East Asian Institute, National University of Singapore

Over the past decade, China has unveiled an ambitious social and economic agenda for the New Era until 2050.  China aims to become a “great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious, and beautiful by the middle of the century.” In getting there, China seeks more productivity driven growth that is more equally distributed, and one that relies less on foreign demand and technology.  China also aims to build an “ecological civilization” spearheaded by the net zero carbon by the 2060 pledge of President Xi Jinping.
 
The implications for China’s fiscal policy are huge.  Since the major fiscal reforms in 1994, which led to a recovery in the tax to GDP ratio and the central government’s share in it, China’s fiscal system has not undergone any fundamental changes.  At the same time, the structure of the economy, the nature of fiscal policy, the structure of spending, and the level of government at which spending takes place have changed radically since the mid-1990s.  Much more change lies ahead: China’s increasingly middle-class and aging society will rapidly increase public spending on health care and pensions.  The recent economic challenges triggered by COVID have also revealed the need to expand coverage of China’s social safety net, in particular for migrant workers. 
 
The goal of achieving a more just income distribution will require more investment in public services especially in rural areas.  It will also require a fundamental shift in the tax system, which is regressive because of the large share in revenues derived from Value Added Tax and the limited role played by the personal income tax.  Meanwhile, the large and growing mismatch between local government expenditure responsibilities and revenue capacity is increasingly undermining the effectiveness of fiscal policies, and will require a major revamp of intergovernmental fiscal relations to resolve. Furthermore, the overreliance on land revenues for infrastructure finance has become a critical issue with the dimming prospects for property development, and sustainable alternative sources of finance will need to be developed.
 
Against this background, we have chosen “China: Fiscal Policies for the New Era” as the topic for the East Asian Institute’s annual conference.  The conference will comprise of keynote speeches, academic sessions and policy panels, and is open to academics, PhD students and policy makers.