During the initial stages of the programme, however, the adjustment measures comprised a mixture of 60 per cent revenue – largely tax – increases and 40 per cent expenditure cuts. The tax increases reduced after-tax income, restraining private consumption, and decreased the after-tax return on investment, reducing the incentive to invest.
The Central Economic Work Conference outlined the goal of expanding domestic demand and lessening the reliance on net export in the pursuit of national economic development, restructuring and growth pattern upgrade. Further reform of the exchange rate regime and adjustment of production factor prices in a broad sense both contribute to the goals above.