Liu Fengyi: On the Macroeconomic Governance Theory of Xi Jinping's Economic Thought
A sound macro-economic governance system is an intrinsic requirement for promoting high-quality development in the New Era and a vital component in constructing a high-level socialist market economy. Macro-economic governance theory provides the theoretical basis for perfecting the macro-economic governance system, refining the institutional system of macro-control, and formulating various macro-control policies. Since the 18th CPC National Congress, the Party Central Committee with Comrade Xi Jinping at its core has continuously deepened its regular understanding [1] of macro-economic governance within the socialist market economy, gradually forming a theoretical system regarding macro-economic governance.
"Macro-economic governance" is a major landmark concept within Xi Jinping’s economic thought. It represents an innovative development of Marxist macro-economic thought and achieves a transcendence over Western macro-control theories.
To date, the theoretical community has achieved fruitful results in the study of Xi Jinping’s economic thought, yet research into the systematization and theoretization of macro-economic governance theory remains relatively weak. Existing research is mainly concentrated in two areas: first, research on the relationship between the government and the market within Xi Jinping’s economic thought, which has not yet been organically integrated with the theoretical system of macro-economic governance; second, research on China's macro-control, which has primarily focused on macro-economic policies themselves—such as objectives, means, and innovative methods—without yet delving into the theoretization and systematization of macro-economic governance. Based on this, and drawing upon insights from studying the first volume of the Selected Economic Works of Xi Jinping, this article summarizes and elaborates on these issues from the perspective of the theoretical system of macro-economic governance.
I. Macro-economic Governance is a Major Landmark Concept in Xi Jinping’s Economic Thought
Compared to the existing concept of "macro-control," macro-economic governance has achieved a "terminology revolution" in Chinese macro-economics. In our country, macro-economic governance is the concept corresponding to macro-control. Macro-control is a concept closely related to the establishment and improvement of China's socialist market economy system. In October 1984, the "Decision of the Central Committee of the Communist Party of China on Reform of the Economic Structure," adopted at the Third Plenary Session of the 12th CPC Central Committee, pointed out: "The more we vitalize the economy, the more we must pay attention to macro-regulation, and the better we must become at comprehensively using economic levers such as prices, taxes, and credit based on a timely grasp of economic trends." In this important "Decision" marking the transition from a planned economy to a market economy, the concept of "macro-regulation" (宏观调节) was used for the first time. In October 1992, the report to the 14th CPC National Congress explicitly stated: "The socialist market economy system we want to establish is to let the market play a foundational role in resource allocation under the macro-control of the socialist state." Here, the concept of "macro-control" (宏观调控) under the socialist market economy system was clearly articulated. From then on, China's macro-economic management entered the era of "macro-control." The theories and policies of China's macro-control have adhered to the guidance of Marxist political economy, innovating and developing continuously by combining the process of establishing and improving the socialist market economy system with a critical appropriation of Western macro-control theories.
Since the 18th CPC National Congress, as the socialist market economy system has been continuously perfected, our Party’s understanding of macro-economic operation and management within the socialist market economy has also deepened. The Third Plenary Session of the 18th CPC Central Committee was an epoch-making meeting that, for the first time, integrated macro-economic management with the modernization of the national governance system and governance capacity. In his "Explanation on the Decision of the CPC Central Committee on Several Major Issues Concerning Comprehensively Deepening Reform," General Secretary Xi Jinping clearly pointed out that letting the market play the decisive role in resource allocation and better playing the role of the government "is a major theoretical viewpoint proposed in the Decision of this Plenary Session." This major theoretical breakthrough emphasizes the decisive role of the market in resource allocation while simultaneously emphasizing the better functioning of the government. He noted: "The Decision of the Plenary Session puts forward clear requirements for better playing the role of the government, emphasizing that scientific macro-control and effective government governance are internal requirements for exerting the institutional advantages of the socialist market economy." Combined with the theme of this meeting, it can be seen that the "effective government governance" proposed here by General Secretary Xi Jinping is actually the starting point for the concept of "macro-economic governance." Following this, although the concept of "macro-control" was still used regarding the management of macro-economic operations, it already exceeded the connotations of traditional macro-control in terms of content, methods, means, and scope. For example, the 2015 Central Economic Work Conference clearly proposed that while moderately expanding aggregate demand, efforts should be focused on strengthening supply-side structural reform and "implementing five major coordinating policy pillars," namely macro policy, industrial policy, micro policy, reform policy, and social policy. These policy contents clearly exceed the scope of macro-control in the general sense. Furthermore, the report to the 19th CPC National Congress in 2017 stated: "We will innovate and improve macro-control, give play to the strategic guiding role of national development plans, and refine coordination mechanisms for economic policies such as fiscal, monetary, industrial, and regional policies." The report further pointed out that comprehensively deepening reform "must adhere to and improve the system of socialism with Chinese characteristics, and continuously promote the modernization of the national governance system and governance capacity." Here, macro-control and national governance became more closely linked.
