What impact does the deficit have on China's economy?

The Influence of Fiscal Deficit on China's Economy

China's fiscal deficit started from 1979, when the deficit was very small. Since the proactive fiscal policy was implemented in 1998, the fiscal deficit has expanded rapidly, from about 60 billion yuan per year in 1994- 1997 to 1998146 billion yuan and 1803. The proportion of fiscal deficit in GDP is close to the international warning line of 3%.

According to the general logic, financial revenue and expenditure is a comprehensive indicator of economic development, and economic improvement should promote the improvement of financial situation. However, from 65438 to 0997, after the reform, China's fiscal deficit has been nearly 20 years in a row, and when it can be eliminated is still unknown. On the one hand, this is caused by the influence of old problems and some new mistakes, on the other hand, it is a factor that has to be done in the process of system reform, economic adjustment and development. Therefore, we cannot simply link the fiscal deficit with the poor economic situation.

After 1980, it is undeniable that the government has taken the initiative to deficit in the budget every year, which directly or indirectly leads to the softening of budget constraints, excessive government functions, low economic benefits, inflation and stable and coordinated economic development. But generally speaking, the fiscal deficit has a great positive effect on maintaining the sustained and stable growth of the national economy. Otherwise, a series of specific reform measures and economic adjustment, stability and development measures will be difficult to introduce. For example, since 1998, the proactive fiscal policy implemented by the government has expanded the scale of expenditure by deficit. First of all, most of China's deficit expenditure is used to provide infrastructure investment for private sector production and operation activities, which is different from the general situation in most countries. Secondly, China's current economic operation is at a low point. The cyclical adjustment caused by economic recession will not crowd out private investment, but will help stimulate private investment, start domestic demand and make the economy recover as soon as possible.