China’s Fiscal Sustainable Development during the 14th FYP Period

Yan Kun (闫坤)* and Bao Shuguang (鲍曙光)

National Academy of Economic Strategy (NAES), Chinese Academy of Social Sciences (CASS), Beijing, China

Rural Development Institute (RDI), CASS

Abstract: In the context of national governance, public finance is embedded into China’seconomic, political, and social systems as a medium between various national subsystems.As such, fiscal sustainable development should be viewed from a systematic and integratedperspective. This paper created an analytical framework consisting of three aspects: fiscalresource adequacy, institutional soundness and effectiveness, and external shocks. Chinesegovernment has a relatively healthy balance sheet with adequate fiscal resources; however,it is faced with implicit debt risks and inefficiencies. China has initially established a basicfiscal framework with Chinese characteristics that are compatible with national governance,but problems remain in terms of fiscal responsibility, lawfulness, efficiency, fairness, andcompatibility. When dealing with external shocks, policymakers should establish a clearfiscal policy rationale and approach based on the implications of fiscal sustainability. Fiscalsustainable development requires the strengthening of government capabilities to assessmanagement and operation; thus, expanding available fiscal resources. Fiscal reformsshould be expedited in order to create a modern fiscal system. Furthermore, a fiscal policysystem should be developed and optimized according to the principles of fiscal sustainabilityin order to withstand external shocks.

Keywords: Fiscal sustainable development, national governance, high-qualitydevelopment, national balance sheet, debt risk

JEL Classification Codes: H11, H60

DOI: 10.19602/j.chinaeconomist.2022.01.04