China’s government: how to push the economic growth in 2012

Source: Katarina Krempova¸ PKF Malta¸ 27 February 2012


In the last decade China has continued to build its position as a global economic giant and the manufacturing monster of the east. But now everything indicates that even this fast growing economy may suffer a rapid economic slowdown as the global economic conditions continue to be unfavorable. After a period of high economic growth in the years 2003-2007¸ it is expected that China will only grow around 8% in 2012.[1]

Senior leaders of the Communist Party of China (CPC) see the option of maintaining a stable development of the economy in proactive fiscal policies and prudent monetary policies that should also be implemented in the year 2012¸ obviously in line with changes in the economy. In addition¸ the country’s fiscal deficit and government debt ratio should remain within the secure area.

This conclusion revealed itself during a meeting held on the 20th February 2012. Based on this meeting a draft report was issued and should be presented at next month’s China’s top legislature’s annual session.

China’s fiscal revenue increased by 24.8 per cent year-on-year and hit a record high of 10.37 trillion Yuan in 2011. It should be noted however¸ that fiscal revenue growth slowed down last year as a consequence of an economic turmoil¸ personal income tax reform¸ easing inflation and waning transaction volumes in the auto and property sectors.[2]

In total¸ while central government earned 5.13 trillion Yuan¸ the central fiscal expenditure reached 5.64 trillion Yuan in 2011. Moreover¸ local government collected 5.24 trillion Yuan and spent 9.24 trillion Yuan.

In 2012¸ the deficit level will remain equivalent to¸ if not slightly above¸ that of the previous year¸” announced Gao Peiyong¸ head of the Finance and Trade Economics Institute under the Chinese Academy of Social Sciences.

According to the Minister of Finance Xie Xuren¸ further expenditure is needed in areas such as key projects under construction and in the planning stage¸ people’s livelihoods¸ as well as smaller businesses. Furthermore¸ the capital flow in key projects should keep investment growing at a steady level. [3]

In short¸ in 2012 the China’s government is planning to:

  • Strengthen and improve macroeconomic regulations
  • Keep a balance between economic growth¸ inflation and transformation of the economic growth pattern
  • Put more efforts to expand domestic demands¸ especially consumption
  • Maintain a steady general level of market prices
  • Support the small and medium-sized enterprises (SMEs) with credit aid and bond issuing
  • Focus its investment activities on the construction of affordable housing projects¸ building new water conservancy projects in rural areas¸ emission reduction and energy-saving
  • Lower import tariffs on some commodities
  • Increase imports of energy¸ resources