In May 2020, the "Opinions of the CPC Central Committee and the State Council on Accelerating the Improvement of the Socialist Market Economy System in the New Era" for the first time explicitly proposed "perfecting the macro-economic governance system" and "further improving macro-economic governance capacity." At this point, macro-economic management in the socialist market economy completed the "terminology revolution" from "macro-control" to "macro-economic governance." In November 2020, the Fifth Plenary Session of the 19th CPC National Congress clearly proposed "健全" (perfecting/strengthening) the macro-economic governance system on the basis of "improving" macro-economic governance. In October 2022, the 20th CPC National Congress further proposed to "健全" (strengthen/perfect) the macro-economic governance system and give play to the strategic guiding role of national development plans. In July 2024, the "Decision of the CPC Central Committee on Further Comprehensively Deepening Reform and Advancing Chinese-path Modernization," adopted at the Third Plenary Session of the 20th CPC Central Committee, treated "strengthening the macro-economic governance system" as a standalone section—one of the fifteen parts of the report—rather than integrating it into other sections as in previous reports. This highlights the important status of macro-economic governance. The Fourth Plenary Session of the 20th CPC Central Committee then clearly proposed "enhancing the effectiveness of macro-economic governance."
II. The Transcendence of Macro-economic Governance Theory over Western Macro-control Theory in Terms of Methodology
Xi Jinping’s economic thought is the latest achievement of political economy with Chinese characteristics, making important original contributions to the enrichment and development of Marxist political economy. The macro-economic governance theory of Xi Jinping’s economic thought transcends Western macro-control theory methodologically.
Western macro-control theory is built on the foundation of Keynesian economics, having formed a theoretical system through continuous development and integration. Unlike Western liberal economic theory, Western macro-control theory acknowledges the fact that economic crises exist under capitalism and recognizes the phenomenon of "market failure" in resource allocation, believing that government intervention is required to resolve crisis issues. Western macro-control theory holds that capitalist economic crises stem from insufficient effective demand in the market; therefore, mitigating the crisis requires the government to use fiscal and monetary policies to stimulate effective demand and promote economic growth. It should be said that the principles of Western macro-control theory regarding the use of fiscal and monetary policies to regulate the macro-economy reflect, to a certain extent, the general laws of market economy operation under the conditions of socialized large-scale production, and they have a certain reference value for forming the macro-economic governance theory in our socialist market economy.
It must be pointed out that the understanding of Western macro-control theory must adhere to the guiding position of Marxist political economy. General Secretary Xi Jinping has noted: "Currently, various economic theories are manifold, but the foundation of our political economy can only be Marxist political economy, and not any other economic theory." This clearly indicates that in our country, Marxist political economy holds the guiding position among various economic theories. The reason we insist on take Marxist political economy as our guide is that it is a scientific theory and methodology. General Secretary Xi Jinping emphasized: "Studying the basic principles and methodology of Marxist political economy helps us master scientific methods of economic analysis, recognize the process of economic movement, grasp the laws of social economic development, improve our ability to command the socialist market economy, and better answer the theoretical and practical questions of our country's economic development." Marxist political economy is an open theory; we should reasonably draw upon those contents in Western economics that reflect the general laws of socialized large-scale production and the market economy. General Secretary Xi Jinping especially cautioned that regarding foreign economics, particularly Western economics, "the contents reflecting the attributes and values of the capitalist system, and those with Western ideological coloring, must not be copied blindly." These important discourses provide a guide for us to deeply understand the limitations of Western macro-control theory and to construct an autonomous knowledge system for China's macro-economic governance theory.
While Western macro-control theory has points worth referencing in its specific categories and principles, it is unscientific in its overall methodology, mainly reflected in the following three aspects:
First, it views capitalist private ownership as an eternal and most efficient system. This is the institutional premise upheld by Western macro-control theory. This premise determines that the theoretical system of Western macro-control must adhere to a capital-centered position; so-called fiscal and monetary policies are fundamentally at the service of maximizing capital interests. At the same time, this theory holds that public ownership cannot be truly or organically combined with a market economy, viewing public ownership as inefficient and claiming that its implementation inevitably leads to the "tragedy of the commons" [2]. In contrast, the macro-economic governance theory of Xi Jinping’s economic thought explicitly proposes that the socialist market economy adheres to a people-centered approach and the basic socialist economic system, continuously exploring and perfecting the organic integration of the socialist system and the market economy.
