Adhering to and improving the socialist system with Chinese characteristics and promoting the modernisation of the national governance system and governance capacity are the overall objectives of the comprehensive deepening reform. The Fourth Plenary Session of the 19th CPC Central Committee, held from 28 to 31 October 2019, made authoritative assertions on the major theoretical and practical issues of "adhering to and perfecting the socialist system with Chinese characteristics and promoting the modernisation of the national governance system and governance capacity". The conference set out the overall objectives of upholding and improving the socialist system with Chinese characteristics and promoting the modernisation of the national governance system and governance capacity. Its three stages are in step with the strategic objectives of China's economic and social development, which will have a long-term and profound impact on China's future reform and development.
The national governance system and governance capacity are rooted in the socialist system with Chinese characteristics, and its contents are diverse and complex. One of its main lines is to deepen the reform of the fiscal and taxation system and to build a modern fiscal system. Since the Third Plenary Session of the 18th Party Central Committee, finance has been given a new historical task and has become the foundation and important pillar of national governance. This positioning makes finance a key part of our country's governance. As a core institutional arrangement in the national governance system, the fiscal system must serve the requirements of modernising national governance.
In modernising national governance, we shall focus on manifesting the "Prosperity of China" and participation in global governance. First, we need to grasp the changes in the main social contradictions, improve the socialist market economy system so as to highlight the advantages of our national system and governance system. We will transform the strengths of our systems and institutions into the effectiveness of national governance, which will propel the CPC and our country forward. Second, we shall respond to the risks and challenges caused by changes in the external environment, such as the phenomenon of counter-globalisation and changes in the international landscape, as a means of highlighting the advantages of the path of socialism with Chinese characteristics. The advantages of the system and the system will be transformed into the effectiveness of national governance, driving the CPC and our country forward.
This imposes a "double requirement" on the development of public finance. The first is to focus on the functions and role of finance in domestic economic and social governance, and take the initiative to adapt to and lead the new economic normal. We need to address the downward pressure on the domestic economy and the social issues, and dovetail with the overall layout of the "balanced economic, political, cultural, social, and ecological progress" and the "Four-Pronged Comprehensive Strategy" strategic layout. The second is to commit to China's participation in global governance strategies to meet the requirements of reform and construction of the global governance system and to match the goal of a “Shared Future for Mankind”, thereby achieving common development and prosperity for all countries around the world.
It is important for public finance to closely follow the requirements of national governance in the new era and provide solid financial support for the "Prosperity of China".
The fundamental context of China’s pubic finance under the new era
The report of the 19th Party Congress points out that the main contradiction in our society has been transformed into the contradiction between the people's growing need for a better life and the unbalanced and insufficient development. Resolving the contradiction between the people's growing need for a better life and unbalanced and inadequate development is the most central element of the modernisation of the national governance system and governance capacity, and is also the basic context for the contemporary public finance. The "need for a better life" encompasses material, spiritual, social, institutional and fairness and justice aspects. However, our contemporary development is still imbalanced and inadequate, which makes the interpretation of this context a central element in the construction of public finance. On the one hand, public finance should serve the "balanced economic, political, cultural, social, and ecological progress " general layout and the "four comprehensive" strategic layout, and coordinate the economic, political, cultural, social and ecological civilization construction to meet the people's multi-dimensional needs for a better life. On the other hand, public finance should help to improve the socialist market economy system, promote the quality of economic growth and fair income distribution, and focus on solving the problem of unbalanced and insufficient development.
The historical mission of public finance in the modernisation of national governance
“Wealth is the life of a nation and the foundation of all affairs.” Throughout history, the decline of a country has often been inextricably linked to fiscal crises, and the rapid rise of the United States and the rapid post-war recovery of Japan and Germany were both closely linked to their fiscal systems. Since the founding of People’s Republic of China, reform of the fiscal and taxation system has often served as an important role in all major reform decisions. Since the reform and opening up, to meet the needs of constructing a socialist market economy, China has gradually established the basic framework of public finance, and the fiscal system has become an important part of the socialist economic system with Chinese characteristics. The Third Plenary Session of the 18th Central Committee proposed that finance is the foundation and important pillar of national governance. This expression breaks away from the previous limitation of focusing mainly on revenue and expenditure functions, and highlights the importance of "government" in the concept of finance. Since then, finance has moved beyond being a mere component of the market economy system to being a key aspect of national governance. The new historical positioning of finance has given public finance a new historical mission, which inevitably requires public finance to undertake a new historical mission in optimising resource allocation, maintaining market unity, promoting social equity and achieving long-term national stability.
