China's active fiscal policy that has been pursued since 1998,is essentially of an expansionary type, but not of an ordinary
one: it is one that has been carried out within specified scope,under specific circumstances and with special measures.This policy,which has been adhered to for two years,has played an important function in solving the contradiction between repulsing the assault of Asian
financial crises and insufficient domestic demand,in boosting the economy,optimizing industrial structure, increasing employment and stabilizing the society.The theory of this policy is based on the Marxist theory about the relation between finance and economy,about the reaction of the state power,and on, in part,the multiple theory of Keynes.The execution of this policy needs four conditions: the imbalance between aggregate supply and demand, insufficient effective demand and slower economic growth; a sound basis for revenue, not too great a financial deficit; the maintenance of a rational-scale national loan; a guarantee of resources for the increase of investment.The factors affecting the role played by this policy: (1)the acting force of the investment multiplier;(2)the effect of the money market or interest rate, ie the negative effect of monetary policy in fiscal policy;(3)the increased financial investment amount,the selection of investment items.The present essential knots to be cut in materializing the said policy:to make it sure that the said policy is a short- or long-term one; to match fiscal expenditure policy to revenue policy to combine the active financial policy with corresponding monetary
policies;to exercise a close supervision over finance,increasingly raising the efficiency of the use of investment.