Wang Yiming: Improving the Effectiveness of Macroeconomic Governance
The 2025 Central Economic Work Conference pointed out: "Regarding the policy orientation for next year’s economic work, we must persist in seeking truth from facts while maintaining stability [1], promote quality improvement and efficiency enhancement, leverage the integrated effects of existing and incremental policies, increase the intensity of counter-cyclical and cross-cyclical adjustments, and elevate the efficacy of macroeconomic governance." Grasping the evolutionary logic from "macro-control" to "macroeconomic governance," reviewing the achievements of macroeconomic governance during the 14th Five-Year Plan period (2021–2025), and analyzing measures to improve macroeconomic governance during the 15th Five-Year Plan period (2026–2030) as well as the macro-policy orientation for 2026, is of great significance for understanding and mastering effective ways to enhance the efficacy of macroeconomic governance under the new situation and continuing to handle economic work well.
Grasping the Logic of the Transition from "Macro-Control" to "Macroeconomic Governance"
Since the 18th CPC National Congress [2], China’s economic development has entered a "new normal," and many trend-like changes have appeared in economic operations. For instance, from the perspective of the total balance of supply and demand, for a long period in the past, the issue was overheating demand and insufficient supply. However, after undergoing high-speed industrial development, China has become the world’s largest manufacturing power, with manufacturing capacity expanding rapidly. Furthermore, with the accelerated aging of the population and deep adjustments in the real estate market, the constraints of demand on economic growth have continued to strengthen. The relationship between supply and demand now manifests as insufficient demand—a pattern of "strong supply, weak demand." Similarly, regarding investment and consumption, investment was the primary driver of economic growth in the past; when facing external shocks and downward pressure, economic growth was often pulled along by expanding investment. But as the space for infrastructure investment narrows and the pressure of accumulated local debt increases, the growth rate of investment has slowed significantly, and its power to drive economic growth has weakened. Furthermore, regarding the conversion of old and new drivers [3], the new round of technological revolution centered on artificial intelligence is profoundly affecting macroeconomic operations by reshaping production methods and resource allocation, accelerating the differentiation of the economic structure. High-tech and strategic emerging industries are maintaining rapid growth. Meanwhile, looking at the external environment, geopolitical conflicts and the restructuring of global production and supply chains have caused the instability and uncertainty of the external environment to rise significantly.
The aforementioned conditions indicate that profound changes have occurred in China’s macroeconomic operations, presenting a complex situation where cyclical, structural, and institutional factors overlap, and internal balances are intertwined with external shocks. Economic development is at a critical stage of converting growth drivers and upgrading the development model, further increasing the complexity and urgency of macro-control. The shift from traditional "macro-control" to "macroeconomic governance" is an inevitable choice to adapt to the phased changes in economic development and respond to complex and severe challenges; it is also a major innovation in our Party's concept and practice of macroeconomic management.
The shift from "macro-control" to "macroeconomic governance" possesses new connotations and practical characteristics. Regarding the subjects of governance, in traditional macro-control, the government and the market exist in a subject-object relationship. Macroeconomic governance, however, emphasizes that both the government and the market are means of resource allocation; it requires coordinating the relationship between an effective market and a proactive government, allowing the "invisible hand" and the "visible hand" to work in synergy. Regarding governance objectives, traditional macro-control has relatively singular policy goals, mainly counter-cyclical adjustments to smooth out fluctuations in the economic cycle, achieve economic growth, promote employment, and control inflation. The policy goals of macroeconomic governance are more diverse, including balancing aggregates, optimizing structure, enhancing quality, and preventing risks. It emphasizes coordinating counter-cyclical and cross-cyclical adjustments—not only smoothing fluctuations through counter-cyclical regulation but also focusing on cross-cyclical balance to prevent policy excesses from leading to diminishing returns or long-term side effects, while forestalling and defusing risks to promote high-quality development. Regarding the focus of governance, traditional macro-control primarily emphasizes demand management, stabilizing total demand through fiscal and monetary policies. Macroeconomic governance emphasizes that supply and demand are two sides of the same coin in economic operation, serving as conditions for one another and being mutually dependent. It requires coordinating the expansion of domestic demand with the optimization of supply to achieve a dynamic balance of supply and demand at a higher level. Regarding the mode of governance, traditional macro-control mainly relies on the policies of macro-control departments. Macroeconomic governance emphasizes the coordination and cooperation of governance subjects, leveraging the strategic guiding role of national development planning, strengthening the coordination of fiscal and monetary policies, and utilizing the roles of policies concerning industry, prices, employment, consumption, investment, trade, regions, environmental protection, and regulation. It involves strengthening the assessment of macro-policy orientation consistency, improving expectation management mechanisms, and forming policy synergy. Regarding the vision of governance, traditional macro-control mainly considers domestic economic operations. Macroeconomic governance emphasizes coordinating internal and external relations; while promoting the domestic economic cycle, it aims to smooth and enhance the international cycle, maintain a basic balance in the current account and overall balance of payments, and promote internal and external economic equilibrium.
