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The new economy in the 14th Five-Year Plan requests us to ground our work in this new stage of development, apply the new development philosophy and foster a new pattern of development. Digitalisation and financialization of economy foreshadow the future state of the new economy. One of the most important features of the new economy is the uncertainty caused by the overlap of digitalisation and financialization. We need to build new certainty based on the new stage of development and inject more certainty to hedge against risks. Finance functions as the foundation and supporting pillar of national governance. The fiscal system is a basic tool or an important way to build the new economy, as well as the basis for building certainty in national development.

First, we should adhere to the concept of people-centredness and implement the reform plan for defining the respective fiscal powers and expenditure responsibilities of central and local governments. To straighten out intergovernmental fiscal relations, it is necessary to change the mindset and focus on the definition of respective fiscal powers and expenditure responsibilities, and to moderately devolve more fiscal powers and expenditure responsibilities to central and provincial governments, so as to provide conditions for comprehensive fiscal coordination and optimal allocation of public resources. This is an institutional condition for better fiscal hedging of public risks. To improve the relationship between the central government and the local government, it is important to highlight people-centredness. The key to promoting people-centred urbanisation is the movement of population, with which funds, transfer payments and public services need to match up. This is a new proposition, involving the definition of respective fiscal powers and expenditure responsibilities between the central and local governments, and requires accelerated reform of the financial system.

Second, fiscal coordination should be strengthened and the reform of performance-based management should be promoted. The Fifth Plenary Session of the 19th Central Committee proposed to strengthen the overall management of financial resources, which includes funds, assets and resources. The current allocation of budget funds is based more on flow, while the compatibility of flow and stock is yet to be strengthened, which requires enhancing the effectiveness of resource allocation through improving performance-based budget management. At present, China's performance-based budget management reform has made some progress, and there is still room for further improvement. In the market sector, it is the market that plays a decisive role in resource allocation, while in the public sector, it is the budget, which is a challenge in deepening the reform of the budget management system.

Third, we should push through the reform of government debt management and prevent and resolve local debt risks. On the one hand, the dynamic monitoring of local debt risks should be further improved, main responsibilities should be assumed by provincial governments, and the framework of risk management at the central and local levels should be improved to avoid the transfer of risks to enterprises, local financial institutions and even the public. On the other hand, the reform of the government debt management system should be accelerated to prevent the localisation of government debt from leading to an increase in the overall debt risk of the country. In terms of debt structure, consideration can be given to appropriately raising the central government's debt to prevent the spread of public risks resulting from the low compatibility between the scale and structure of local government debt and the overall economic and social development.

Fourth, a new tax system should be constructed to satisfy the needs of the new economy. The new economy formed on the basis of digitalisation and financialization requires a new theory of taxation and a new tax system constructed under the guidance of the new theory. In addition, for common prosperity, to a certain extent, we need to play an active role in regulating income distribution by sustaining the balance between raising revenue and regulating distribution. Furthermore, the extent to which the taxation system is perfected becomes the basis for whether the fiscal relationship between the central and local governments can be straightened out. Issues like the proportion of local direct taxes are crucial to further improving the fiscal relationship between the central and local governments, the reasonable definition of respective fiscal powers and expenditure responsibilities between the central and local governments, and the division of revenues.