Abstract

Fiscal policy in China has operated in a difficult environment in recent years. The central government’s influence on public finances weakened, and budget deficits persisted. At the same time, ongoing reforms, as well as recurrent macro-economic cycles, increased the demands on fiscal policy to both support the reform process and help stabilize the economy. These concerns have been a driving force behind the authorities’ decision to implement a sweeping program of fiscal reform in 1994.

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