Li Chengjian, Research Team on “Modernization-Oriented Fiscal and Tax Reform”, Department of Macro-Economic Research, DRC

Research Report, No.65, 2019 (Total 5565) 2019-5-6

Abstract: Since the founding of New China, its fiscal expenditure structure has undergone major adjustments with the transformation of the development stages and economic institutional reform. In light of the overall scale, the proportion of fiscal expenditure in total GDP (gross domestic product) has witnessed some major changes from a stable operation to a fall-to-rise performance. With regard to expenditure structure, the proportion of local fiscal expenditure continued to increase, economic construction expenditure saw a dramatic decline, social, cultural and educational expenditure increased significantly and administrative expenditure decreased to some extent. From international perspective, the proportion of China’s fiscal expenditure in total GDP is not that high, whereas its growth speed stands out. In the future, it will face great pressure induced by pension and medical health-care expenditure. At present, while having a clear picture of the achievement of fiscal expenditure structure adjustment, efforts need to be made to further optimize fiscal expenditure structure. In addition, work needs to be done to stabilize the relationship between fiscal expenditure and GDP, improve the division of administrative authority and spending responsibilities between the central and local governments, further alleviate direct intervention on economic performance and formulate countermeasures to cope with the potential pressure caused by social security expenditure.

Key words: fiscal expenditure, structural features, tangible problems, policy options.