context: The Third Plenum emphasised that better macroeconomic regulation and effective government governance are crucial for leveraging the advantages of the PRC’s socialist market economy system.
In the face of global changes and domestic challenges, including technological revolutions and industrial transformations, the PRC must enhance macroeconomic governance to support Chinese-style modernisation, says Li Jiangtao 李江涛 Central Party School National Governance Research Department deputy director.
Despite progress, issues like imbalance, disharmony and unsustainability persist, requiring improved macroeconomic regulation that is both scientific and forward-looking. Supply-side management, as a fundamental approach to macroeconomic regulation, focuses on resolving structural problems and stimulating long-term economic growth momentum, he says.
In contrast, demand-side management addresses aggregate issues and concentrates on short-term regulation to manage economic fluctuations.
Li notes distinctive PRC characteristics of macroeconomic governance in the New Era
- national medium- and long-term development plans serve as strategic guides
- all macroeconomic policies must align with these plans to ensure consistency and predictability
- proactive fiscal policy and prudent monetary policy are central to macroeconomic regulation, enhancing governance efficiency and ensuring steady economic growth
- employment, industry, investment, consumption, environmental protection and regional policies are closely coordinated to improve macroeconomic quality and effectiveness
- balancing short-term counter-cyclical adjustments with medium- and long-term cross-cycle design ensures macroeconomic stability and addresses structural issues
- maintains policy continuity, stability and sustainability
- the macroeconomic regulation model of 'range-based regulation + targeted regulation + timely regulation' enhances precision and effectiveness
- combines overall regulation with specific, timely measures to avoid economic volatility without resorting to excessive stimulus
Improving macroeconomic governance is an important deployment made by the recent Third Plenum, says Li. This involves
- strengthening mechanisms for strategic formulation and policy coordination, ensuring all economic and non-economic policies work cohesively
- enhancing statistical indicators and implementing a national macroeconomic balance sheet for better resource allocation
- enhancing systems that support coordinated regional development strategies, fostering sustainable economic growth across different regions
- promoting development patterns in the western, northeastern, central and eastern regions and integrating major regional initiatives
- adjusting fiscal relations between central and local governments to provide institutional guarantees for effective fiscal policy transmission
- expanding local tax sources, improving fiscal transfer payments and optimising taxation to support high-quality development and social equity
- improving modern central banking to enhance macroeconomic governance capabilities
- developing various financial services like technology finance, green finance and inclusive finance, improving capital market functions and strengthening financial regulation to prevent systemic risks