Li Chungen: Improving the Institutional System to Enhance the Effectiveness of Macroeconomic Governance
Scientific macro-control and effective government governance are inherent requirements for leveraging the advantages of the socialist market economy system. Improving the macro-economic governance system—guided by national development planning as its strategy, utilizing fiscal and monetary policies as primary instruments, closely coordinating policies in employment, industry, investment, consumption, environmental protection, and regional development, and characterized by optimized goals, rational division of labor, and efficient synergy—represents a major innovation in macro-control theory and practice made by the CPC Central Committee with Comrade Xi Jinping at its core. General Secretary Xi Jinping has emphasized the need to "improve the macro-economic governance system, give play to the strategic guiding role of national development planning, strengthen the coordination and cooperation of fiscal and monetary policies, focus on expanding domestic demand, and enhance the foundational role of consumption in economic development and the key role of investment in optimizing the supply structure." The Third Plenary Session of the 20th CPC Central Committee [1] proposed to "uphold and improve the basic socialist economic system, better leverage the leading role of economic structural reform, improve the macro-economic governance system, and ensure that high-quality development progresses steadily and reaches far," emphasizing the need to "elevate the effectiveness of macro-economic governance." This series of important deployments constitutes a strategic arrangement based on the overall situation of Chinese-path modernization and the challenges of macro-economic governance in the New Era, providing the compliance necessary to crack the deep-seated problems in economic operations.
Currently, global economic growth is sluggish; geopolitical conflicts continue to disrupt the stable operation of global industrial and supply chains; and nations generally face the dual test of "stabilizing growth" and "preventing risks." China's economic development is affected by insufficient effective demand in the short term, while facing challenges such as a lack of innovation and imbalanced regional development in the long term. These are problems occurring through development and transition, which must be addressed by further comprehensively deepening reform. Improving the macro-economic governance system is a vital component of economic structural reform. Further improving this system, perfecting related mechanisms, and elevating governance effectiveness is not only an inevitable requirement for responding to internal and external risks and stabilizing the overall economy, but also an important path for accelerating the construction of the new development paradigm [2] and promoting high-quality development. We must correctly handle the relationship between the government and the market, work hard to further perfect the macro-control institutional system, coordinately advance reforms in key areas, form policy synergy, and continuously elevate the effectiveness of macro-economic governance.
The Collaborative Synergy of Effective Markets and Capable Government
How to correctly handle the relationship between the government and the market is the core issue of China's economic structural reform and a worldwide conundrum in economics. Xi Jinping Economic Thought creatively proposes advancing the improvement of the socialist market economy system, emphasizing that the market should play the decisive role in resource allocation while the government better plays its role. This transcends the Western economic viewpoint regarding the opposition between market and government, opening a new frontier for political economy with Chinese characteristics.
An "effective market" is primarily reflected in three aspects: reflecting the scarcity of various productive factors through price signals to let resources flow where they are needed; relying on competition mechanisms to force corporate innovation and stimulate the vitality of micro-entities; and achieving the maximization of resource allocation efficiency through the dynamic balance of supply and demand. A "capable government" is reflected in the "visible hand" taking proactive initiative in strategic guidance, scientific regulation, institutional supply, risk prevention and control, and ensuring fairness. This both compensates for market failures and creates a stable environment for the efficient operation of the market. To let the market play the decisive role in resource allocation, the government must manage those things the market cannot manage or cannot manage well; the two are not in a relationship of opposition or substitution, but rather a dialectical unity of complementary advantages and collaborative synergy. Promoting the better integration of an effective market and a capable government, following the laws of the market economy, and fully leveraging the institutional advantages of socialism with Chinese characteristics are the prerequisites for effective macro-economic governance.
