How China’s Fiscal Policy Contributes to Its Investment

This paper discusses how the two indicators used in official statistics of China, namely total investment in fixed assets and the gross fixed capital

formation, reflect changes in fixed asset investment and their relationship, analyzes the growth of fixed asset investment and its contribution to changes of economic growth rate since the reform and opening-up, and explains how fiscal policy impacts the growth of fixed asset investment and analyzes in detail the impacts of the two rounds of contractionary fiscal policy, two rounds of expansionary fiscal policy and one round of neutral fiscal policy on China’s fixed asset investment growth since reform and opening-up using full and accurate data. Practice shows that the impact of fiscal policy on China’s fixed asset investment is direct and obvious, yet sometimes too drastic. In the future, fiscal policy should be used in alignment with other economic policies with appropriate intensity and timing so that it will help stabilize the growth of fixed asset investment.

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