Fiscal Policy and the Government Balance Sheet in China

Author/Editor:

Waikei R Lam ; Marialuz Moreno Badia

Publication Date:

August 4, 2023

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

In this paper, we present the most comprehensive estimates of China’s government balance sheet to date. Based on these estimates, we show how major shifts in fiscal policy over the last two decades have shaped the health of the public sector prior to the Covid-19 pandemic. We find that, at US$12.5 trillion, China has the largest stock of financial assets in the world. However, its net financial worth as a percent of GDP—though still higher than the large majority of countries—has declined over the last decade. This trend can be traced back to the turn of the century when China undertook a major restructuring of its state-owned enterprises but left important shortcomings in the intergovernmental fiscal system unaddressed. Compounding these risks, reform momentum stalled in the aftermath of the global financial crisis leading to high leverage and falling profitability among state-owned enterprises.

Series:

Working Paper No. 2023/154

Subject:

Frequency:

regular

English

Publication Date:

August 4, 2023

ISBN/ISSN:

9798400248221/1018-5941

Stock No:

WPIEA2023154

Format:

Paper

Pages:

55

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