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16.
In
recent
years the Chinese
leaders have
repeatedly stressed the greater use of macroeconomic policy
tools, instead of direct administrative measures, to regulate the overall economic activity in China, in a way is practised in the advanced western countries. This is to avoid impeding or disrupting the operation of market forces, which have the important function of directing
resource allocation to the various economic activities at
the sectoral and enterprise levels even in a period of
as
relatively high inflation.
17.
The
the western
fiscal and
macroeconomic policy tools in China, as in
market economies, can be categorised into
monetary measures. Past experience suggests
that there is little room for the government to manoeuvre
on the fiscal front. The fiscal expenditures in China are
structurally entrenched in many areas.
The price and
enterprise subsidies could be reduced substantially only in the longer term by continuing the various economic reforms,
which are expected to bear fruit only gradually. The
fiscal balance in the short term is determined largely by changes in fiscal revenue, mainly involving submissions provinces and municipalities and by the state-owned enterprises to the central coffers. The income tax system in China is still at its formative stage. It is
obviously not yet
usable as a means of regulating overall
The Chinese leaders have a further
from the
economic activity.
reason for their reluctance in using drastic administrative to curb inflation this time round, as the negative
measures
impact
on
economic
growth
could worsen the already
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