Core Insights - The "15th Five-Year Plan" emphasizes the role of proactive fiscal policy and enhancing fiscal sustainability as a response to complex domestic and international situations [1][2][3] Fiscal Policy - The plan indicates a continuation of expansionary fiscal policies, highlighting the need for fiscal measures to support economic development during the transition period [3][4] - The shift in focus to proactive fiscal policy reflects the urgent need for counter-cyclical adjustments to stabilize the economy and foster new growth drivers [2][3] Fiscal Sustainability - The emphasis on enhancing fiscal sustainability is crucial for ensuring fiscal security, fulfilling government functions, and achieving national development goals [5][6] - Current fiscal challenges include insufficient effective demand and prominent fiscal revenue-expenditure contradictions, necessitating a focus on sustainable fiscal practices [5][6] Government Debt Management - The total government debt is projected to reach 92.6 trillion yuan by the end of 2024, with a debt-to-GDP ratio of 68.7%, indicating manageable risk levels [5] - Future strategies to enhance fiscal sustainability include stabilizing the macro tax burden and optimizing tax policies to ensure long-term fiscal health [5][6] Tax Policy Adjustments - The plan suggests maintaining a reasonable macro tax burden, with current levels around 13% of GDP, potentially rising to approximately 15% [6] - Actions taken include the removal of certain tax exemptions and the expansion of tax bases, indicating a shift towards a more robust tax system [6]

Core Viewpoint - The current fiscal pressure in China is closely related to previous constructive debt rather than an increase in "welfare" from enterprises and households. Improving expenditure efficiency and optimizing expenditure structure are crucial for sustainable fiscal health, followed by revenue enhancement [1][5]. Summary by Sections Fiscal Revenue and GDP Ratio - Experts have suggested increasing the fiscal revenue-to-GDP ratio, with former Finance Minister Lou Jiwei advocating for this in his 2025 paper on fiscal policy reform [2]. - The fiscal revenue ratio reflects the government's ability to concentrate financial resources from the economy and its macro-control capacity. China's fiscal revenue includes four main accounts: general public budget, government fund budget, state-owned capital operating budget, and social insurance fund budget [3]. Current Fiscal Situation - The macro tax burden in China is currently at 28.2%, with a reasonable target considered to be around 30%. This indicates room for increasing the fiscal revenue ratio [4]. - The decline in fiscal revenue ratio in recent years is attributed to large-scale tax cuts and fee reductions initiated since 2019, with the ratio dropping from 28-29% in 2018 to 26% in 2023 [9]. Historical Context - Since the tax-sharing system reform in 1994, the fiscal revenue ratio has seen fluctuations, peaking during the "Twelfth Five-Year Plan" at 21.4% and declining to an average of 16.7% during the "Fourteenth Five-Year Plan" [7]. - The fiscal revenue ratio has decreased from 35.7% in 2013 to 30.4% in 2022, a decline of 5.3 percentage points, while the average for 11 middle-income countries increased slightly during the same period [10]. Taxation and Revenue Enhancement - Lou Jiwei has indicated that there is potential to raise the value-added tax (VAT) rate, which currently stands at a low 13%, compared to an average of 20% in other countries [14]. - Other revenue sources, such as social security fund income and land transfer income, have limited growth potential, while the personal income tax has structural weaknesses that make reform challenging [14]. Alternative Revenue Strategies - Experts suggest enhancing the state-owned capital operating budget and reducing unfair tax incentives as alternative methods to increase fiscal revenue without raising tax rates [20][21]. - The state-owned capital operating budget, which is currently underutilized, could significantly contribute to fiscal revenue, especially as land finance declines [21]. Efficiency in Fiscal Spending - Improving the efficiency of government spending and investment is essential for maintaining economic vitality and ensuring public service provision [12][23]. - The focus should be on balancing revenue enhancement with expenditure efficiency, rather than solely increasing the fiscal revenue ratio [18].