Second, it holds a metaphysical way of thinking regarding the relationship between the government and the market. Although Western macro-control theory acknowledges market failure and believes the government should extend its "visible hand" (i.e., implement macro-control) in areas where the market fails, its macro-economic methodology views the government and the market as a binary opposition—a "zero-sum" relationship. It regards the government as an exogenous variable rather than an organic constituent part of the market economic system. From this perspective, Western macro-control theory is essentially consistent with Western liberal economic theory. On the surface, Western liberal economics and Western macro-control theory are sharply opposed: liberal economics rejects the notion of market failure and thus opposes government intervention, believing that even if an economic crisis occurs, it is a temporary phenomenon that the market can always mitigate and eliminate through its own adjustment. Western macro-control theory, however, believes that the government must intervene in the event of market failure. At the policy level, the focus of the debate between the two is "large market, small government" versus "small market, large government." Fundamentally, both theoretical systems view the relationship between the government and the market as one where one gains at the expense of the other—a binary opposition. In the system of Western economic theory, this binary opposition is manifested as the incompatibility between macro-economics and micro-economics. Marxist political economy, however, holds that the government (the state) possesses a dual nature: one is a class attribute, and the other is a public service attribute, with the latter subordinate to the former. Specifically regarding the functions of a bourgeois government, it serves the class of capital owners on the one hand and social public affairs on the other, but the latter must serve the former. Because of this, the primary purpose of all interventionist activities by a bourgeois government is to serve capital's pursuit of maximum profit; as for satisfying people’s livelihoods and public services, these do not reside within the operational logic of capital. Therefore, the "visible hand" of government intervention in Western macro-control theory is restricted by the fundamental requirement of serving capital's interests. In contrast, macro-economic governance theory in Xi Jinping’s economic thought adheres to the fundamental purpose of meeting the people's needs, masters the dialectics of the relationship between the government and the market, coordinates the relationship between an "efficient market" and a "capable government," and breaks through the metaphysical thinking of the government-market binary.
Third, Western macro-control theory is limited solely to the sphere of circulation [3]. Western macro-control theory uses the relationship between aggregate supply and aggregate demand to analyze the trends of macro-economic operation. When aggregate supply exceeds aggregate demand, the market economy exhibits a surplus of products and finds itself in a state of...
A state of insufficient "effective demand" leads to economic crises. According to this theoretical logic, resolving an economic crisis requires the government to find ways to expand demand so that the exchange of products can be successfully realized. Of course, situations where total supply is less than total demand may also arise during market operations; in such cases, government intervention seeks ways to increase supply to meet social needs. Whether stimulating demand or suppressing supply, Western macro-control theories generally seek a way out within the relationship between supply and demand. Their essence is an attempt to solve problems within the sphere of circulation. This violates the law of interaction between production, distribution, circulation, and consumption within the organism of the national economy, and it does not conform to the actual economic and social development of Western countries; it is, therefore, unscientific. Conversely, the macro-economic governance theory of Xi Jinping Thought on Economy persists in proceeding from the organism of the national economy. It studies the laws of macroeconomic operation based on the dialectical relationship between the four links of production, distribution, circulation, and consumption in a socialist market economy, as well as the organic integration of total supply and total demand.
III. Upholding the Centralized and Unified Leadership of the Party over Economic Work is the Fundamental Feature of Macro-economic Governance Theory
The leadership of the Communist Party of China is the most defining feature of socialism with Chinese characteristics and the fundamental guarantee that the socialist market economy develops in the right direction. General Secretary Xi Jinping has pointed out: "Upholding the Party's leadership and giving play to the Party's role as the leadership core in overseeing the overall situation and coordinating all parties is an important feature of our country's socialist market economy system... In our country, the Party's strong and powerful leadership is the fundamental guarantee for the government to play its role." The centralized and unified leadership of the Party over economic work is the fundamental feature of our country's macro-economic governance theory and the essential difference between our macro-economic governance and Western macro-control, manifested primarily in the following aspects.
First, upholding the Party's leadership ensures that the fundamental standpoint of macro-economic governance is people-centered. The essential difference between Western macro-control theory and the macro-economic governance theory of Xi Jinping Thought on Economy lies in the different class positions they represent. Western macro-control theory represents the interests of capitalists; regardless of which Western bourgeois party is in power, they persist in being capital-centered and formulate various macroeconomic policies according to the logic of capital. The Communist Party of China always represents the fundamental interests of the broadest possible majority of the people; it does not have any special interests of its own, and it never represents the interests of any interest group, any power bloc, or any privileged stratum. General Secretary Xi Jinping noted: "We must take the realization, maintenance, and development of the fundamental interests of the broadest possible majority of the people as the starting point and foothold of all our work, and more consciously ensure that the fruits of reform and development benefit all people more extensively and fairly." Macro-economic governance theory within Xi Jinping Thought on Economy consistently adheres to the fundamental people-centered standpoint.
Second, upholding the Party's leadership ensures that the fundamental purpose of macro-economic governance is to meet the needs of the people. The starting point of Western macro-control theory is responding to "insufficient effective demand," believing that the cause of such insufficiency lies in the psychological factors of consumers and investors. Whether the government adopts fiscal, monetary, or other policies to address insufficient effective demand, these policies are formulated around stimulating the motive of capital to pursue maximum profit. As for meeting the needs of the masses, it is by no means the purpose of production itself in a capitalist society; it is merely a "driven wheel" [4] to satisfy the needs of capital valorization. On this point, no matter which bourgeois political party comes to power, the essence remains the same.
