The issues of the Sino-US trade friction, the revaluation of the Chinese currency and China's energy security have all caught the attention globally in the recent period. It is against this backdrop that China's Finance Minister Jin Renqing elaborated in an interview the "prudent fiscal policy", the high-profile policy made by the central government for the economic situation and the macro-control.

Jin stressed that as an important lever for the macro-control endeavor, the fiscal policy which may be expansive, tight or prudent plays a positive role as long as it helps the macro-economic development and is used properly.

The key, or the soul, of the macro-control is to make right decisions at right time, he said.

He defined the prudent fiscal policy as a package of deficit control, restructuring, further reform, revenue increase and expenditure cut.

He explained that the central fiscal deficit should be reasonably reduced without any sharp shrinking, aiming to flag the direction of the macro-control. It is designed to curb any signs of inflation on the one hand and the reoccurrence of deflation on the other. In this way, the prudent fiscal policy reflects the principle of reinforcing and improving the macro-control, as well as consolidating and furthering the macro-control.

He expected the fiscal budget deficit for 2005 to stand at 300 billion yuan, 19.8 billion yuan less than in 2004.

He thinks it is necessary to readjust the structure of both the fiscal expenditure and the investment in projects funded by treasury bonds. He promised more favored treatment toward weak sectors in the economic and social development, such as agriculture, employment and social security, environment and ecological construction, public health care, education and science and technology.

The commitments on the further reform, he observed, indicates a transformation of the economic growth driven by T-bond investment. More resources will go to support the systematic reform and innovation on mechanism to build a long-term mechanism which facilitates the inward-driven healthy economic growth. This is supposed to be made possible by the trade-off between central-fiscal-revenue-funded investment being kept at a "certain scale" and the T-bonds-invested-projects being slimmed and adjusted.

Jin also called on further improvement on the tax rebate system for exports. The taxation based on production will be switched to the taxation based on the consumption which is being experimented in the northeast. Studies on a uniformed tax policy on domestic and foreign companies should be done to have a level playfield in place.

The agricultural tax will be annulled around China as of 2006 and subsidies will be arranged through the central fiscal budget.

Tax collection strictly in compliance with the law is expected to secure the steady rise of fiscal revenue on the condition that the existing overall tax burdens are maintained or even cut a little.

In the mean time, the expenditure will be put under strict management to spend the funds more efficiently. And that, Jin said, is what the macro-control and an energy-saving society need.

By People's Daily Online