Chen Yanbin: Priorities for Reforming and Improving the Macroeconomic Governance System
Scientific and effective macroeconomic governance is an objective requirement for modernizing the national governance system and governance capacity, and an essential component of constructing a high-level socialist market economy. In recent years, China has achieved a series of innovative results in the practice of macroeconomic governance; its connotations have become increasingly clear, its practice more enriched, its system more robust, and its efficacy more apparent. Centering on further comprehensively deepening reform, the Third Plenary Session of the 20th CPC Central Committee made important deployments for improving the macroeconomic governance system, emphasizing that "scientific macro-control and effective government governance are inherent requirements for leveraging the advantages of the socialist market economy system." The Central Economic Work Conference [1] proposed the need to "implement a more proactive and effective macro-policy" and to "enrich and improve the policy toolbox while enhancing the forward-looking, targeted, and effective nature of macro-control."
The "macroeconomic governance system" is a vital component of Xi Jinping Thought on Economy; it represents a significant innovation in the concepts and approaches of macro-control and is an important achievement of the independent knowledge system of Chinese economics. The macroeconomic governance system possesses rich connotations, pluralistic goals, and diverse tools. Beyond spanning the macro-economic policy system, it also encompasses local government economic governance and regional coordinated development strategic mechanisms, as well as reform measures that fundamentally improve the efficacy of macro-policies, rendering it more effective in resolving complex regulatory issues. In practice, we must proceed from the overall situation and a systemic perspective, fully recognize the profound significance contained therein, identify key reform priorities, and ensure the scientific nature, effectiveness, and sustainability of macroeconomic governance.
The Necessity of the Transition from Macro-Control to Macroeconomic Governance
Since the beginning of reform and opening up, China's macro-control system has been continuously refined, playing a vital role in maintaining high-speed economic growth. In recent years, along with significant changes in the domestic and international macroeconomic environment, the logic governing economic operations has shifted. The effectiveness of traditional macro-control methods has declined to a certain extent, necessitating continuous improvement, innovation, and a breakthrough beyond original conceptual limitations. There is a need for a further upgrade to the new level of macroeconomic governance to better adapt to the laws of economic development and promote the simultaneous increase in the quantity and quality of the economy.
First, this is a requirement for responding to an increasingly complex macroeconomic environment. Currently, the internal and external environments facing China's economy are complex and volatile. Externally, global economic growth is slowing, geopolitical conflicts are frequent, and the trade environment is severe. Internally, China is in a critical stage of economic structural transformation, where cyclical and structural contradictions are intertwined, and demand-side and supply-side shocks are superimposed. Key factors such as population aging impact both short-term and medium-to-long-term development. To respond to diversified economic shocks, policy objectives will increase; policy tools must increase accordingly. Otherwise, macro-policy will face a trade-off problem where a few tools are stretched across many goals, inevitably leading to a decline in regulatory efficiency. Therefore, faced with more multi-source and complex economic shocks, it is necessary to transition from macro-control to macroeconomic governance, balancing multiple objectives and coordinating various policies. Only in this way can the efficiency of macro-policy be significantly enhanced.
Second, this is a requirement for breaking through institutional bottlenecks and mechanistic obstacles. At the current stage, deep-seated obstacles still exist in China's economic operations that macro-policies such as monetary and fiscal policy cannot solve on their own; these must be addressed through systems and mechanisms. For example, the low proportion of resident consumption within the total demand structure cannot be addressed by monetary policy alone; it requires the continuous improvement of long-term mechanisms for expanding consumption. Similarly, implementing a proactive fiscal policy must be supported by adjustments to the tax system and the optimization of central-local fiscal relations, which requires the continuous deepening of fiscal and tax system reform. Institutional and mechanistic obstacles hinder the transmission of macro-policy to some extent and weaken regulatory effects. The macroeconomic governance system includes not only the macro-policy system—such as fiscal and monetary policy tools—but also a series of reform measures and institutional arrangements. Coordination between these parts helps clear the transmission channels of macro-policy, allowing macro-control to function more efficiently. Therefore, upgrading from macro-control, which primarily uses traditional policy tools, to macroeconomic governance, which integrates institutional reform measures, helps break existing bottlenecks, further release market vitality, and thereby improve macro-policy performance.
Third, this is a requirement for adapting to the cultivation and vigorous development of new quality productive forces. Traditional macro-policy theories were distilled based on the economic laws of the industrial economy era; the supporting macro-policy systems were adapted to traditional productive forces. New quality productive forces are primarily catalyzed by revolutionary technological breakthroughs like artificial intelligence, which can form entirely new industrial organizational forms and bring about massive changes in the way factors of production [2] are combined. This places new demands on macro-control methods. The "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Advancing Chinese-path Modernization," adopted at the Third Plenary Session of the 20th CPC Central Committee, explicitly emphasized the need to improve relevant rules and policies and accelerate the formation of relations of production that are better adapted to new quality productive forces, promoting the clustering of various advanced factors of production toward the development of these forces. In view of this, only by transforming traditional macro-control and upgrading it to macroeconomic governance can we better adapt to the economic laws of the digital economy era and promote the development of new quality productive forces.