Since the Reform and Opening-up [3], China has achieved a historic transformation from a highly centralized planned economy system to a vibrant socialist market economy system. The 14th National Congress of the CPC clarified that the goal of our economic structural reform was to establish a socialist market economy system, proposing that the market should play a foundational role in resource allocation under the macro-control of the socialist state. Subsequently, our Party continued to deepen its understanding of the relationship between the government and the market based on expanding practice. The 15th National Congress proposed letting the market play a foundational role in resource allocation under the state's macro-control. The 16th National Congress proposed giving play to the foundational role of the market in resource allocation to a greater extent. The 17th National Congress proposed better leveraging the foundational role of the market in resource allocation institutionally. Since the New Era, the CPC Central Committee with Comrade Xi Jinping at its core has further deepened this understanding. The 18th National Congress proposed giving play to the market's foundational role in resource allocation to a greater extent and in a wider scope. The Third Plenary Session of the 18th CPC Central Committee revised the "foundational role" of the market in resource allocation to the "decisive role." The 19th National Congress emphasized again letting the market play the decisive role in resource allocation. The Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Advancing Chinese-path Modernization [4], deliberated and adopted at the Third Plenary Session of the 20th CPC Central Committee, emphasized that we "must better leverage the role of market mechanisms, create a fairer and more dynamic market environment, realize the optimization of resource allocation efficiency and maximization of benefits, ensuring that we both 'let it live' [5] and 'keep it under control,' better maintaining market order, compensating for market failures, smoothing the circulation of the national economy, and stimulating the endogenous drive and innovative vitality of the whole society." History and practice have proven that promoting the better combination of an effective market and a capable government is an inevitable choice that accords with China’s national conditions and adapts to the requirements for developing the productive forces.
An important prerequisite for improving the macro-economic governance system and elevating its effectiveness is handling the relationship between the government and the market. First, precisely define the boundaries of responsibilities between the government and the market. To better play the government's role, the key lies in accelerating the transformation of government functions and preventing these functions from being displaced, overextended, or absent [6]. We must continue to deepen the reform of the administrative approval system and the commercial system, deepening the management of "power lists" and "responsibility lists," while simultaneously strengthening oversight during and after the fact. Second, accelerate the modernization of the government governance system and governance capacity. We must promote the construction of a digital government, utilizing big data, artificial intelligence, and other technologies to enhance the precision of macro-control; we must also improve the legal protection system to create a stable, predictable institutional environment and a fair, orderly competitive ecosystem for business entities; we must further resolutely break down various barriers to the equal use of productive factors according to law and fair participation in market competition, promoting the healthy and high-quality development of the private economy. Finally, focus on improving coordination mechanisms. It is necessary to establish communication and coordination mechanisms to reflect market demands in a timely manner, absorb corporate suggestions, and optimize or adjust macro-economic policies. Meanwhile, we should enhance the consistency of macro-policy orientation, avoid policy fragmentation, pay more attention to policies working in the same direction and coordinating with one another, and enhance overall effectiveness.
Continuously Perfecting the Macro-control Institutional System
The macro-control institutional system is a vital part of the macro-economic governance system; its degree of perfection directly determines the actual results of macro-economic governance and affects the caliber of high-quality development. Perfecting this system can effectively optimize the mechanisms that safeguard the steady operation of the macro-economy, help realize the optimization and maximization of resource allocation efficiency, and flexibly respond to internal volatility risks and external imported risks brought about by changes in the macro-economic environment.
Since the 18th National Congress of the CPC, China’s macro-control institutional system has been continuously perfected and its governance effectiveness continuously elevated. 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, proposed "improving a macro-control system guided by national development strategies and planning, with fiscal and monetary policies as the primary means." Since then, China has proposed "discretionary control" [7], requiring innovation in macro-control methods and the strengthening of range-based control, targeted control, and discretionary control; it has proposed improving the cross-cycle design and adjustment of macro-control to achieve a long-term balance between stabilizing growth and preventing risks; and it has proposed perfecting the macro-control institutional system to enhance the consistency of macro-policy orientation.
