Balancing hand of government An explicit national development strategy with macroeconomic regulation targets can promote healthier market relations
In a move to promote the healthy and sustainable development of the national economy and elevate China’s economic and comprehensive national strength to a new high, the Third Plenum of the 18th Central Committee of the Communist Party of China vowed to push for more scientific macroeconomic regulation and effective governance. According to a guideline passed by the session, to improve the country’s macroeconomic regulatory system, China should pay more respect to market rules, more reasonably define the boundary of macroeconomic regulations and better handle some key relationships.
The relationship between the government and the market should first be appropriately handled. The country should not just abide by market rules and give the market a decisive role in the distribution of resources, it should also work hard to prevent market dysfunctions and make up for market shortcomings. The key to a sound macroeconomic regulatory system is to transform government functions and reduce its interventions into microeconomic issues as much as possible. To this end, the government should take practical measures to delegate some of its power to other players and cancel the rigid examination and approval procedures over those economic activities that can be more effectively regulated by the market mechanism. Efforts should be accelerated to set up a modern market system in which enterprises can decide economic activities on their own and commodities and other factors can realize free flow and exchange on an equal footing. The government should try to draft its development strategy, policies and standards, and strengthen their implementation in a bid to create a standardized market order and equitable competition environment, which will help strengthen oversight and reasonably guide market players.
The relationship between the central and local governments should also be handled well. Macroeconomic regulations are aimed at not only maintaining the authority of central government regulations but also giving local governments enough space to play their own role based on differentiated conditions. Local governments should be empowered to fully realize their advantages and manage all grassroots economic and social activities.
For more scientific macroeconomic regulation, the country also needs to properly handle the relationship between long-term and short-term issues. It should try to promote a general demand-supply balance through reasonable macroeconomic regulations, iron out short-term economic fluctuations, control inflation, ensure full employment, defuse various kinds of risks, and prevent the drastic rise and fall of economic development. The country should also target macro regulations at improving its middle- and long-term supply capabilities, raising production efficiency through innovation and industrial upgrading and optimization, boosting its economic growth potential and improving the quality and efficiency of national economic development.
The country also needs to handle the relationship between overall arrangements and regulations in individual fields to achieve better regulatory effects through effective implementation of macroeconomic policies in different fields. While ensuring the enforcement of its macroeconomic regulation policies, the country should also strengthen policy assessment and make timely improvements and adjustments based on new circumstances emerging in their implementation.
For better macroeconomic regulations, the country should first define their main tasks in a scientific way. These are to maintain a balance in terms of its economic aggregate, promote its economic structural coordination and optimization of its production pattern, reduce cyclical economic fluctuations, prevent regional or systematic risks, stabilize social expectations, and promote sustainable and healthy development of national economy.
A macroeconomic regulatory system guided by the national development strategy and based on the country’s financial, fiscal and monetary policies should be put in place.
An explicit national development strategy with macroeconomic regulation targets remains the main foundation of the country’s fiscal and monetary policies. The national development layout should play its coordinating role in the arrangement of the country’s public budgets, the use of its financial capital, the development of land, as well as the distribution of resources. The country should regard making improvements to its fiscal and monetary policies and giving them a full role as the main means of national macro regulations. Given that fiscal policies can play an important role in promoting economic growth, optimizing structure and regulating income distribution, the country should try to make improvements to the implementation of its fiscal policies. At the same time, monetary policies should also be given a full part in regulating the ratios of the country’s capital adequacy, liquidity and leverage.
Efforts will be strengthened to promote coordination between the country’s financial and monetary policies and its industrial and pricing policies to make its macro regulations more targeted and more far-sighted. Departments in charge of macroeconomic regulations should strengthen policy coordination among themselves and with other departments to prevent these policies from being offset or excessively overlapping. Measures will also be made to promote institutionalization of the country’s macroeconomic regulation targets and policymaking. A democratic decision-making mechanism will be set up so that public opinions can be heard when major policies are made. At the same time, efforts will be accelerated to form an international macroeconomic policy participation and coordination mechanism. Such a mechanism can help China keep a close watch on international economic and financial conditions and policy changes in some major countries and strengthen policy coordination and communication with them. More active participation in multilateral economic cooperation can also boost China’s voice on the international arena, push forward the reform of international economic governance and promote a more reasonable international economic order. It will also help create a China-favorable international environment, expand its development space and maintain its opening-up interests.
Practical measures will also be taken to deepen the country’s investment system to give enterprises a bigger role in investment activities. For the sake of the establishment of a sound macro regulatory system, China should limit its examinations and approvals and reduce its interventions into corporate activities.