BEIJING, Nov. 9 (Xinhua) -- China will adopt an
"active" fiscal policy and a "moderately easy" monetary policy to boost its
economy, according to an executive meeting of the State Council, or cabinet, on
Sunday.
These stances mark a shift from "prudent" fiscal and
"tight" monetary policies the government adopted at the start of 2008. And they
are one of only a few major policy shifts in the past three decades.
Before Sunday, China had made six major
macro-economic policy shifts over the 30 years since the era of reform and
opening up began in 1978:
-- From 1979 to 1981, China moved to cool an
overheated economy and inflation resulting from investment booms since 1978. The
government lowered economic targets, curtailed spending, tightened credit
controls and froze corporate savings through administrative means.
-- From 1985 to 1986, China adopted tight fiscal and
monetary policies after economic growth surged 15.2 percent in 1984 on strong
investment. It was the first time the government tried to use fiscal and
monetary policies in macro-controls, which included curbing bank lending and
money supply.
-- From 1989 to 1990, runaway price rises and heady
investment growth led to a series of strong actions by the government, which
imposed price caps on major industrial inputs, reduced expenditure, strictly
controlled credit and at one point even halted lending to township enterprises.
As a result, economic growth plummeted to 3.8 percent in 1990 from 11.3 percent
in 1988.
-- From 1991 to 1997, China pursued "appropriately
tight" fiscal and monetary policies. It reduced interest rates and expanded
money supply at first to revive the economy, but saw a record high inflation
rate of 21.7 percent in 1994. The government managed to curb price hikes by
keeping the growth of money supply and fiscal outlays within a moderate range.
-- From 1998 to 2003, China turned to an "active"
fiscal and "prudent" monetary policy after the Asian financial crisis dragged
down the economy and added deflation risks. Government spending was hiked and
more debt was issued to fund infrastructure projects. Measures were taken to
increase revenues of low-income groups and improve social welfare to stimulate
domestic demand.
While reducing interest rates, the government started
to tax interest on deposits and adjusted money supply through central bank
open-market operations.
-- From 2004 to 2008, with excessive credit and
fixed-asset investment growth and strained supplies of energy and grain, China
embarked on a new phase of macro-controls to prevent overheating and inflation.
During that period, it modified its stances several times without a fundamental
overall change.
The government changed its fiscal policy from
"active" to "prudent" in 2005. It continued to pursue a prudent monetary policy
till June 2007, when the cabinet proposed a "prudent" but "appropriately tight"
monetary policy to counter rising inflationary pressure.
In December 2007, the government decided to adopt a
"tight" monetary policy and continue the "prudent" fiscal policy in 2008.
Flexible macro policies prepare China
for financial turmoil
BEIJING, Oct. 26 (Xinhua) -- Facing the financial tsunami, Chinese officials
were confident they would be able to deal with the crisis. Observers said the
confidence came from an overall and flexible management of the country's
economy. Full story
China's top legislature to deliberate
finance macro control
BEIJING, Oct. 26 (Xinhua) -- China's top legislature on Sunday will listen to
and deliberate reports delivered by the State Council, the Cabinet, on issues
including enhancing macro-control of the financial markets. Full story