In our country, in developing a socialist market economy, the fundamental purpose of production is to meet the people's growing needs for a better life. As General Secretary Xi Jinping pointed out: "Adapting to changes in the needs of the masses, striving to run various livelihood undertakings well, and making life better and better for the common people is the fundamental purpose of socialist production." Therefore, our macroeconomic policies—whether fiscal, monetary, or industrial—must comply with the requirements to stimulate the vitality and momentum of various market entities, and must also comply with the requirements of the fundamental purpose of meeting the people's needs. Precisely because of this, our macro-economic governance policies emphasize the consistency between economic and non-economic policies, highlighting that investment and consumption are always closely linked with the guarantee and improvement of people's livelihoods.
Third, upholding the Party's leadership ensures the socialist nature of macro-economic governance. Adhering to a people-centered macro-economic governance that meets the needs of the people requires a solid economic foundation as a guarantee. Upholding the Party's leadership necessitates unswervingly consolidating and developing the public ownership economy, maintaining the dominant position of public ownership and the leading role of the state-owned economy, and persisting in making state-owned capital and enterprises stronger, better, and bigger to provide a solid foundation of public ownership for meeting the people's needs. It requires maintaining the dominant position of distribution according to work and persisting in the path of shared development and common prosperity to provide a solid institutional foundation for meeting the people's needs. It requires making the real economy stronger, better, and bigger to provide a solid material foundation for meeting the people's needs. General Secretary Xi Jinping emphasized: "We must never allow the real economy, which concerns national security, the national economy, the people's livelihood, and international competitiveness, to become hollowed out or diminished." The non-public economy is an important component of the socialist market economy; we must unswervingly encourage, support, and guide the development of the non-public sector. Through effective economic governance, our Party gives play to the positive role of capital. General Secretary Xi Jinping explicitly stated: "We must explore how to give play to the positive role of capital under the conditions of a socialist market economy, while effectively controlling its negative effects" and "we must prevent the 'barbaric growth' [5] of some capital."
Fourth, upholding the Party's leadership ensures that the institutional advantages of macro-economic governance are transformed into governance efficacy. Western macro-control theory emphasizes the top-down, unidirectional action of the government; therefore, in the discourse of Western macro-control, government intervention is often metaphorically described as the "visible hand." The macro-economic governance theory of Xi Jinping Thought on Economy is different; it embodies a relationship of systemic integration, in which the centralized and unified leadership of the Party occupies the dominant position. General Secretary Xi Jinping pointed out: "Economic work is the center of our work. The Party's leadership must naturally be fully reflected in this central work. By grasping the 'ox's nose' [6] of central work, other tasks can be better unfolded." At the same time, our macro-economic governance involves both top-down and bottom-up processes, as well as horizontal coordination; various forces interact to form a synergy for joint governance. To this end, General Secretary Xi Jinping vividly noted: "In the 'grand chessboard' [7] of the national governance system, the Party Central Committee is the 'commander' [8] sitting in the central tent, while the 'chariots, horses, and cannons' [9] each play to their strengths; the overall game is clearly defined."
The Party Central Committee focuses on top-level design, performing forward-looking thinking, overall planning, strategic layout, and holistic advancement of economic development, playing its role in setting the direction, managing the overall situation, and ensuring implementation. Localities resolutely implement the decisions and deployments of the Party Central Committee, avoiding the practice of each going their own way, while also bringing local initiative and creativity into play, leveraging the advantage of combining top-level design with "crossing the river by feeling the stones" [10]. Our macro-economic governance also emphasizes the dialectics of "coordinated development": emphasizing the combination of coordinating concentrated resources to accomplish major undertakings with giving play to the decisive role of the market in resource allocation; emphasizing the coordination of the strategy to expand domestic demand with supply-side structural reform; emphasizing the coordination of the effective enhancement of quality with the reasonable growth of quantity; emphasizing the coordination of the consistent orientation of economic and non-economic policies; and emphasizing the coordination of the unity of development quality, structure, scale, speed, benefit, and security, among others. All of these fully demonstrate the distinctive feature of our macro-economic governance in creatively transforming institutional advantages into governance efficacy.
IV. The New Relationship Between Government and the Market is the Basic Core of Macro-economic Governance Theory
The relationship between the government and the market is a fundamental issue in a market economy. In our country, properly handling this relationship has always been the core issue of economic structural reform. Our macro-economic governance has always revolved around this core issue. As previously mentioned, in terms of theory, there are serious divergences between liberal economics and Keynesian economics regarding the relationship between the government and the market: the former advocates the concept of "market omnipotence" and opposes government intervention; the latter emphasizes the existence of "market failure" and advocates necessary government intervention. In practice, Western countries, facing the periodic outbreaks of economic crises, have constantly wavered between "large market, small government" and "small market, large government," failing to find a truly law-abiding and effective governance system. Therefore, General Secretary Xi Jinping called the problem of the relationship between government and market a "world-class puzzle in economics."
