Adaptability Adjustment of China’s Fiscal and Taxation Policies under “New Normal”—Based on Korea’s Experience

Yuanqing Han

doi:10.4236/me.2016.714149

Abstract

In recent years, the economic development of China has gradually showed the different characteristics from the past and has entered the new normal. Under the new normal, China’s economic growth trends and characteristics have undergone the great changes, the economic growth is in transition from high-speed growth to the medium-high-speed growth, and the economic growth model will be transferred from relying on exports and investment to relying on being driven by the domestic demand, the key for economic growth will be transferred from the factor driven to the innovation driven. At present, the main task of China’s economic development is to adapt to new normal. As an important means of national macro-control, fiscal and taxation policies have their own problem of inadequate system supply. This thesis intends to study the deficiencies of China’s fiscal and taxation policies under new normal, and propose the suggestions for the adaptability adjustment of fiscal and taxation policies. The study finds that under new normal, there’s difficult economic transition due to the insufficient supply of China’s fiscal and taxation policies in terms of the income, encourage innovation and environmental protection, and it is urgent to supplement and adjust China’s existing fiscal and taxation policies. Based on the reference to beneficial experiences of adjustment of Korea’s fiscal and taxation policies, combined with the actual situation of China, this thesis puts forward that the fiscal and taxation policies in China under new normal should be improved greatly from the aspects of tax structure, fiscal and taxation support of the scientific and technological innovation and fiscal and taxation policies of environmental protection, and others.

Highlights

China’s economy into new normal is mainly caused by changes in factor endowments
After 2010, there’s very obvious momentum shift in China’s economic growth, Gross Domestic Production (GDP) growth rate in 2010 was of 10.6%, and it fell to 9.5% in 2011, a decrease of 1.1%, the decline was very obvious, GDP continued to decline in 2012, and it fell to 7.8%, a decrease of 1.7% lower than the previous year, the decline was more obvious, GDP in 2015 fell to the lowest point in recent decades, which was 6.9%1, the economic growth rate was minimum in nearly two decades, economic downward pressure was increased further
The previous approach of China’s economic development relying mainly on the industrial expansion formed by factor accumulation is infeasible, with China’s industrialization, the urbanization has entered a new historical stage, environmental protection and resource conservation, urbanization and changes in factor endowments, the traditional labor-intensive needs to upgrade towards capital-intensive and technology-intensive industries, which requires the realization of endogenous growth of China’s economy, and it is necessary to change the production function to expand the production frontier, which must rely on the promotion of total factor productivity (TFP),namely it is to vigorously promote institutional change while promoting the technical progress and achieving the innovation-driven

Summary

Introduction

China’s economy into new normal is mainly caused by changes in factor endowments. After the reform and opening up, China’s economy has experienced the stage of more than 30 years of rapid growth [1], which is rare in the world. After China’s accession to the World Trade Organization (WTO) in 2001, GDP growth rate had maintained the high double-digit high value for many years, which was called as the miracle of the world economy. It’s mainly due to China’s population structure has undergone the great changes, the growth rate of 15 - 59-year-old working-age population has been in decline year by year and reached its peak recently, the process of the population aging has been significantly increased. The “demographic dividend” supporting China’s economic growth for a long time will be gradually lost, and the labor cost shows the trend of constant increase. This means a fundamental change in China’s factor endowment. Under the background of China’s economic growth enters into new normal, it’s of great significance to discuss the demand of fiscal and taxation policies will be faced by China under its new normal, using the effective fiscal and taxation policies to promote economic structure transformation and upgrading, while promoting China’s economic development to adapt to new normal as soon as possible

Connotation and Features of New Normal of China’s Economic Development

Problems of China’s Insufficient Supply under the New Normal

Korea’s Experience Reference

Findings

Conclusions and Suggestions