China’s New Macro-control Measures

Considering the challenges posed by COVID-19, China’s macro-control has been quite effective. Three policy instruments stand out for their innovation, necessity and foresight, namely, consumer coupons, special government bonds and new infrastructure projects.

Coupons Instead of Cash

Facing the pressure of insufficient consumer demand, China has adopted the method of issuing consumption vouchers to stimulate consumption and serve residents according to its specific national conditions such as a high savings rate and a high ownership rate for housing.

Issuing consumption vouchers brings three natural advantages that direct cash distribution lacks: First, it neither exacerbates the government’s current debt nor needs to be paid by the government in the current period while leveraging the government’s credit to reduce fiscal pressure. Second, it avoids the leakage of direct cash distribution. Third, it eliminates worries about inflation and redistribution of income.

Special Government Bonds

At an April 17 meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee, the special national debt program was named “anti-epidemic bonds,” and its attributes, purpose

and standards were clarified. According to the government work report delivered on May 22, one trillion yuan (about US$140 billion) of government bonds for COVID19 control would be issued.

In addition to support for infrastructure, equipment, and medical services in the field of public health, the bonds do not directly interfere with or affect the market in other fields. They support the resumption of production, transformation and upgrading, and innovative growth of the target industries and market entities by leveraging the role of the market, increasing market efficiency and enlarging market mechanisms.

New Infrastructure Projects

“New” infrastructure is mostly industrial infrastructure with a more mature market operation mode as well as mature investors and operators. The government’s involvement in new infrastructure is mainly from two perspectives: building a foundation as public infrastructure that serves industrial infrastructure and investing in difficult and blind spots in the market, namely, sectors that are difficult to enter, manage or be satisfied by the market. The government’s participation in new infrastructure is mostly as a cooperative partner, and investment comes from special debt, which makes new infrastructure spending a capital expenditure rather than an operating expenditure managed with subsidies. Relevant market investors can obtain direct support from government policies, thus obtaining greater and cheaper funding for the launch and construction of new infrastructure projects.