Marxist political economy holds that the national economy is an organic whole; the macro-economy is not a simple sum of micro-individuals, but an organic unity where micro-individuals are dialectically connected and interdependent. In Xi Jinping Thought on Economy, the relationship between government and market is not a binary opposition or strictly separated, but a relationship of dialectical unity and mutual promotion. This determines that the relationship is not one of unidirectional control, but of bidirectional governance. The basic guideline of this governance relationship is to let the market play the decisive role in resource allocation and better play the role of the government. General Secretary Xi Jinping pointed out: "Proposing that the market plays the decisive role in resource allocation is a new breakthrough in our Party's understanding of the laws of building socialism with Chinese characteristics, a new achievement in the Sinicization of Marxism, and marks that the development of the socialist market economy has entered a new stage."
Letting the market play the decisive role in resource allocation while better playing the role of the government is a major new breakthrough in Xi Jinping Thought on Economy's understanding of the laws governing the relationship between the government and the market in the New Era. It achieves a transcendence over Western economics' theories and practices concerning this relationship, providing theoretical guidance for building a high-level socialist market economy, promoting high-quality development, and advancing Chinese-path modernization.
From the general laws of a market economy, the market plays the decisive role in resource allocation. This decisive role is realized through the operation of the law of value, where market entities independently make decisions on what to produce, how much to produce, and how to produce based on various types of market information. The market mechanism of survival of the fittest incentivizes market entities to exercise initiative, proactivity, and creativity, gaining greater returns through continuous innovation. The interaction of mechanisms such as price, supply and demand, and competition in the market allows resources to shift and flow between different sectors in the pursuit of maximum self-interest by market entities, thereby achieving the optimal allocation of resources across society. In this sense, market-based resource allocation is the most efficient form, and perfecting the socialist market economy system must follow this law.
It must be emphasized that the market economy is not an abstract existence; it is always combined with a specific social system. General Secretary Xi Jinping emphasized: "We are developing a market economy under the prerequisite of the leadership of the Communist Party of China and the socialist system; at no time can we forget the modifier 'socialist'." Letting the market play the decisive role in resource allocation is based on the basic socialist economic system; therefore, it must not only follow the general laws of market resource allocation but also give play to our country's institutional advantages. In a socialist market economy, the nature and structure of market entities differ from those in a capitalist market economy. In this context, state-owned capital and enterprises play a guiding, fundamental, and even pillar role in important industries and key fields concerning national security and the lifeblood of the national economy, as well as in public services, public welfare sectors, and forward-looking strategic emerging industries. While upholding the "two unswervinglys" [11], we must make state-owned capital and enterprises stronger, better, and bigger, while also making the private economy bigger, better, and stronger, so as to stimulate market vitality, enhance developmental momentum, and better meet the people's growing needs for a better life through the liberation and development of social productive forces.
Correctly understanding the market's decisive role in resource allocation requires opposing the "market omnipotence" of Western economic theory. General Secretary Xi Jinping emphasized: "The market playing the decisive role in resource allocation does not mean it plays the entire role." Allowing the government to play an important role in resource allocation is a requirement of the laws for ensuring the steady and orderly operation of the market economy. This is because, from a dynamic perspective, the pursuit of maximum self-interest by various market entities will inevitably lead to blindness in resource allocation due to the incompleteness and lag of various market information, which may destroy the proportional relationships between sectors and cause resource waste. Meanwhile, the pursuit of maximum self-interest may also conflict with social public interests, resulting in various economic and social problems and "market failures," such as supply-demand imbalances, unemployment, monopolies, negative externalities, and polarization. Therefore, it is necessary to better play the role of the government, overcome market defects, and guide resources to aggregate toward the development of new quality productive forces.
To correctly understand better playing the role of the government, one must transcend Western economic theories that restrict the government's role solely to "remedying market failures." Unlike liberal economics, Western Keynesian economics acknowledges the existence of market failures and the necessity of government regulation, holding that the government can remedy market failures by employing fiscal and monetary policies. It should be said that this point offers us certain reference value; however, it must be pointed out that Western macro-control theory is based on two important premises: first, the belief that capitalist private ownership is most efficient, and second, the belief that government intervention is an ex post [12] measure limited to remedying market failures. Our country persists in the system where public ownership remains the mainstay and diverse forms of ownership develop together. For us, better playing the role of the government is not merely about remedying "market failures," but more importantly about leveraging institutional advantages to continuously enhance the efficacy of macroeconomic governance. As General Secretary Xi Jinping has pointed out: "Emphasizing scientific macro-control and effective government governance is an inherent requirement for leveraging the advantages of the socialist market economy system." Our Party adheres to a people-centered approach. By formulating medium- and long-term plans for national economic development, coordinating the major proportional relationships between sectors, regions, and urban and rural areas, providing public goods and security services concerning people’s livelihoods, and innovating comprehensive governance methods involving fiscal, monetary, industrial, and planning policies, we give play to the institutional advantage of ex ante [13] governance, continuously transforming institutional advantages into governance efficacy. This fully demonstrates how the socialist market economy transcends Western economic theory and practice in terms of better playing the role of the government.