In further perfecting the macro-control institutional system, we must grasp several key points. First, starting from perfecting the national strategic planning system and policy coordination mechanisms, we must strengthen the deep integration of major national strategies to avoid every department fighting its own battle. On this basis, we must effectively execute national strategic plans, promoting the collaborative synergy of fiscal, monetary, industrial, price, and employment policies centered on national development planning. Second, improve the mechanisms for promoting coordinated regional development. Construct a regional economic layout and territorial space system with complementary advantages, improve macro-control mechanisms that promote coordinated regional development, strengthen supporting guarantee mechanisms, improve the main functional zone system, and deeply implement the strategy for coordinated regional development. Third, strengthen the coordination mechanism between scientific and technological innovation and industrial transformation and upgrading. Improve institutional arrangements that promote the deep integration of the innovation chain and the industrial chain, establish mechanisms for the collaborative promotion of strategic emerging industry cultivation and traditional industry upgrading, optimize the macro-policy environment that encourages innovation, and fully stimulate the innovative vitality of various business entities. Fourth, construct a macro-control institutional framework guided by green and low-carbon principles. Incorporate ecological and environmental protection into the evaluation scope of macro-control, guide various resources toward green and low-carbon fields, accelerate the construction of a unified national carbon market, and improve carbon pricing mechanisms. Fifth, improve expectation management mechanisms, focusing on standardizing the release of macro-economic policy information and building regular policy communication channels to reduce expectation fluctuations caused by information asymmetry, thus guiding social expectations to remain consistent with the direction of macro-control.
Coordinately Advancing Reform in Key Areas
Fiscal and tax policies, along with financial policies, are the links between government macro-control and micro-resource allocation; more importantly, they are vital policy tools for transmitting policy intentions, allocating social resources, and stabilizing the overall economy. Coordinately advancing reforms in key areas such as finance, taxation, and the financial sector is an important handle [8] for elevating macro-economic governance effectiveness.
Deepening the reform of the fiscal and tax system requires focusing on three aspects. First, strengthen the integration of fiscal resources and budgeting, and vigorously promote the scientific and meticulous management of finances. Deepen zero-based budgeting reform, unify budget allocation power, improve the system for budget transparency and supervision, as well as the comprehensive government financial reporting system. Strengthen the guarantee of financial resources for major national strategic tasks and basic people’s livelihoods, and enhance the unity and standardization of budget management to ensure the precise and efficient allocation of fiscal resources. Second, optimize the tax system. Centering on goals such as building a unified national market, optimize the tax structure, research tax policies suitable for the development of new business models, and fully implement the principle of statutory taxation. Improve the direct tax system, standardize various income tax policies, and further deepen the reform of tax collection and management to provide precise support for the development of key areas. Third, further rationalize the fiscal relationship between the Central Government and local governments. Form a relationship with clear powers and responsibilities, coordinated financial resources, and regional balance. We must appropriately strengthen the Central Government's powers and increase the proportion of central fiscal expenditure, reducing central powers delegated to local authorities, while also expanding local tax sources, appropriately enlarging local tax management authority, improving the fiscal transfer payment system and the local government debt management system, and increasing the degree to which local financial resources match their responsibilities. This ensures that fiscal operations are safe and sustainable and gives full play to the initiative of both the Central and local governments.
Deepening reform in key financial areas requires collaborative efforts from all sides. First, improve the positioning and governance of financial institutions, perfect incentive and constraint mechanisms for serving the real economy, and promote the tilting of financial resources toward key areas and weak links of the real economy, strengthening the support of finance for technological innovation, industrial upgrading, and people's livelihood guarantees. Second, improve mechanisms for the healthy development of the capital market. Centering on the goals of preventing risks and strengthening regulation, optimize the investment and financing functions of the capital market, support long-term capital entering the market, and maintain capital market order and enhance internal market stability by improving the quality of listed companies, strengthening delisting systems and investor protection, and standardizing the behavior of major shareholders. Third, strengthen financial security mechanisms under open conditions, formulate financial laws, improve the financial regulatory system, build safe and efficient financial infrastructure, steadily and solidly promote the internationalization of the Renminbi, steadily advance the research, development, and application of the digital Renminbi, effectively prevent and control systemic risks, and promote high-level financial opening-up under the premise of ensuring financial security, thereby elevating the effectiveness of financial governance.
