Fiscal system reform

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摩根士丹利:中国思考-可能改变一切的三方组合-如果被允许的话
摩根· 2025-07-03 02:41
Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - China requires not just new stimulus but a new growth algorithm, with a focus on structural rebalancing of its growth model [2][4] - The upcoming 15th Five-Year Plan (2026–2030) will be a critical test for the implementation of proposed reforms [13] Summary by Sections Fiscal System Reform - The current tax regime heavily relies on indirect taxes like VAT, which incentivizes overproduction and overcapacity [5] - Rebalancing fiscal transfers and reducing project-based subsidies are essential to support public goods and household income [6] Realigning Macro Targets - China's macroeconomic targets have historically focused on production, emphasizing GDP growth and industrial output while neglecting household consumption and social welfare [9] - A shift from a supply-centric approach to a demand-focused policy is necessary for economic rebalancing [9] Improving Statistics Mechanism and Revamping Official Performance Evaluations - The National Bureau of Statistics (NBS) primarily uses a production approach for GDP accounting, which complicates the alignment of local officials' behavior with consumption metrics [10][11] - Redefining performance evaluations to prioritize household consumption and environmental quality is crucial for meaningful change [11] Institutional Challenges - Despite encouraging reform signals, there is significant institutional inertia that may hinder the implementation of new policies [12] - The 15th Five-Year Plan could institutionalize structural reforms, but it requires political will and bureaucratic alignment to succeed [13][14]