Effective macroeconomic governance must coordinate the relationship between an effective market and a promising government. Under different social systems, due to differences in the economic base and the corresponding superstructure, the nature of the relationship between the government and the market also differs. Therefore, understanding this relationship must be scientifically grasped in conjunction with the nature of the social system. As General Secretary Xi Jinping pointed out: "A key factor in the tremendous success of China’s economic development is that we have leveraged both the strengths of the market economy and the superiorities of the socialist system." In a socialist market economy, the government and the market share an organically unified relationship of mutual supplementation, coordination, and promotion. General Secretary Xi Jinping emphasized that regarding the government-market relationship, "We must adhere to dialectics and the doctrine of two points [14], continuing to work hard on the integration of the basic socialist system with the market economy, giving full play to the advantages of both. We need both an 'effective market' and a 'promising government,' striving to solve this worldwide economic puzzle through practice." Supply-side structural reform is the main line of China’s promotion of high-quality development, embodying the dialectical thinking regarding the government-market relationship in Xi Jinping’s economic thought. Some have equated it with the theories of the Western Supply-side School. In response, General Secretary Xi Jinping pointed out that the supply-side structural reform we speak of "emphasizes both supply and demand, highlights the development of productive forces while focusing on improving relations of production, leverages the decisive role of the market in resource allocation while better playing the role of government, and addresses both current concerns and long-term foundations." Its purpose is not simply to stimulate investment through tax cuts, but rather, through structural reform, to promote technological innovation, develop the real economy, enhance effective supply, and increase total factor productivity. In the process of promoting high-quality development, China has organically combined the strategy of expanding domestic demand with the deepening of supply-side structural reform, transcending the metaphysical [15] thinking of Western economic theories which hold that one can only conduct either demand-side management or supply-side management.
The boundary between the government and the market is not fixed, but changes dynamically across different stages and conditions of economic and social development. Therefore, the relationship between the government and the market is a process of dynamic equilibrium that must be coordinated. Effectively coordinating the relationship between an effective market and a promising government to form an economic order that is both "dynamic without chaos" (放得活 fàng de huó) and "controlled without stagnation" (管得住 guǎn de zhù) represents a new regular [16] understanding of the dialectical relationship between the government and the market. The key to forming such an economic order lies with the government. A promising government must be adept at knowing what to do and what to refrain from doing—fully delegating to the market what should be delegated, while managing well and thoroughly what should be managed by the government. As General Secretary Xi Jinping emphasized: "The more standardized government behavior is, the more effective the market role becomes." This not only profoundly reveals the dialectical relationship between an effective market and a promising government, and between "releasing" and "managing," but also carries important methodological significance for guiding practice.
V. Smoothing the Circulation of the National Economy is the Objective Requirement of Macroeconomic Governance Theory
As noted previously, Western macroeconomic theory is limited to understanding macroeconomic issues within the sphere of circulation, using the aggregate balance between total supply and aggregate demand as the basic criterion for judging macroeconomic operations. If total supply exceeds aggregate demand, the economy is in a state of surplus; if total supply is less than aggregate demand, it is in a state of shortage; and if they are equal, the economy is in equilibrium. Various Western macro-control policies are formulated and implemented according to these different states of the supply-demand relationship.
Marxist political economy, however, holds that the macroeconomy reflects the continuous process of national economic operation and social reproduction. In a market economy, macroeconomic operation involves two levels. The first level consists of the deep-seated relations of the market economy; that is, understanding the national economic operation through the four stages of social reproduction—production, distribution, circulation, and consumption—and their interaction and dialectical unity. One cannot merely remain in the sphere of circulation; this is the deep-level issue of national economic operation. The second level consists of the surface-level relations of the market economy; that is, understanding national economic issues from the perspective of the supply-demand relationship. From a macroeconomic perspective, the supply-demand relationship is directly manifested as the relationship between total supply and aggregate demand. At this level, Marxist political economy shares commonalities with Western macro-control theory, but this commonality is only superficial. In Marxist political economy, the analysis of total supply and aggregate demand considers not only aggregate balance but also structural balance; it is the unity of the two. For example, the content regarding the reproduction of the two major departments in Volume II of Capital analyzes both material and value forms, as well as both aggregates and structures. This is essentially different from Western macroeconomic theory, which only considers aggregate balance.
Xi Jinping’s economic thought creatively uses the concept of "circulation" (循环 xúnhuán) to analyze the laws of China's macroeconomic operation by organically combining the four stages of social reproduction with the relationship between total supply and aggregate demand. In Volume II of Capital, the term "circulation" in the context of the circuit of industrial capital refers to the issue of capital's movement. Xi Jinping's economic thought expands the connotation of "circulation," using the concept in both a narrow and broad sense. In the narrow sense, circulation refers to issues in the sphere of circulation, such as the balance between total supply and aggregate demand or the construction of a unified national market. In the broad sense, circulation refers to the dialectical movement between the various stages of production, distribution, circulation, and consumption within the organism of the national economy. The new development pattern proposed in Xi Jinping's economic thought—which features domestic circulation as the mainstay while domestic and international dual circulation promote each other—encompasses both the narrow and broad senses of circulation. If smoothing the circulation of the national economy is the basic goal of macroeconomic governance, then the unimpeded flow of this circulation is a major manifestation of the efficacy of macroeconomic governance.
