chapter  3
Financial support to the gradual reform
ByJie Zhang
Pages 19

This chapter defines fiscal subsidies and financial subsidies and establishes a simple in-system growth model considering financial subsidies, based on which the logical connection between financial subsidies and gradual reform is illustrated and therefore the special role of the financial factor in the gradual reform of China is determined. Compared to other transitional countries, China has maintained a high domestic saving rate, rendering considerable financial surpluses to economic growth; meanwhile, China has a greater control power that can apply most financial surpluses to supporting in-system output growth through state-owned banks.