ECON 336 Chapter Notes - Chapter 18: Rein, Deflation, Business Cycle

• School: McGill University
• Department: Economics
• Course: ECON 336
• Professor: Christopher Green

Document Summary

China has been able to navigate around the large macroeconomic pitfalls that normally plague transitioning economies such as those in the former soviet union. Chinese saving rates were high under the planned economy and remained high after reforms. Under the planned economy soes did nearly all the saving. Reasons for this are listed below: income growth accelerated, working-age households had less security in old age (only one child now), household investment opportunities exploded. As a result of the increasing importance of savings in gdp, the banking system, through its lending decisions, increasingly held the key to macroeconomic stability. Before 1978 the government raised revenue from soe profits; there was no real tax policy. The most important fiscal reforms came in 1994 when the government made the tax structure very similar to the west implementing a vat on manufactured goods. (75% to federal and 25% provincial) After 1994, budgetary revenues increased dramatically and went towards the civilian economy.