Conditions and Advantages for Constructing the Macroeconomic Governance System
The transitional upgrade from a macro-control system to a macroeconomic governance system is not only a requirement of the times but also a necessity for development. The fundamental conditions required to construct such a system are equally crucial. Overall, China already possesses the multi-faceted conditions necessary, including a solid and massive material foundation as support, unique institutional advantages, a scientific methodology, and long-term practical accumulation.
The advantage of "concentrating resources to accomplish great tasks" [3] helps various policies within the macroeconomic governance system effectively form a unified force. This advantage is primarily reflected in the state's powerful execution capability when responding to major tasks, solving complex problems, and promoting key projects. Various departments can quickly coordinate, act in unison, and form a joint force, thereby ensuring that strategic decisions are rapidly implemented and achieve practical results. This advantage has been fully demonstrated in major scientific and technological breakthroughs and large-scale engineering projects since the founding of the People's Republic of China. This advantage provides an important guarantee for the construction of the macroeconomic governance system, enabling China to build a more multi-dimensional and rich governance system that effectively concentrates the regulatory power of macroeconomic policies, other economic policies, and non-economic policies, enhancing the consistency of macro-policy orientation and ensuring that multiple types of policies effectively form a synergy.
Adhering to a systemic concept and the scientific method of "grasping the principal contradiction" [4] helps macroeconomic governance accurately anchor core objectives. The systemic concept is a foundational ideological and working method. Adhering to it allows for the analysis of problems and the search for countermeasures from a comprehensive, holistic, and relational perspective, grasping the core and key of a problem to explore more precise and effective solutions. Grasping the principal contradiction is an important method for dealing with complex problems; if the crux of a problem is found at the source, other secondary contradictions will also be resolved. Only by adhering to a systemic concept can the various components of macroeconomic governance be organically integrated, and the relationship between existing [5] and incremental [6] policies, as well as between macro-policies and reform measures, be properly handled. Only by grasping the principal contradiction can the core objective be identified among the multiple goals of the macroeconomic governance system according to changes in the economic situation, using breakthroughs in key areas to drive the improvement of the entire macroeconomic governance effect.
The long-term practice of balancing multiple objectives and coordinating various policies helps the macroeconomic governance system take firm root. Since the reform and opening up, the macro-control system China has constructed is markedly different from Western macroeconomic policy systems, breaking through the regulatory framework of a single goal and a single tool. In terms of policy tools, in addition to short-term stabilization policies like monetary and fiscal policy, China's macro-control includes long-term growth policies such as Five-Year Plans and various structural policies. In terms of policy objectives, China's system differs significantly from Western systems that focus primarily on short-term economic and financial stability. The "Decision of the Central Committee of the Communist Party of China on Several Major Issues Concerning Comprehensively Deepening Reform," adopted at the Third Plenary Session of the 18th CPC Central Committee, clearly stated that the main tasks of macro-control are to maintain the balance of economic aggregates, promote the coordination of major economic structures and the optimization of the layout of productive forces, mitigate the impact of economic cyclical fluctuations, prevent regional and systemic risks, stabilize market expectations, and achieve sustainable and healthy economic development. From an economic perspective, this includes three major macro-control objectives: first, the short-term goal of economic and financial stability (economic stability meaning "maintaining the balance of economic aggregates" and "mitigating the impact of economic cyclical fluctuations"; financial stability meaning "preventing regional and systemic risks"); second, the long-term economic growth goal ("achieving sustainable and healthy economic development"); and third, the goal of economic structural optimization ("promoting the coordination of major economic structures and the optimization of the layout of productive forces"). It is evident that China's macro-control system has undergone rich practical explorations centered on short-term stability, long-term growth, and structural optimization, possessing a stronger capacity for policy coordination. These practical advantages are conducive to China constructing a more comprehensive and systemic policy system in macroeconomic governance, allowing it to better leverage the advantages of policy coordination to more powerfully safeguard economic operations.
Persisting in a Systemic Concept, Focusing on Key Reforms, and Implementing Integrated Measures
Improving the macroeconomic governance system is a complex piece of systems engineering. It requires grasping the inherent laws of economic development from a "macro-perspective," adhering to a systemic concept, focusing on key reforms, and implementing integrated measures across multiple dimensions to enhance the overall efficiency of economic operations.