Group 1: Fiscal Revenue and GDP Ratio - Recent discussions among experts suggest increasing the fiscal revenue as a percentage of GDP, with former Finance Minister Lou Jiwei advocating for this in his 2025 paper [2][3] - The fiscal revenue ratio reflects the government's ability to concentrate financial resources from the economy and its macro-control capacity [3] - Since the 1994 tax-sharing reform, the fiscal revenue ratio has shown a trend of initially increasing and then decreasing, with the ratio dropping from 21.4% during the 12th Five-Year Plan to an average of 16.7% in the first four years of the 14th Five-Year Plan [5][6] Group 2: Tax Burden and Comparison with Other Economies - In 2024, the macro tax burden is reported at 28.2%, indicating room for improvement compared to the generally accepted 30% threshold [3] - China's macro tax burden is lower than 20% when measured by tax revenue as a percentage of GDP, which is below levels seen in OECD countries [4] - The decline in fiscal revenue ratio is linked to large-scale tax cuts implemented since 2019, which reduced the ratio from 28%-29% in 2018 to 26% in 2023 [6][7] Group 3: Need for Fiscal Reform - The 2023 Central Economic Work Conference highlighted the need for a new round of fiscal reform due to the significant decline in fiscal revenue ratios [7][8] - The fiscal revenue ratio for 2023 is noted to be 26%, which is lower than the 30% average for similar income countries and significantly below the 35% average for developed countries [8] - Experts emphasize the importance of improving the efficiency of fiscal spending and optimizing the expenditure structure to ensure fiscal sustainability [4][9] Group 4: Alternative Revenue Sources - Experts suggest that besides increasing tax revenue, other methods to enhance fiscal revenue include expanding the state capital operating budget and reducing unfair tax incentives [14][15] - The state capital operating budget is seen as having significant potential for growth, especially as land finance diminishes [15][17] - The current state capital operating budget revenue is reported at 6783 billion yuan for 2024, with substantial profits from state-owned enterprises indicating room for increased contributions [15][16]

Group 1 - The core viewpoint of the article emphasizes the need for a transformation and optimization of China's active fiscal policy after 17 years of implementation, highlighting its effectiveness in promoting economic stability, quality growth, and social welfare, while also addressing existing shortcomings and future directions for fiscal policy [2][3][4][5][6]. Group 2 - Active fiscal policy has effectively responded to external shocks, maintaining economic stability with an average growth rate of 9.9% from 2008 to 2010, compared to the global average of 1.7%, and a growth rate of 4.7% from 2020 to 2023, significantly higher than the global average of 2.3% [3][4]. - The policy has shifted focus towards technology innovation and green development, enhancing the potential for long-term high-quality economic growth [4]. - Social welfare has improved, with rural minimum living standards increasing by 73.3% and urban low-income standards by 45.4% from 2017 to 2023, while the share of public budget for social welfare rose from 35.1% in 2013 to 40.7% in 2023 [5]. Group 3 - Current fiscal policy faces challenges, including an overemphasis on short-term fiscal balance, which may hinder long-term economic stability and increase hidden government debt risks [8][9]. - The effectiveness of large-scale tax reductions is diminishing, with the macro tax burden decreasing to 16.3% of GDP in 2024, down 5.1 percentage points from 2013, which may threaten fiscal sustainability [12]. - The structure of fiscal spending needs optimization, as there is a tendency to focus more on supply-side and enterprise support rather than on demand and household needs [13][24]. Group 4 - Future fiscal policy should transition from a balanced approach to a functional one, allowing for a potential breach of the 3% deficit limit to better support economic stability and growth [16][17]. - Systematic responses to long-term challenges such as aging population and digital economy risks are necessary, including enhancing social security systems and adapting tax policies to new economic realities [18][20]. - The focus should shift from income policies to expenditure policies, emphasizing direct government spending to stimulate demand and support households [22][25]. Group 5 - The article suggests that the term "active fiscal policy" should be reconsidered to "expansionary fiscal policy" to better convey the intended signals to the market and stabilize expectations [26][27].

Group 1: Implementation Effects of Active Fiscal Policy - Active fiscal policy has effectively responded to external shocks, maintaining an average economic growth rate of 9.9% from 2008 to 2010, compared to the global average of 1.7% during the same period[7] - From 2020 to 2023, China's average economic growth rate was 4.7%, significantly higher than the global average of 2.3%[7] - Social welfare spending has increased, with rural minimum living standards rising by 73.3% and urban low-income support increasing by 45.4% from 2017 to 2023[9] Group 2: Challenges of Active Fiscal Policy - The emphasis on current fiscal balance may impact long-term fiscal risks, with a consistent deficit rate below 3% reflecting a balanced fiscal approach[11] - The effectiveness of large-scale tax cuts is diminishing, with the macro tax burden needing stabilization as general public budget revenue as a percentage of GDP fell to 16.3% in 2024, down 5.1 percentage points since 2013[17] - The fiscal expenditure structure requires optimization, with a tendency to focus more on supply-side measures rather than demand-side support, leading to potential demand deficiencies[19] Group 3: Directions for Fiscal Policy Transformation - Transition from a balanced fiscal approach to a functional fiscal policy, potentially breaking the 3% deficit constraint to better support economic stability[21] - Fiscal policy objectives should balance short-term economic stability with long-term systemic challenges, addressing issues like population aging and digital economy risks[23] - Shift focus from income policies to expenditure policies, enhancing the efficiency and effectiveness of fiscal measures[28]