from 193s to 196s, developed market economy countries such as Britain and the United States usually adopted expansionary fiscal policies advocated by Keynesians when they encountered economic downturn, and directly expanded demand to stimulate economic recovery. At the end of 1997, due to the financial crisis in Southeast Asia, China experienced a weak market and a slowdown in economic activities. Since the beginning of 1998, there has been a vicious cycle of deflation caused by the continuous decline in the overall price level, insufficient domestic demand, unsalable products and reduced corporate profits. Since 1998, the Chinese government has gradually implemented anti-recession economic measures with expansionary fiscal policy (proactive fiscal policy) as the mainstay and moderately expansionary monetary policy, and applied Keynesian macroeconomics theory to China's economic practice. ?

1. Keynesian theory has played an active role in China's economic development in recent years?

from 1998 to 22, the Chinese government issued about 66 billion yuan of long-term construction bonds and arranged nearly 1, national debt projects, with a total investment of more than 2 trillion yuan. During these five years, the pulling effect of national debt investment accounted for more than 2% of GDP growth every year. Through the proactive fiscal policy, the government increased investment in transportation, telecommunications, energy and other facilities, China avoided short-term economic recession and achieved rapid economic growth. The fiscal policy is matched with a prudent monetary policy. The central bank lowered the deposit and loan interest rates eight times and increased the money supply. The advantage of this economic policy that the government directly creates demand is that it can quickly increase demand and quickly curb the downward trend of the economy. ?

China's economy began to recover from the second half of 1999, driven by the proactive fiscal policy to expand domestic demand. By the beginning of 2, the downward trend of China's economy had been effectively curbed, and the economy had undergone positive changes. In 2, it achieved 8% GDP growth and re-entered the expansion stage of the economic cycle. However, in 21, China's economic recovery was relatively weak, especially due to the negative impact of the world economic downturn, and the net export demand shrank, which was the same as that in 2 in the growth economic cycle. In 22, the government further implemented a proactive fiscal policy and appropriately strengthened the expansionary tendency of a prudent monetary policy. With the positive accumulation of effects of fiscal policy and the improvement of the world economic situation, although the inertia of deflation still exists, the investment in fixed assets and import and export trade are growing rapidly. In 22, China's GDP increased by nearly 8%, which was significantly higher than that in 21.

second, the sustainable development of China's economy can't completely depend on Keynes's theory of expanding demand?

Although the expansionary fiscal policy has stimulated economic growth, the total demand has increased both by directly increasing demand and by influencing people's expectations. However, because private investment and household consumption have not been driven up, the total demand is still sluggish and prices continue to fall. In 22, China's overall price level dropped significantly, with the national consumer price level dropping by .8% and the ex-factory price of industrial products dropping by 1.82%. Therefore, China's policy of expanding demand based on Keynesian theory has not really solved deflation, the most important macroeconomic problem in China at present. The main reason lies in:

1. The expansionary fiscal policy has its own limitations. Looking at China's situation, we can see from the experience that the government used expansionary fiscal policy to stimulate economic growth in mid-1998 that this method of government investment to stimulate economic growth is limited. Relying solely on this policy can stimulate economic recovery in the short term, but it is difficult to ensure efficient long-term stable growth. The first is the crowding-out effect. The so-called crowding-out effect refers to the reduction of private consumption or investment caused by the increase of government expenditure. In a full-employment economy, the increase of government expenditure will offset the reduction of private investment in the following ways: due to the increase of government expenditure, the purchase of products and services in the commodity market will intensify, and prices will rise. Under the condition that the nominal money supply remains unchanged, the actual money supply will decrease due to the price increase, thus reducing the amount of money that can be used for speculative purposes, resulting in a decline in bond prices and an increase in interest rates, which in turn will lead to a decrease in private investment. When investment is reduced, people's consumption is reduced. That is to say, the increase in government expenditure "squeezes out" private investment and consumption. Second, the efficiency of government investment in most competitive sectors is not as good as that of private investment, and the scale of government investment is too large and lasts too long, which will lead to the decline of investment efficiency in the whole society; The third is that long-term use of fiscal policy to support economic growth will inhibit the enthusiasm of private investment. Because the debt is always repaid, the main scope of financial investment is public infrastructure, and its profit level is relatively low, and the payback period is very long, which will be repaid with tax revenue; If other conditions remain unchanged, the increase in tax revenue will inevitably affect the enthusiasm of private investment. Therefore, in the short term, the positive effect of financial investment is greater than the negative effect, but if the expansionary fiscal policy is dragged on for too long, its negative effect will become larger and even exceed the positive effect. ?

