More active fiscal policy will keep growth on track: China Daily editorial

That the fiscal policy is to "become more active" should by no means be taken as an indication the government will resort to a deluge of stimulus policies, since to do so would only swell debt and increase the pressure on the economy.

A statement issued after a meeting of the State Council on Monday, which was presided over by Premier Li Keqiang, indicates that policy fine-tuning will be undertaken to ensure the economy continues to grow within a reasonable range by boosting the development of the real economy and supporting domestic demand.

That its pace of growth has stayed within the range of 6.7 to 6.9 percent for 12 straight quarters by the end of June reflects the resilience of the Chinese economy. And with consumption contributing 78.5 percent of the growth in the first half of the year according to the National Bureau of Statistics, it is successfully being weaned off its reliance on exports for growth.

This restructuring means it is better positioned to withstand the impact of a trade war with the United States, which seems ever more likely with the Donald Trump administration threatening to impose tariffs on more Chinese imports.

The more active fiscal policy will focus on giving a shot in the arm to the real economy with the government expanding a preferential policy for small technology companies to all enterprises. Coming on top of the initial goal of cutting taxes and fees by 1.1 trillion yuan ($162.58 billion) this year, this will effectively reduce the costs for businesses and ease their tax burden.

The government will also quicken the issuing of 1.35 trillion yuan in special bonds for infrastructure projects, which will also add more impetus to the economy.

While the readjusted fiscal and monetary policies will undoubtedly boost business confidence and keep China's economic growth on a relatively fast track in the near future, measures must also be taken to make sure they serve to improve the quality and efficiency of the economy.

There are many lessons to learn from the past when loose credit inflated property bubbles worsened the overcapacity problems in many industrial sectors.

To ensure those lessons are heeded, policymakers must keep the overall context in mind when implementing financial and fiscal policy measures, and they will have to stay true to the pledge to "avoid strong stimulus" and maintain a close eye on financial system irregularities.