ABSTRACT
The proactive fiscal policy changes its measures or shifts its focus every year throughout its seven-year practice. The effects of the seven-year proactive fiscal policy cover many aspects. For example, important infrastructure construction is enhanced, industrial structure adjustment is promoted, regional productive resources are re-allocated, investment environment is improved, and the state-owned enterprises (SOEs) reform is supported. In China, both academics and officials are quite familiar with the macroeconomic rationale: inflation needs to deflate, while deflation needs to expand. Fiscal policy, as one of the two macroeconomic control measures, cannot be functional unless it takes tight or expansionary counter-cyclical actions on public revenue. By the end of 2003, the proactive policy lasting for six years had already left us up to 800 billion Yuan of debts. The Central Economic Work Conference (CEWC) held in early December 2004 finally made the significant decision to shift fiscal policy orientation in 2005 after an overall analysis of current global situations.
