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August 6, 2009

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Home » Business » Economy

Call for proactive extension

CHINA'S proactive fiscal policy should be extended for at least three years, according to a senior researcher at the Chinese Academy of Social Sciences.

"Conservatively speaking, the time frame for China's proactive fiscal policy should cover at least three years, based on the country's current economic performance and the theory of economic development," Gao Peiyong, deputy director at the Institute of Finance and Trade under the CASS, said in an article published in People's Daily yesterday.

Chinese authorities adopted a proactive fiscal policy and a moderately loose monetary policy in November to counter the effects of the global financial crisis.

The central government's fiscal revenue in the first five months decreased 6.7 percent from a year earlier to 2.7 trillion yuan (US$395.3 billion), after the government cut taxes and companies reported less profits.

Fiscal expenditure, on the other hand, amounted to 2.25 trillion yuan, up 488.7 billion yuan, or 27.8 percent, from a year ago, according to Xinhua news agency.

"The foundation of China's economic recovery is not yet solid," Gao said. "It is both necessary and urgent to keep the policy stable, even at the cost of fiscal imbalance."

He said it was inevitable that the country would have some difficulties in its fiscal balance sheet in the long term.

In Gao's article, he also called for more tax cuts, especially in value added tax, and urged the government to spend more on health care, education and pensions to improve the social safety net.

He said reform was necessary in China's individual income tax system to make sure the rich paid more taxes, while reducing the tax burden on the poor.


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