The essence of a smooth national economic circulation is the organic connection between the various stages of social reproduction. Marxist political economy maintains that social reproduction includes four stages: production, distribution, circulation, and consumption, where the production stage determines the latter three, and the latter three exert a counter-reaction on production. In the circulation of the national economy, the consumption stage has a special character: it is both the endpoint of the previous cycle and the starting point for a new one. Properly handling consumption is crucial to the circulation of the four stages. From the perspective of supply and demand, consumption sits on the demand side. Consumption includes productive consumption and individual consumption. Individual consumption is final consumption and constitutes real demand; meanwhile, productive consumption consists of mutual purchases between enterprises and belongs to corporate investment behavior. Since the purpose of investment is production, from a future perspective, it actually increases supply. In Western macro-control theory, investment (productive) consumption is treated as a component of total social demand. In Marxist political economy, however, a specific analysis is required to determine whether investment (productive) consumption, as a variable of aggregate demand, actually increases demand or increases supply. The distribution and circulation stages do not directly form a supply-demand relationship, but without income distribution, consumption is impossible; circulation is the intermediary stage, and without it, the cycle between production and consumption cannot occur. In this regard, General Secretary Xi Jinping pointed out: "Economic activity requires the combination of various productive factors to connect organically across the stages of production, distribution, circulation, and consumption, thereby achieving a circular flow."
From the perspective of the surface-level relations of market economic operations, macroeconomic operation manifests as the relationship between total supply and aggregate demand. Consequently, the national economic circulation manifests as the coordination of the balance between total supply and aggregate demand. In Western macroeconomic theory, it is generally believed that supply-side management is long-term, while demand-side management is short-term; therefore, it is difficult for both sides to act simultaneously. This understanding remains on the surface of supply and demand, ignoring the internal laws of dialectical unity and organic connection between the stages of social reproduction, and thus possesses a certain one-sidedness. Practice has shown that as long as social reproduction activities recur, total supply and aggregate demand remain in a state of mutual influence and interaction; coordinating the relationship between the supply side and the demand side thus becomes an inevitable requirement of the laws of national economic operation. Our Party's proposal to organically combine the strategy of expanding domestic demand with the deepening of supply-side structural reform is based precisely on this theoretical consideration.
Total supply and aggregate demand can balance at a low level or a high level. The task of China's macroeconomic governance is to achieve high-quality development. A national economic circulation that follows high-quality development must necessarily meet the inherent requirements of high-quality development at both the level of the four stages of the national economy and the level of the supply-demand relationship. General Secretary Xi Jinping has provided clear expositions on both levels. Regarding the requirements of high-quality development from the perspective of supply and demand: "High-quality development should achieve a relatively complete industrial system, with production organization methods that are networked and intelligent, and characterized by strong innovation, demand-capture capability, brand influence, and core competitiveness, alongside high-quality products and services. From the demand perspective, high-quality development should continuously satisfy the individualized, diverse, and escalating needs of the people, which in turn leads changes in the supply system and structure, while supply transformations continuously spawn new demand." Regarding the requirements of high-quality development from the perspective of the four stages of the national economy: "High-quality development should achieve the smooth circulation of production, circulation, distribution, and consumption, with relatively reasonable major proportional relationships and spatial layouts in the national economy, and relatively stable economic development without major fluctuations."
To promote high-quality development, we must accelerate the construction of the new development pattern. Given the complex and volatile domestic and international situation, building the new development pattern first requires strengthening the internal circulation of the domestic economy, because the advantage of a large-scale economy is its capacity for internal circulation. To strengthen the domestic economic circulation, we must persist in the strategy of expanding domestic demand, ensuring the organic integration of the two levels of national economic circulation. In this regard, General Secretary Xi Jinping pointed out: "We must firmly grasp the strategic baseline of expanding domestic demand, enabling the stages of production, distribution, circulation, and consumption to rely more on the domestic market to achieve a virtuous cycle. We must clarify the strategic direction of supply-side structural reform and promote the realization of a dynamic balance between total supply and aggregate demand at a higher level."
Policies will be constantly adjusted and changed according to the development of the economic situation, but there must be a theoretical basis behind policy formulation. The various policies of China's macroeconomic governance all revolve around national development plans and major strategies, coordinating fiscal, monetary, industrial, technological, environmental, price, and employment policies to act in synergy. They promote the coordinated development of regions and urban-rural areas and emphasize the consistency between economic and non-economic policies. Various methods and means of macro-control are constantly being innovated. At a deeper level, these are all developed using the smoothing of the national economic circulation as their theoretical basis.
China's macroeconomic governance seizes upon the primary aspect of the contradiction—taking the domestic cycle as the main body—while simultaneously adhering to the dialectics of ensuring that the domestic and international dual circulation mutually reinforce one another. Within Xi Jinping Thought on Economy, promoting global economic governance constitutes an organic component of the macroeconomic governance system. The modern economy is a globalized economy. Economic globalization is an objective requirement of the development of social productive forces and an inevitable result of scientific and technological progress. While providing a powerful impetus for world economic growth, it has also led to serious problems of poverty and unemployment, a widening income gap, and rising uncertainty. In particular, the United States' heavy promotion of trade protectionism and unilateralism has struck a blow to multilateralism and the free trade system; the peace deficit, development deficit, and governance deficit [17] have become severe challenges facing humanity. In response, General Secretary Xi Jinping has repeatedly emphasized that we must actively participate in global economic governance.