First, the institutional system for national economic and social development planning must be improved to leverage the guiding role of national development planning strategies. General Secretary Xi Jinping has clearly pointed out that using medium-to-long-term planning to guide economic and social development is an important method of our Party’s governance. From the perspective of macro-control, national development plans provide direction for guiding the expectations and behaviors of market entities and offer stable, continuous, long-term strategic guidance for development. This not only clarifies long-term growth goals but also helps implement structural policies by optimizing the layout of productive forces, enhancing the efficiency of monetary and fiscal policies, and improving the effect of expectation management. In the history of China's economic development, the "Three-Step" strategy [7] formulated in the 1980s and the "New Three-Step" strategy proposed later both played vital roles. In the next stage, perfecting the institutional system for national economic and social development planning will remain a priority for reform. We must master several aspects: 1. Improve the national strategic planning system and policy coordination mechanisms to ensure effective execution and synergy between major strategies. 2. Focus on fiscal, monetary, industrial, price, and employment policies to work in synergy around national development plans. 3. Strengthen the monitoring and evaluation of the implementation process to ensure the blueprint is followed while allowing for dynamic adjustments based on a problem-oriented approach.
Second, we must deepen the reform of the fiscal, tax, and financial systems to provide key institutional support for the macroeconomic governance system. Regarding fiscal and tax reform, it is necessary to ensure the stable operation of fiscal revenue and expenditure so that fiscal policy is more proactive and effective. Specifically, we must improve the budget system and strengthen the coordination of fiscal resources, while establishing a tax system conducive to high-quality development, social equity, and a unified market. On this basis, we should further establish central-local fiscal relations characterized by clear powers and responsibilities, coordinated financial resources, and regional balance. We should appropriately strengthen the central government's authority and increase the proportion of central fiscal expenditure to alleviate the expenditure and debt pressures faced by local governments, thereby clearing the transmission channels of fiscal policy. Regarding financial system reform, we should actively develop technology finance, green finance, inclusive finance, pension finance, and digital finance to improve the ability of financial services to serve the real economy [8]. We should improve capital market functions to coordinate investment and financing and smooth the transmission mechanism of monetary policy. At the same time, we must accelerate the improvement of the central bank system, refine the financial regulatory system, and improve the "dual-pillar" regulatory framework of monetary policy and macro-prudential policy. Through these actions, we can provide crucial institutional support for the macroeconomic governance system. This year’s Central Economic Work Conference proposed the implementation of a more proactive fiscal policy and a moderately loose monetary policy, aiming to...
"Combined punch" [9]. From the systemic perspective of the macro-economic governance system, this incorporates planning considerations for next year's economic work. The key is to form policy synergy, further increase support for key areas and weak links, and guide more capital toward the real economy, scientific and technological innovation, and livelihood consumption. This will better stimulate the endogenous momentum and innovative vitality of the entire society, thereby achieving superior macro-economic governance results.
Third, enhance the consistency of macro-policy orientation and promote the formation of synergy among various macro-policies.
The 2022 Central Economic Work Conference [10] proposed "strengthening the assessment of consistency with macro-policy orientation"; the 2023 Central Economic Work Conference emphasized "enhancing the consistency of macro-policy orientation"; and the 2024 Central Economic Work Conference further proposed "incorporating both economic and non-economic policies into the consistency assessment of macro-policy orientation, coordinating the entire process of policy formulation and execution, and improving overall policy effectiveness."
In the process of promoting high-quality development, enhancing the consistency of macro-policy orientation helps economic agents form consistent expectations and encourages various macro-policies to form synergy, thereby better coordinating the three major goals of short-term stability, long-term growth, and economic structural optimization. our country possesses extensive practical experience in coordinating stability policies, growth policies, and structural policies. Through the "integration of the three policies" [11] in macro-policy, we can provide an important guarantee for the implementation of consistent macro-policy orientation. Of course, the top-level design for policy coordination and cooperation still needs to be strengthened. It is necessary to further strengthen the understanding of the basic characteristics and institutional guarantees of "macro-policy orientation consistency" from a theoretical level, and design effective implementation paths to avoid falling into cognitive misunderstandings, thereby ensuring effective execution in practice.
Fourth, improve the expectation management mechanism and create favorable expectations for stable economic development. our country's expectation management mechanism is an important innovation that differs from the expectation management of developed countries. It covers both the short-term guidance of people's expectations by relevant ministries and the long-term guidance provided by medium- and long-term planning. In recent years, the Central Committee has continuously improved the expectation management mechanism, accumulating much valuable experience and achieving positive results. For example, by means of policy interpretation, information disclosure, and press conferences, it has strengthened information communication with the public and effectively guided, coordinated, and stabilized social expectations. For instance, it has highlighted the role of medium- and long-term planning in guiding expectations, providing effective guidance for the long-term growth path of the economy.
Moving forward, we must deepen the reform of the expectation management systems and mechanisms, further leverage the advantages of our country's expectation management system, and combine short-term expectation management with long-term expectation guidance to stabilize social expectations. In particular, we must strengthen adaptive expectation management, effectively reverse social expectations, and form a virtuous cycle between economic improvement and enhanced expectations. This will promote the improvement of expectations among micro-level entities, thereby perfecting the macro-economic governance system from the level of expectation management mechanisms and enhancing the effectiveness of macro-economic governance.
(The author is a specially invited researcher at the Ministry of Education's Research Center for Xi Jinping New Era Socialism with Chinese Characteristics and Vice President of the Capital University of Economics and Business) Source: Economic Daily (December 26, 2024) Web Editor: Huihui