China Economy and Policy Outlook

Abstract

It was mentioned in the discussion that during the current economic downturn, we need to use fiscal policy to solve many structural problems. From the fiscal revenue side, we may consider adjusting the size of the deficit, issuing special Treasury bonds, and increasing borrowing by policy banks. From the fiscal expenditure side, three things should be prioritized: First, bailout as priority: to ensure basic livelihood of people, to ensure the survival of market entities, and to ensure grassroots operations; second, fiscal funds should try to leverage effective credit demand and do a good job in guaranteeing discounted loans; finally, be cautious about housing and infrastructure construction. Compared with the U.S. government's leverage level of about 130%, China’s leverage level is still relatively low, and the scale of assets owned by China’s government is the largest in the world, so there is still more room for leverage. We can continue to increase fiscal expenditure and make precise efforts, especially in consumption.