BEIJING, Dec 27 (Reuters) - China will roll out fiscal policies proactively next year to stabilise economic growth, the finance ministry said on Monday, vowing that the impact of the drive would be felt earlier than usual.

The government will launch another round of tax and fee cuts to support businesses and help them make infrastructure investments "appropriately" ahead of time, according to a readout from an internal meeting by the finance ministry on fiscal policy for 2022.

The world's second-largest economy, which has lost steam after a solid recovery from the pandemic last year, faces multiple challenges as a property downturn deepens, supply bottlenecks persist and strict COVID-19 curbs hit consumer spending.

Fiscal expenditures will be kept up to bolster growth and the central government will step up transfers to local governments to support necessary spending, the finance ministry said.

China will also take steps to curb increases in local government hidden debt in 2022, according to the meeting readout, as well as to maintain "overall social stability" ahead of the 20th congress of the ruling Communist Party next year.

(Source: https://www.reuters.com/markets/rates-bonds/china-roll-out-fiscal-policies-proactively-stabilise-growth-next-year-2021-12-27/.)

(a) What stage of the business cycle is the Chinese economy in? Provide some evidence from the article for your answer. (4 marks)

(b) Identify the type of fiscal policy the Chinese government is undertaking (is it expansionary or contractionary?). Provide some evidence from the article for your answer. (4 marks)

(c) Explain parts (a) and (b) in the context of the aggregate demand and aggregate supply (AD/AS) model. (You do not need to draw a diagram, just explain in words what would happen in the AD/AS model). (4 marks)