Achievements of Macroeconomic Governance During the "14th Five-Year Plan" Period
During the 14th Five-Year Plan period, facing intricate changes in the international environment and arduous tasks of domestic economic transformation, China persisted in the general principle of seeking progress while maintaining stability [1]. It implemented a series of proactive and effective macro-policies, continuously improved the pertinence and effectiveness of macro-control, and accelerated the construction of a macroeconomic governance system adapted to phased changes in economic development.
As a major instrument of macro-control, fiscal policy played a dual role in expanding total demand and adjusting the structure, smoothing cyclical economic fluctuations and promoting the balance of economic aggregates and structural optimization. During the 14th Five-Year Plan period, proactive fiscal policies were vigorously implemented to expand the scale of expenditure and strengthen financial guarantees for key areas, effectively responding to the shocks of the COVID-19 pandemic and challenges brought by the changing international environment. The structure of fiscal expenditure was optimized to support the construction of the world’s largest education, social security, and healthcare systems. The implementation of even more proactive fiscal policies effectively supported the expansion of domestic demand and promoted a sustained economic recovery and improvement.
Monetary policy likewise played an important role in macro-control. During the 14th Five-Year Plan period, monetary policy was adjusted and optimized several times to ensure that the growth of social financing and money supply matched the expected targets for economic growth and the general price level, promoting a steady decline in integrated social financing costs. In September 2024, the Central authorities promoted the introduction of a package of incremental policies, including a series of high-intensity monetary policy measures, which effectively pushed the economy to stabilize and bounce back. Since 2025, a moderately loose monetary policy has been implemented. In May 2025, a new package of monetary measures was launched, including further reductions in the reserve requirement ratio and interest rates, increasing structural monetary policy support for technological innovation, boosting consumption, supporting small and micro-enterprises, and stabilizing foreign trade, while optimizing two monetary policy tools supporting the capital market. These measures effectively maintained ample liquidity in financial markets and pushed social financing costs to historical lows, playing a positive role in boosting market confidence, improving social expectations, responding to external shocks, and promoting a sustained economic recovery.
On the basis of implementing more proactive and effective macro-policies, the improvement of the macroeconomic governance system was accelerated. Greater emphasis was placed on policy coordination, strengthening the cooperation between fiscal and monetary policies while also enhancing coordination with policies regarding industry, prices, employment, consumption, investment, trade, and regions. Assessments of macro-policy orientation consistency were conducted to enhance the coherence and effectiveness of policy trends. Greater focus was placed on expectation management, improving mechanisms to guide expectations and manage risks under complex circumstances. Reviewing the 14th Five-Year Plan, China has achieved the multiple goals of stable growth in economic aggregates, continuous structural optimization, and effective quality improvement by accelerating the improvement of the macroeconomic governance system. This is mainly manifested in: First, the economic scale reached new heights. During the 14th Five-Year Plan period, GDP successively crossed the three major thresholds of 110 trillion, 120 trillion, and 130 trillion yuan; it is expected to reach approximately 140 trillion yuan in 2025, with China’s status as the world’s second-largest economy being consolidated and elevated. Second, new progress was made in structural adjustment, with the economic structure continuing to optimize and the pace of industrial upgrading accelerating. Third, development quality achieved new improvements, with technological innovation capabilities greatly enhanced and comprehensive scientific and technological strength rising significantly.
