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E-mail China.org.cn, March 17, 2025
21st Century Business Herald:
The report proposes implementing more proactive and effective macro policies. What are the key considerations behind this approach? In which areas will this approach be reflected? What innovations can we expect in the implementation of macro policies this year? Thank you.
Shen Danyang:
I would like to invite Mr. Chen to answer this question. He was once head of the Macroeconomic Research Department at the Development Research Center of the State Council and deputy director of the center, and so is well-placed to address this issue given his extensive experience in macroeconomic research.
Chen Changsheng:
Thank you for your question. The issue you raised has been a focus of attention since last year's Central Economic Work Conference. The premier's report this morning revealed the details. It's important to note that the Political Bureau of the CPC Central Committee made a decisive move on Sept. 26 last year by implementing a package of incremental policies, which resulted in positive shifts in economic performance, increased confidence and a clear economic rebound. This year's report calls for more proactive and effective macro policies, continuing the policy approach outlined at the Political Bureau of the CPC Central Committee meeting on Sept. 26 last year. From a macroeconomic perspective, external uncertainties are increasing, and domestic aggregate demand remains insufficient, with weak consumption in particular standing out as a prominent issue. These challenges make it necessary to implement stronger counter-cyclical adjustments through macro policies. From the perspective of policy space, we are also well-positioned. For example, China's government debt ratio is around 70%, which is lower than that of major economies, with the central government's debt level being particularly low, providing significant room for borrowing. Globally, many countries are currently adopting accommodative monetary policies, and given China's price level, there is considerable room for maneuvering in monetary policy.
How can we embody the principle of being "more proactive and effective?" You all read the report delivered by the premier this morning. Much of the data was released for the first time, and some even exceeded expectations. Being "more proactive and effective" can be understood from four aspects: First, in terms of policy orientation, this is the first time we have proposed "a more proactive fiscal policy." We have also replaced the "prudent monetary policy" implemented for 14 consecutive years with "an appropriately accommodative monetary policy." This combination of macroeconomic policies is designed to deliver a clear and strong policy signal to people of all sectors. Second, in terms of policy support, this year's deficit-to-GDP ratio is set at approximately 4%, representing a 1 percentage point increase from last year. The government deficit is projected at 5.66 trillion yuan. In addition, a total of 1.3 trillion yuan in ultra-long special treasury bonds and 4.4 trillion yuan in local government special-purpose bonds will be issued, both reaching record highs. In total, this year's new government debt will reach 11.86 trillion yuan, an increase of 2.9 trillion yuan compared to last year. This scale is very large. We will see monetary policy play a greater role in adjusting both the monetary aggregate and structure. The policy will include timely cuts to required reserve ratios and interest rates, providing stronger support for the real economy and aiming to reduce overall financing costs. Third, regarding timing, policies should be implemented as soon as possible, which in itself reflects the policy support. Some policies should be implemented as soon as they are decided — better early than late — to stay ahead of any uncertainties. Once a policy is finalized, we should act decisively and with ample force to maximize its effectiveness. Fourth, with regard to coordination, we will further strengthen the alignment of macro policy orientations, enhance evaluations of policy consistency, and improve coordination and collaboration among various departments. We will also focus on prominent issues and pool policy resources to improve policy coordination, creating a combined impact greater than the sum of individual actions.
If you continue to pay attention to the report or read it closely, you will find that it fully embodies the innovative approaches to macroeconomic regulation introduced by the CPC Central Committee since the meeting of the Political Bureau of the CPC Central Committee held on Sept. 26. For example, the report explicitly states that we should pursue people-oriented macro policies. If you read it more carefully, you may notice some new expressions. For instance, the report challenges the conventional notion that "consumption is a slow variable," gives boosting consumption a more prominent position, and promotes synergy between increasing consumption and expanding investment. Another example is the report's emphasis on asset prices in macroeconomic regulation. For the first time, ensuring stability in both the real estate market and the stock market has been included as one of the overall requirements, as noted by some reporters familiar with macroeconomics. Additionally, the report highlights that more policy resources will be directed toward serving the people and meeting their needs. These are examples of innovations in macro policies. By creating a positive interplay between economic growth and improvements in people's lives, we aim to better promote high-quality development, stabilizing both growth and employment. Thank you.
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