Clarifying the issues to be addressed by public finance in the context of national governance
The functions of traditional public finance are mainly reflected in the three aspects: resource allocation, macro-control and revenue distribution, while the functions of public finance are not limited to these. In general, under the new historical orientation, public finance should concentrate on solving the contradiction between the people's growing need for a better life and the unbalanced and insufficient development. However, specific aspects remain to be further elaborated. It is indisputable that public finance was born out of the public finance system, which means that public finance has to undertake the basic functions of the traditional finance system. However, the differences lie in the fact that public finance is integrated and leading, with the responsibility of integrating the various social systems and bringing into play the effectiveness of finance in the governance of the country. Therefore, its arrangement needs to be oriented towards the comprehensive and systematic nature of finance, focusing not only on the overall task of reforming the fiscal and taxation system, but also on solving specific problems.
Awareness of the main elements of modern financial construction in the national governance environment
While the specifics of public finance are still uncertain, it is undeniable that the establishment of public finance depends on further reform of the existing financial system and the intensive application of new technological tools. In terms of institutional arrangements, its main elements are focused on the following four areas: Establishing a modern central-provincial relationship, allocating the financial resources of all levels of government in a reasonable manner, and clearly defining the responsibilities of affairs and expenditure; Improving the modern taxation system, gradually increasing the proportion of direct taxes in national taxes and progressively improving the provincial taxation system; structuring a modern budget system, strengthening the compulsory constraints of the budget on government actions, enhancing budget performance assessment and improving budget transparency; promoting China's finance and participating in global cooperative governance. In terms of the application of technological tools, the modern financial system is needed to integrate with modern scientific and technological tools such as the Internet, big data and artificial intelligence. We are able to use these technical tools to adequately anticipate trends in revenue and expenditure and to track the flow of national tax revenues. Through these means, we are able to improve the hierarchy and level of national governance, expand the breadth and depth of national governance and solve difficult problems we were unable to solve in the past.
Public finance should be aimed at China's participation in the process of global governance and provide a solid institutional guarantee for the "China Strategy".
The premise of the role of public finance in promoting change in global governance is to identify the constraints of the overall environment that China faces when participating in global governance, and implement our corresponding strategic arrangements. It defines the role and instruments that public finance undertakes in global governance.
Capturing the constraints and national strategies for China's participation in global governance
At present, the global economy is hunched in volatility and conflict, the global economic weakness has led to a widening gap between rich and poor countries, the process of globalisation is suffering from trade disputes, and international non-traditional security issues are proliferating. Conventional rules of globalisation have become a constraint that hinders the common development of all countries in the world. Despite the increasing downward pressure on the Chinese economy in recent years, China remains the most prominent contributor to world economic growth. To resolve disputes in the process of globalisation and to promote the common development of all mankind, China deserves to play a greater role in global governance. The concept of “a shared future for mankind” is precisely the Chinese wisdom contributed by China's leaders based on the current call for the common development of all countries in the world, which demonstrates China's magnificent political imagination in addressing the common development of all countries in the world. "The Belt and Road Initiative" is a major strategic initiative taken by China to implement the concept of "a shared future for mankind", which has greatly contributed to the economic prosperity and cooperation of countries along the route.
Defining the role of public finance in improving global governance
Market failure is the theoretical premise of government intervention, and the "global market failure" calls for China to take greater responsibility. The current global market failure is mainly manifested in the inadequate supply of global public goods, the persistence of global public risks and the widening gap in global income distribution. China's key to effectively responding to these global issues and assuming greater international responsibility lies in enhancing its global resource allocation capabilities, and establishing a modern fiscal system that is compatible with our finances. It places a three-fold demand on public finance: first, we will provide global public goods and, in particular, a solid guarantee for the transformation and reshaping of the global public order; second, we shall respond to global public risks, providing a grip for eliminating global uncertainties and resolving global public risks; And third, we shall address the global income distribution gap to provide the basis for eliminating global poverty and achieving common development for all mankind.
Identifying the tools that modern finance depends on in advancing global governance
China has been actively participating in global governance and contributing Chinese solutions to the common development and prosperity of all countries in the world. Modern finance, as an important institutional arrangement for the implementation of the China programme, can only be achieved through a corresponding fiscal policy. At present, China contributes to common global development mainly through tax policy, debt policy and international aid. In terms of tax policy, China is focusing on creating a fair and uniform tax environment, allowing domestic and foreign enterprises to enjoy fair and consistent tax treatment, and striving to avoid vicious international tax competition. In particular, in terms of tariff policy, China has long adhered to and implemented a green tariff policy to avoid the transfer of polluting products through international trade. In terms of debt policy, China has purchased some of the government debt issued by other countries in an effort to maintain the relative stability of the world landscape, while providing government debt to developing countries, with interest and debt forgiveness for developing country governments with weak or insolvent repayment capacity. In terms of aid policy, China has adopted various forms of aid instruments, including both direct economic and material support and the provision of technical training and assistance in building infrastructure.