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Prof. Yao Yang: Reach Growth Target through Boosting Confidence and Managing Expectations

Mar 06-2024   



This year monetary policy should be directed at realizing the CPI target set by the ‘two sessions’, said Prof. Yao Yang in a media interview before the opening of these two national political gatherings, namely the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC). As the CPI has been running at a low level, setting a CPI target can in effect manage expectations, enhance confidence, and spur an increase in demand in the economy, he said.

 

Asked to comment on the trending word ‘new-quality productive force’, Prof. Yao said that it stands for all productive forces that are capable of raising all-factor productivity. China’s all-factor productivity has been contributing about 20-40% of its economic growth, a figure that Prof. Yao believed will move up to the higher end of the range as the country’s technology advances and innovation blossoms.

 

He also debunked the myth of slow consumption growth. Official statistics showed that excluding price factor, per capita spending went up by 9% last year, and consumption contributed 82% of economic growth. Against such a backdrop, he stressed the importance of activating investment. As corporate investment is endogenous, this year more focus should be put on government investment, he said. Since China’s economic growth rate trails its potential, he proposed using monetary policy and fiscal policy to shore up confidence and make the wheel of the economy turn faster. Issuing government bonds for such investment purpose won’t result in heavy burdens. Instead, they can be transformed into products and drive economic growth. A stronger economy is likely to dilute or dissolve debts, said Prof. Yao.

 

On the real estate industry, Prof. Yao urged for more powerful measures, such as cancelling limits on property purchases across the board, applying the same interest rates to the first and the second apartment of a household, and barring local governments from interfering in housing prices. On the supply side, banks should be given back the loan decision-making power while government agencies focus on reinforcing oversight. When real estate firms regain liquidity, they will be in a better position to complete hitherto unfinished projects for home buyers.

 

On aging, Prof. Yao pointed out that approximately 400 million people will retire over the next 15 years and each of them will receive pensions for 25 years on average. This will cause pressure on the social security system and the medical care. Prof. Yao suggested that extending health span be made a main focus of social work, which can alleviate burdens on medical care.

Prof. Yao Yang: Reach Growth Target through Boosting Confidence and Managing Expectations

Mar 06-2024   



This year monetary policy should be directed at realizing the CPI target set by the ‘two sessions’, said Prof. Yao Yang in a media interview before the opening of these two national political gatherings, namely the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC). As the CPI has been running at a low level, setting a CPI target can in effect manage expectations, enhance confidence, and spur an increase in demand in the economy, he said.

 

Asked to comment on the trending word ‘new-quality productive force’, Prof. Yao said that it stands for all productive forces that are capable of raising all-factor productivity. China’s all-factor productivity has been contributing about 20-40% of its economic growth, a figure that Prof. Yao believed will move up to the higher end of the range as the country’s technology advances and innovation blossoms.

 

He also debunked the myth of slow consumption growth. Official statistics showed that excluding price factor, per capita spending went up by 9% last year, and consumption contributed 82% of economic growth. Against such a backdrop, he stressed the importance of activating investment. As corporate investment is endogenous, this year more focus should be put on government investment, he said. Since China’s economic growth rate trails its potential, he proposed using monetary policy and fiscal policy to shore up confidence and make the wheel of the economy turn faster. Issuing government bonds for such investment purpose won’t result in heavy burdens. Instead, they can be transformed into products and drive economic growth. A stronger economy is likely to dilute or dissolve debts, said Prof. Yao.

 

On the real estate industry, Prof. Yao urged for more powerful measures, such as cancelling limits on property purchases across the board, applying the same interest rates to the first and the second apartment of a household, and barring local governments from interfering in housing prices. On the supply side, banks should be given back the loan decision-making power while government agencies focus on reinforcing oversight. When real estate firms regain liquidity, they will be in a better position to complete hitherto unfinished projects for home buyers.

 

On aging, Prof. Yao pointed out that approximately 400 million people will retire over the next 15 years and each of them will receive pensions for 25 years on average. This will cause pressure on the social security system and the medical care. Prof. Yao suggested that extending health span be made a main focus of social work, which can alleviate burdens on medical care.