Government Work Report: Why Continue to Implement More Proactive and Effective Macroeconomic Policies?

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The State Council Information Office held a press conference today. Chen Changsheng, a member of the team drafting the Government Work Report and Deputy Director of the State Council Research Office, stated that this year's macro policies are strong, targeted, and innovative. So, how should we understand the Government Work Report's proposal to continue implementing more proactive and effective macro policies?

Two Considerations

1. The Situation Requires It

This year, the external environment is highly uncertain, and the domestic pattern of strong supply and weak demand continues, resulting in a certain gap in total demand. Therefore, it is necessary to intensify policy regulation, using the certainty of macro policies to cope with the uncertainty of the situation.

2. There Is Policy Space

From an international perspective, our country's government debt ratio, especially the central government debt ratio, remains relatively low. There are still conditions for further reductions in the required reserve ratio and interest rates. Moreover, there is room for innovation in policy combinations. This policy orientation is also meant to convey the continuity of macro policy adjustment to society as a whole. On September 26 two years ago, the Central Political Bureau meeting launched a package of incremental policies; this year's policy orientation is a continuation of that approach and pays greater attention to expectation management. By intensifying counter-cyclical adjustments, clear and strong macro policy signals are sent to society.

Three Aspects of "More Proactive and Effective"

1. Stronger Intensity and Scale

This year, the deficit ratio remains at about 4%, one of the highest in history, with the deficit increased by 230 billion yuan. The total scale of new government debt reaches 11.89 trillion yuan, setting a new record. General public budget expenditure will reach 30 trillion yuan for the first time, up 1.27 trillion yuan from last year. These reflect the more proactive fiscal policy. Monetary policy continues with a moderately loose orientation, emphasizing the effective use of various tools such as reserve ratio and interest rate reductions, maintaining ample liquidity, strengthening and expanding the implementation of new policy financial tools, striving to lower corporate financing costs, and supporting the real economy.

2. Greater Focus on Precision and Effectiveness

On fiscal policy, there is a special emphasis on deepening zero-based budget reform, reallocating inefficient and poorly spent money to more useful areas. Some results were achieved last year, and more effort will be made this year. Further optimization of expenditure structure and revitalization of existing assets will allow more fiscal funds to be used for boosting consumption, investing in people, and safeguarding livelihoods. Monetary policy will also optimize structural policy tools to reinforce support for expanding domestic demand, technological innovation, and small and micro enterprises.

3. Emphasis on Policy Innovation

There is not only innovation in policy tools, but also in policy combinations. For example, a newly created 100 billion yuan special fund for fiscal-financial coordination to promote domestic demand. The coordinated role of fiscal and financial policies should be fully utilized, supporting private investment and expanding consumption through loan interest subsidies, financing guarantees, risk compensation, etc. Another example is the emphasis on leveraging intangible assets such as data elements and intellectual property to expand channels for credit issuance.

Source: CCTV News

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