2. The market system in which Keynesian theory is applied in China is not mature enough. Because Keynesianism was put forward against the market failure of developed market countries, it operated on the basis of relatively developed and perfect markets. However, China is in the process of marketization. There is neither a relatively developed and perfect market system nor a serious market failure, but the role of the market has not been effectively brought into play. Therefore, in the operation of China's economy, system and policy cannot be separated. Although our macro-policy has changed, from austerity to expansion, the system policy has not changed, and it continues to tighten, such as the concentration of finance, the strengthening of monopoly trends in some departments, and the strengthening of administrative control in some aspects, and so on. Institutional contraction restricts and offsets the effect of policy expansion. ?

3. The fiscal deficit risk brought by expansionary fiscal policy is greater. Since 1998, the direct cost of China's proactive fiscal policy is the huge and long-term deficit of the central fiscal budget. The national debt burden rate and the dependence of the central fiscal debt have risen rapidly, and the fiscal deficit accounted for 3% of GDP in 22, which gestates the potential risks of future fiscal development and fiscal balance. The fiscal deficit risk brought by proactive fiscal policy is self-evident. It can be seen that the debt dependence of China's current government budget is already very large, and it is impossible to increase the investment by fiscal deficit, and it is impossible for a country's economic growth to be based on infrastructure construction by government investment for a long time. ?

4. There are special circumstances in China's residents' consumption. Keynes believed that increasing residents' income can expand consumer demand. However, although the Chinese government has invested a lot of money to increase residents' income, the consumption demand has not expanded much. Because the income difference is too big, a few high-income people have bought everything they should, and there is no demand; Most low-income people have needs but are unable to pay. According to the figures released by the Bureau of Statistics, the savings of urban residents, who account for 29.1% of the total population, account for 8.1% of the total savings, while those of rural residents, who account for 7.9% of the total population, account for only 19.9% of the total savings. The actual consumption of rural consumers, who account for 7.9% of the country's total population, is only over one-third of the national consumption. Among the urban residents, there is also a great difference between the low-income group which accounts for 2% of the population and the high-income group which accounts for 2% of the population. As far as the annual household income is concerned, the latter is four times that of the former.

5. In terms of practical operation, this Keynesian demand management policy also has a series of restrictions, which greatly affects the policy effect. The first is the difficulty in judging the economic situation. When the economy deviates from the output level of full employment, it is necessary to judge whether this deviation is a long-term deviation or a temporary deviation. If it is a long-term deviation, we should adopt appropriate economic policies; If it is a temporary deviation, there is no need for policy adjustment, so that the economy can automatically return to its due level. At this time, if the policy of intervening in the economy is adopted, the rhythm that the economy could have reached the output level will be disrupted and the economy will fluctuate more. The second is the time lag in the process of policy implementation. That is to say, there is a process from the judgment of economic situation to the making of policy decisions, and then to the formal implementation, and finally effective. For example, to implement the tax reduction policy, it will take some time from the choice of tax types, the size of the range, the argumentation of decision-making bodies and the discussion and approval of the legislature. The policy that is likely to be adopted has not yet been adopted, and the economic situation has changed, which will bring difficulties to the implementation of the policy. The third is to measure the degree of implementation. For example, if the expansionary policy of increasing government purchases is implemented, it is necessary to calculate how much purchases will be increased. If the increase is too much, the action will be too fierce and the private expenditure will be "squeezed out" too much; It is useless to increase less. This accurate calculation depends on comprehensive information collection and correct judgment and calculation, which are not easy. Fourth, the uncertainty of macroeconomic policies, not only because the economic situation will be ever-changing, but also because the public has expectations of government policies and acts accordingly, which will affect the effectiveness of government policies. ?

therefore, the proactive fiscal policy is generally only used as an emergency policy. In the long run, it is not enough to promote economic development only by adopting Keynesian policies. At the same time, we must take all means to bring the potential of "supply side" into play, thus forming a virtuous circle in which expansion and demand increase promote each other and pushing the economy out of the vortex of deflation. In fact, the policy of encouraging and expanding supply has played a certain role in China's economic development. For example, since the 15th National Congress of the Communist Party of China, a series of policies to encourage "taking public ownership as the main body and developing various ownership economies together" have effectively stimulated the vitality of enterprises, promoted the effective investment and demand of society, and alleviated the side effects of expansionary fiscal policies to some extent. Such as Zhejiang, Jiangsu, southern Jiangsu and the Pearl River Delta, the GDP growth has exceeded double digits year after year, social investment has rebounded rapidly, foreign trade has been unprecedentedly active, and the employment situation is good, which has become the leader of the national economy. ?