As early as 2014, General Secretary Xi Jinping proposed the strategy of accelerating the construction of Free Trade Zones. He pointed out, "Accelerating the implementation of the Free Trade Zone strategy is an important platform for our country to actively participate in the formulation of international economic and trade rules and to strive for institutional power in global economic governance. We cannot be bystanders or followers; rather, we must be participants and leaders." On numerous international conference occasions, General Secretary Xi Jinping has emphasized that all countries in the world must jointly promote the formation of a new order for international economic governance. For example, at the 2016 G20 Hangzhou Summit, General Secretary Xi Jinping pointed out that in the face of challenges confronting the world economy, "we should strengthen macroeconomic policy coordination and work together to promote global economic growth and maintain financial stability. G20 members should, in light of their own national conditions, adopt more comprehensive macroeconomic policies, utilize a variety of effective policy tools, and coordinate fiscal, monetary, and structural reform policies to strive for the expansion of global aggregate demand, comprehensively improve the quality of supply, and consolidate the foundation for economic growth." General Secretary Xi Jinping emphasizes the creation of a fair and rational governance model. He pointed out that "it is necessary to persist in multilateralism and safeguard the authority and effectiveness of multilateral systems." We must build open cooperation platforms, jointly create an environment conducive to open development, promote the construction of a fair, rational, and transparent system of international economic and trade investment rules, facilitate the orderly flow of productive factors, ensure the efficient allocation of resources and deep integration of markets, and achieve the goal of mutual benefit and win-win results.
The world economic cycle is an important component of our national economic cycle; therefore, promoting the construction of the New Development Paradigm must likewise follow the dialectical unity of the laws of circulation across the links of production, distribution, circulation, and consumption.
General Secretary Xi Jinping emphasizes that the leading role of innovation must be exerted in international production activities: "All countries should seize the opportunities brought by the new round of technological revolution and industrial transformation, strengthen cooperation in frontier fields such as the digital economy, artificial intelligence, and nanotechnology, and jointly create new technologies, new industries, new business forms, and new models." To this end, we must seize the new development opportunities of the New Industrial Revolution and promote the mutual compatibility and reinforcement of national industrial development plans to maintain the vitality of economic growth.
General Secretary Xi Jinping emphasizes that in international circulation, "all countries should adhere to an open policy orientation, take a clear-cut stand against protectionism and unilateralism, enhance the level of multilateral and bilateral openness, promote the interconnectedness of national economies, and jointly build an open world economy." To this end, we must improve the coordination mechanisms for international macroeconomic policies, reduce negative spillover effects, and rationally promote world economic growth.
General Secretary Xi Jinping emphasizes that the income distribution deficit should be narrowed within international distribution relations. Addressing the current situation where the wealth held by the world's richest 1% exceeds the total wealth held by the remaining 99%, and where income distribution is unequal and development space is unbalanced, General Secretary Xi Jinping pointed out: "In today's deeply developing economic globalization, the law of the jungle and 'winner-takes-all' is a dead end that grows narrower as one travels; inclusive benefit and mutual win-win results are the 'Great Way' [18] for humanity that grows wider as one travels." To resolve the global distribution gap and polarization, we must persist in synergy and linkage to create an open and win-win cooperation model. China advocates that all countries in the world, through "Belt and Road" international cooperation, actively develop open economies, participate in global governance and the provision of public goods, and join hands to build a broad community of interests. This will further "promote the realization of modernization for all countries in the world, build an open, inclusive, interconnected, and communal development world, and jointly promote the construction of a community with a shared future for humanity."
Conclusion
Perfecting the macroeconomic governance system, innovating and enriching various macroeconomic policies, and promoting the synergistic operation between various policies are important components of building a high-level socialist market economy system. Scientific macroeconomic regulation and effective government governance are inherent requirements for exerting the advantages of the socialist market economy system. This inevitably requires scientific theory as a guide. The macroeconomic governance theory of Xi Jinping Thought on Economy, on the basis of adhering to the basic principles and methodology of Marxist political economy, has made original contributions to Marxist macroeconomic thought, enriched the macroeconomic theory of political economy with Chinese characteristics, transcended Western macroeconomic regulation theory, and formed an independent knowledge system and discourse system for Chinese macroeconomics. It provides important theoretical support for building a high-level socialist market economy system. The macroeconomic governance theory of Xi Jinping Thought on Economy provides a guide for action for our country to promote high-quality development, advance Chinese-path modernization, persist in a people-centered approach in macroeconomic governance, and scientifically utilize and master the socialist market economy. The macroeconomic governance theory of Xi Jinping Thought on Economy is an open system that will certainly continue to be enriched and developed along with the practice of economic and social development.