Imf Fiscal Affairs Department Director Vitor Gaspar On Global Debt And China's Growth

Shoot China’s fiscal policy play a bigger role in softening the trade impact so when it comes to fiscal China does have fiscal space and we understand that China is aware that the current tax dispute and the increase increase in tariffs on Chinese experts exports will have a negative impact on growth that will be partially offset by expansionary fiscal.

China does have the room to adjust in order to smooth the impact of this trade.

Disputes on the path of economic activity in China we believe that this.

Partial offset is appropriate at the same time it’s crucial for China to continue engaging in the rebalancing of the economy that we have commented a few.

As China pursues a high-quality growth China has announced numerous steps to cut fees and taxes this year including corporate tax and individual income taxes what is a comment on those policies so as is implicit in your question the.

Crucial challenge for China is to improve the quality.

Of growth and not so much to emphasize the growth rate as such it’s very important that China rebalances its economy moving from investment to consumption moving from credit.

Based growth to growth which is compatible with a gradual process of the leveraging China has engaged in tax reform over the years and in the last decades the improvements in the Chinese tax system have been quite marked and.

We in the fiscal affairs department of the IMF are very proud to have been associated.

With that process the recent reforms that include a simplification of eate and a streamlining of the process of v80 refunds associated with export activities for example are very important initiatives because they will improve the efficiency and.
Effectiveness of the v80 clearly the.

V80 refunds are crucial for the overall function of the p80 while the tax administration will naturally insist on safeguards to avoid fraudulent behavior when it comes to the.

Personal income tax a number of initiatives are completely in line with past IMF staff advice the only point where we would be reticent reticent has to do with the deductibility of mortgage interest payments that may exacerbate the trend to favor debt financing which is not in line.

With the rebalancing of the Chinese economy that we were mentioning before another aspect that one might perhaps considered would be to simplify the.

Personal income tax system and to focus more on some regressive elements of social contributions in China it has been 40 years since China started to open up and start economic reforms what are the biggest achievement and challenges in China’s reform of fiscal policies over the forty years well their many achievements it’s quite remarkable how much China has progressed over this 40 years China has posted one of the strongest enduring growths firs recorded in world.

Economic history during that period China moved from being a relatively backward economy to being.
One of the largest most dynamic and most important economies in the.

World during this period China moved from being a relatively poor country to being an upper-middle income country and still growing strong during this period more than eight hundred million of people in China have been lifted off poverty.

And I could continue so clearly there has there have been many.

Successes but at this point in time as we very much stress in the context of our analysis.

Of fiscal policy there has been quite.

A substantial buildup in debt and leverage in China.

The authorities have started taking effective action about two years ago and the increasing leverage has clearly slowed down that process must continue and the rebalancing and adjustment of the Chinese economy will have to take place.

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