3. Discussion on the application of tax reduction in China's active fiscal policy?

the tax reduction policy is an important aspect for market economy countries to implement expansionary fiscal policies in the period of economic weakness. However, the author believes that there is not much room for tax reduction in China. Because tax reduction is mainly to reduce personal income tax and corporate income tax. ?

as far as China is concerned, personal income tax is just a new tax. Of course, it is not impossible to implement tax cuts. The question is, how much stimulus will tax cuts have on the national economy? In my opinion, the implementation of personal income tax reduction will not have any stimulating effect for two main reasons: (1) Personal income tax has little impact on the national economy in terms of absolute scale or relative scale, unlike in western countries, where personal income tax accounts for about 5% of the total fiscal revenue, tax reduction will have a significant impact on national consumption. (2) From the perspective of China's personal income tax structure, it should be said that most people who pay personal income tax are people with middle income or above, and their marginal propensity to consume is lower than that of low-income people. In other words, the collection of personal income tax will not have a significant impact on the lives of people with middle income or above. Similarly, if tax reduction is implemented for this group of people, it will only increase their disposable income, thus increasing their savings, without significantly increasing their consumption. On the contrary, if the personal income tax is increased for this group of people and this part of the money is subsidized to low-income people, it will increase the consumption level of the national economy. ?

As usual, tax reduction for enterprises can reduce leakage and increase injection. However, the main source of fiscal revenue in China was state-owned enterprises. Due to the poor efficiency of state-owned enterprises, the fiscal revenue turned over has been greatly reduced, that is, there is not much tax to be reduced. Although some state-owned enterprises with good economic benefits still undertake the important task of paying state taxes, tax reduction will have a great impact on the state budget on the one hand and lack feasibility; On the other hand, the government has opened up other financing channels for these enterprises, such as the listing of state-owned enterprises, bank debt-to-equity swaps, and continued loan support. Judging from the amount of funds, these measures are much larger and more effective than tax cuts. Can the tax on non-state-owned enterprises also be reduced? Of course. But we should study the effect of tax cuts. After-tax profits of non-state-owned enterprises are basically privately owned. The result of tax cuts will increase the money in investors' personal wallets. However, like tax reduction for personal income tax, tax reduction will not have a substantial impact on investors' current consumption behavior. Its direct effect is to increase savings. Will it stimulate their investment behavior? Tax reduction will inevitably increase the profit rate of investment after tax, which will stimulate investment, but there are many factors that determine investment, because investment is made under uncertain conditions. Investors decide whether to invest or not, mainly by anticipating the future economic prospects, rather than looking at the immediate tax burden. No matter how light the current tax burden is, investors still have to estimate the expected profit rate of the investment project during its economic life. If the economic prospect is uncertain, they will not invest rashly. Similarly, tax reduction for enterprises cannot be regarded as an expedient measure, that is, a temporary measure to deal with deflation. If enterprises generally think so, it will have a more adverse impact on the investment of enterprises. ?

fourth, further improve the application of Keynesian theory in China's economic practice?

A close reading of the government work report at the National People's Congress in March 23 shows that the new government should still adhere to the policy of expanding domestic demand, continue to implement a proactive fiscal policy, and maintain the double pull of consumption demand and investment demand on economic growth, that is, issue another 14 billion yuan of long-term treasury bonds. Judging from the current situation of China's economy, it is feasible and necessary to continue to implement the expansionary fiscal policy in a certain period of time, but the relevant policies need to be improved and adjusted. ?

In fact, in 22, China's fiscal policy was gradually improving under the premise of adhering to the expansion orientation. It not only further strengthened the quality management of treasury bonds investment and optimized the fiscal expenditure structure, but also used special treasury bonds funds to support technological transformation of enterprises and supplement social security funds, adjusted the combination of policy means, continued to increase export tax rebates, implemented tax relief for high-tech industries, financial and insurance industries, fixed assets investment and real estate industries, and comprehensively expanded the pilot work of rural tax and fee reform, which played an important role in both total expansion and structural adjustment. In the next stage, to make Keynesian theory continue to play a more active role in China's economic development, we need to further grasp three aspects:?

first, improve the direction and method of using financial funds. Under the current conditions in China, the overall effect of fiscal expenditure is worthy of recognition, and what needs to be studied is the structural effect. That is to say, in the use of funds, it is necessary to change the practice of concentrating financial funds on infrastructure construction, diversify investment directions, and increase the proportion of investment in education, scientific research, and technological development. In terms of capital utilization methods, it is necessary to avoid the government's all-in-one approach, consider reducing the scale of direct investment by the government in public facilities, and try to adopt discount, equity participation, project financing and other methods.