News Center



Home News Center News

Appropriate Fiscal and Monetary Policies in Need

Dec 30-2019   



 

Against a backdrop of medium to long term economic restructuring and slowing growth, the Chinese economy went through a short-span downturn in 2018-2019. The reasons include deterioration in external environment, floundering confidence of corporate investment, and over-stringent supervisory measures, said Prof. Zhang Fan of the NSD in an opinion piece for The Beijing News.

 

Micro-economic policies, in the form of appropriate short-term measures, should be deployed to cope with the situations, and not just for maintaining certain growth rate but also for mitigating economic fluctuations along long-term trends.

 

Policy tools at disposal can start with moderate loosening of the monetary policy. Liquidity should be raised up to an adequate level to avoid snapping of debt chains. The low probability of stagnation and the serial rate reductions by the Fed afford China with some leeway for monetary maneuvers, such as lowering the bank reserve ratio and the benchmark interest rate.

 

Moreover, fiscal policies should be more proactive. Government investments should be increased to an appropriate level. Not all government investments are the same and they should be classified for better management. As for taxation, measures that have been taken in 2019 to lower corporate VAT and social security outlay are yet to come to fruition. Further tax reduction will hinge on decreasing the size of the government and its expenditures. In addition, administrative restrictions on home purchasing can be relaxed modestly.

 

Managing the confidence and the expectations of the public is of utmost importance. For enterprises to buy in its promotions and promises, the government must undertake real and credible measures, such as downsizing the government and paring down expenditures.

Appropriate Fiscal and Monetary Policies in Need

Dec 30-2019   



 

Against a backdrop of medium to long term economic restructuring and slowing growth, the Chinese economy went through a short-span downturn in 2018-2019. The reasons include deterioration in external environment, floundering confidence of corporate investment, and over-stringent supervisory measures, said Prof. Zhang Fan of the NSD in an opinion piece for The Beijing News.

 

Micro-economic policies, in the form of appropriate short-term measures, should be deployed to cope with the situations, and not just for maintaining certain growth rate but also for mitigating economic fluctuations along long-term trends.

 

Policy tools at disposal can start with moderate loosening of the monetary policy. Liquidity should be raised up to an adequate level to avoid snapping of debt chains. The low probability of stagnation and the serial rate reductions by the Fed afford China with some leeway for monetary maneuvers, such as lowering the bank reserve ratio and the benchmark interest rate.

 

Moreover, fiscal policies should be more proactive. Government investments should be increased to an appropriate level. Not all government investments are the same and they should be classified for better management. As for taxation, measures that have been taken in 2019 to lower corporate VAT and social security outlay are yet to come to fruition. Further tax reduction will hinge on decreasing the size of the government and its expenditures. In addition, administrative restrictions on home purchasing can be relaxed modestly.

 

Managing the confidence and the expectations of the public is of utmost importance. For enterprises to buy in its promotions and promises, the government must undertake real and credible measures, such as downsizing the government and paring down expenditures.