China's economic development has not only changed itself but has also influenced the world. During the 14th Five-Year Plan period, China’s contribution rate to global economic growth remained at around 30%, making it the most stable and reliable driver of world economic growth. As a mega-scale economy, its development spillover effects are significant. In 2024, China’s total trade in goods reached 43.8 trillion yuan, ranking first in the world for eight consecutive years. The export of high-quality, reasonably priced goods has created favorable conditions for many countries to maintain price stability and improve national welfare. China’s exports of wind and solar products during the 14th Five-Year Plan period reduced carbon emissions for other countries by a cumulative total of approximately 4.1 billion tons, making a major contribution to the global low-carbon transition.
Key Orientations for Enhancing the Efficacy of Macroeconomic Governance During the "15th Five-Year Plan" Period
The "Recommendations of the CPC Central Committee on Formulating the 15th Five-Year Plan for National Economic and Social Development" (hereafter the Recommendations), adopted by the Fourth Plenary Session of the 20th CPC Central Committee, made general arrangements for enhancing the efficacy of macroeconomic governance during the 15th Five-Year Plan period, proposing to "improve the macroeconomic governance system" and "elevate the efficacy of macroeconomic governance." Compared to the 14th Five-Year Plan, the 15th Five-Year Plan emphasizes "strengthening counter-cyclical and cross-cyclical adjustments, implementing more proactive macro-policies," "enhancing the consistency of macro-policy orientation," "improving expectation management mechanisms," and "promoting the formation of an economic development model dominated more by domestic demand, driven by consumption, and fueled by endogenous growth," providing a clear direction for enhancing macroeconomic governance efficacy.
Strengthening counter-cyclical and cross-cyclical adjustments. Increase the intensity of proactive fiscal policy. Optimize the structure of fiscal expenditure, placing greater emphasis on "investing in people," reasonably increasing the proportion of public service expenditures within fiscal spending, and raising the share of government investment in areas related to people’s livelihoods. By increasing expenditures on public services and livelihood guarantees such as education, childcare, elderly care, and healthcare, the consumption capacity of residents will be improved. Promoting stable economic growth and a reasonable rebound in prices should be taken as important considerations for monetary policy, guiding financial institutions to increase support for key areas such as expanding domestic demand, technological innovation, and small and micro-enterprises. The structural problems faced by economic operations cannot be solved in the short term; they require strengthening cross-cyclical adjustments and advancing structural reforms. In the coming period, it is necessary to accelerate the construction of a unified national market, thoroughly rectify "involutionar-style" [4] competition, and improve the mechanism for the orderly exit of backward and overcapacity industries.
Strengthening regional coordination and policy cooperation. The macroeconomic governance system with Chinese characteristics must leverage the roles of fiscal and monetary policies while simultaneously reinforcing the strategic guiding role of national development planning. It must strengthen fiscal and monetary policy coordination and make good use of policies regarding industry, prices, employment, consumption, investment, trade, regions, environmental protection, and regulation. This avoids policy effects canceling each other out or falling into a "composition fallacy," thereby forming policy synergy and improving macro-governance efficacy.
Improving expectation management mechanisms. More attention should be paid to market expectation management, strengthening communication and exchange with market entities, and improving policy transparency. When major policies are introduced or major emergencies occur, authoritative interpretations should be provided to allow market entities to better understand policy intentions, avoiding market fluctuations caused by misjudgments, and enhancing the ability to guide expectations and manage risks under complex circumstances.
Promoting the formation of an economic development model more dominated by domestic demand, driven by consumption, and fueled by endogenous growth. Expanding domestic demand cannot rely solely on short-term policy adjustments to form a long-term mechanism. Short-term policies must be combined with mid-to-long-term institutional building to form a long-term mechanism for expanding domestic demand and effective institutional arrangements for promoting consumption. As the Recommendations clearly state...