Enhancing the Consistency of Macro-policy Orientation
Systems thinking is a foundational ideological and working method. Since the 18th National Congress of the CPC, facing a complex international situation and arduous domestic tasks of reform, development, and stability, the CPC Central Committee with Comrade Xi Jinping at its core has effectively responded to a series of major risks and challenges, pushing the cause of the Party and state to new major achievements, with China's economic strength, technological strength, and comprehensive national power reaching new heights. At the same time, new situations, new problems, and new challenges place higher requirements on the systemic and collaborative nature of macro-policies.
Enhancing the consistency of macroeconomic policy orientation is a pragmatic move to promote high-quality development. From an international perspective, the global economic recovery is lackluster, trade protectionism and unilateralism are on the rise, geopolitical conflicts are intensifying, and the uncertainty and instability of the external environment are becoming increasingly prominent; consequently, the external inflationary and systemic risks [9] facing our country have increased significantly. Facing this complex situation, we must maintain consistency in policy orientation, coordinating the counter-cyclical adjustments of fiscal and monetary policies, the cultivation of key industrial chains and clusters, and the steady expansion of institutional opening-up [10] to form a "policy combo" [11] that strengthens the resilience of economic development. Looking domestically, in the short term, our country's economic development faces pressures such as insufficient effective demand, overcapacity in certain industries, and the mitigation of local government debt risks; in the long term, we must still realize innovation-driven development and advance supply-side structural reform. To this end, it is equally necessary to maintain consistency in policy orientation and coordinate short-term growth with medium- and long-term development. Furthermore, as the connections between various economic and social fields become increasingly profound, a single move often affects the whole body [12]. We must enhance the consistency of macroeconomic policy orientation, incorporating both economic and non-economic policies into a unified consistency assessment to ensure that policies—from top-level design to step-by-step transmission and finally to implementation and results—always exert force in the same direction.
To enhance the consistency of macroeconomic policy orientation, it is necessary to strengthen top-level design, form high-level policy coordination mechanisms, and ensure the proper decomposition of tasks and division of responsibilities. Before major policies are issued, a consistency assessment of the macroeconomic policy orientation must be carried out. We must properly link central and local policies, allowing localities to create differentiated implementation plans based on their actual conditions; this ensures both adherence to the "national chess game" [13] and the utilization of local characteristics. It is necessary to optimize transmission mechanisms, using technical means to integrate data related to policy execution, monitor policy effectiveness, and accurately identify bottlenecks and sticking points. At the same time, we must strengthen policy interpretation and the guidance of expectations, using accessible language to clarify policy directions, enhancing policy transparency, and preventing market entities from making misjudgments due to information asymmetry. We must persist in dynamic adjustments; consideration should be given to establishing a normalized mechanism for research, judgment, and early warning of the macroeconomic situation, integrating multi-sectoral data to capture new conditions and problems in economic operations in a timely manner. We must clarify the trigger conditions and operating procedures for dynamic policy adjustments, responding quickly when major changes occur in the external environment or economic indicators. We should improve the post-evaluation system for policies, regularly assessing policy effects to ensure that policies always align with the actual needs of economic development. It is necessary to improve supervision and evaluation, incorporating the effectiveness of policy synergy into the performance appraisal systems of local governments and departments, and holding those accountable according to regulations if poor policy coordination produces adverse effects. At the same time, we must smooth the feedback channels for enterprises and trade associations so that relevant policies both align with macro-control objectives and stay close to the actual needs of the market.