On the Fiscal Risk in Proactive Fiscal Policy: Analyses Under the Impact of the New Crown Pneumonia Epidemic

In order to withstand the economic and social impact of the new crown pneumonia epidemic, the Chinese government has introduced a new round of proactive fiscal policies. However, this round of positive fiscal policy is issued under the condition that the financial risk has been at a high level. The internal and external sources of fiscal risk include the widening of income and expenditure gap, the expansion of debt scale, the slowdown of economic growth, and the distortion of market system actually limit the possible deficit expansion boundary of proactive fiscal policy. The new round of proactive fiscal policy should strictly follow the principle of risk prudence. In the implementation of expansionary fiscal policy, close attention should be paid to the trend of potential fiscal risk to prevent fiscal risk from exceeding the critical point. In order to effectively achieve the expected goal of active fiscal policy, it is suggested to analyze and clarify the endogenous and exogenous sources of fiscal risk from the perspective of risk governance. The general principle is to implement precise policies, joint prevention and governance. The endogenous sources of fiscal risks can be resolved by improving the tax system, further budget performance reforms, clearing local hidden debts, and ensuring people's livelihood and employment. The exogenous sources of fiscal risks can be resolved by adopting measures such as expanding investment in "new infrastructure" and promoting the system reform of the factor marketization to ultimately promote the return of fiscal risks to normal levels.