“Promote the formation of an economic development model dominated by domestic demand, driven by consumption, and sustained by endogenous growth.” This requires addressing the deep-seated problems of insufficient domestic demand and weak consumption from the perspective of the economic development model itself. To transform the economic development model, we must exert great effort to deepen reform. First, we must deepen the reform of the fiscal and taxation systems. In China, consumption tax is levied at the production stage and in the place of production; because local governments in the places of consumption struggle to benefit from this, it constitutes an institutional factor weakening their inherent motivation to promote consumption. We must accelerate the implementation of the decision made at the Third Plenary Session of the 20th CPC Central Committee to “promote the shifting of consumption tax collection to a later stage in the distribution chain and steadily delegate the revenue to local governments.” This will incentivize local governments’ enthusiasm for expanding consumption and change the local government behavioral pattern of “emphasizing investment while neglecting consumption.”
Second, we must accelerate the urbanization of the agricultural transfer population [5]. We must speed up the implementation of the system wherein basic public services are provided based on the household registration of the place of permanent residence. We should encourage governments in places of permanent residence to resolve issues regarding basic public services for the agricultural transfer population—such as social insurance, housing security, and education for children relocating with them—and establish effective incentive mechanisms to increase the enthusiasm of these governments to provide such services, thereby releasing the enormous consumption potential of the agricultural transfer population.
Third, we must relax market access restrictions in the service industry. While China’s commodity consumption is relatively saturated, the potential for service consumption is immense. We must innovate diversified consumption scenarios and expand service consumption. Access restrictions should be relaxed and service prices streamlined to attract more social capital, developing high-quality products and services in more niche sectors to satisfy the diverse and differentiated service consumption needs of middle- and high-income groups.
Implementing More Proactive and Effective Macro Policies in 2026
The year 2026 marks the opening year of the 15th Five-Year Plan. The 2025 Central Economic Work Conference [6] put forward requirements such as “adhering to the general keynote of seeking progress while maintaining stability,” “implementing more proactive and effective macro policies,” and “striving to stabilize employment, stabilize enterprises, stabilize markets, and stabilize expectations to promote the economy in achieving effective improvement in quality and reasonable growth in quantity,” thereby ensuring a good start for the 15th Five-Year Plan.
Currently, the difficulties and challenges facing China’s economic operation mainly involve the deepening impact of changes in the external environment, the prominent internal contradiction of strong supply versus weak demand, and numerous hidden risks in key areas. We must face the problems head-on and confront the challenges, recognizing that these are issues encountered during development and transformation; they cannot be bypassed or avoided, and they can be resolved through effort. In response to the multiple pressures such as insufficient domestic demand facing economic operations, we must maintain the necessary scale and intensity of macro policies, continue to implement a more proactive fiscal policy and a moderately loose monetary policy, and leverage the integrated effects of existing and incremental policies to promote a sustained economic recovery.
Continued implementation of a more proactive fiscal policy involves maintaining the necessary fiscal deficit, total debt scale, and total expenditure in terms of policy intensity. We must focus on the present by making full and effective use of fiscal policy space, while also leaving room to respond to future risks to ensure fiscal sustainability. In terms of policy quality and efficiency, we must focus on improving precision and effectiveness. We should optimize the structure of fiscal expenditure, strengthen the financial guarantee for major national strategies, and promote more capital and resources to “invest in people,” placing greater emphasis on benefiting people’s livelihoods, expanding domestic demand, and increasing developmental momentum.
Continued implementation of a moderately loose monetary policy involves taking the promotion of steady economic growth and a reasonable rebound in prices as important considerations. We should treat price targets as the “anchor” of monetary policy, keeping a close eye on changes in the Consumer Price Index (CPI) and the GDP deflator, and maintaining sufficient intensity in monetary policy. In terms of policy execution, we should flexibly and efficiently utilize various monetary policy tools such as lowering reserve requirement ratios and interest rates to maintain ample liquidity. This ensures that the growth of social financing scale and money supply matches the expected targets for economic growth and the general price level, promoting the low-level operation of comprehensive social financing costs and creating a favorable monetary and financial environment for a sustained economic recovery. We must unblock the transmission mechanism of monetary policy to guide the flow of funds toward key areas such as expanding domestic demand, promoting technological innovation, and supporting the development of small, medium, and micro enterprises.
(Author: Wang Yiming, Vice Vice Chairman of the China Center for International Economic Exchanges) Source: Guangming Daily (January 13, 2026) Web Editor: Huihui