Macroeconomic policies are a crucial guarantee for my country's economy to maintain stable operation and move towards high-quality development. In 2025, my country implemented a more proactive fiscal policy for the first time and a moderately loose monetary policy for the first time in 14 years, playing a significant role in promoting the sustained recovery and improvement of the economy. According to the arrangements of the Central Economic Work Conference, the macroeconomic policy orientation in 2026 should adhere to the principle of seeking progress while maintaining stability and improving quality and efficiency, continue to implement more proactive and effective macroeconomic policies, leverage the integrated effects of existing and new policies, increase counter-cyclical and cross-cyclical adjustments, and effectively enhance the efficiency of macroeconomic governance.
A more proactive fiscal policy should be more precise and effective.
Greater support will be provided for key projects and emerging industries, the implementation of new economic and social development policies will be intensified and expanded, investment in basic research will be significantly increased, and policy tools for stabilizing employment will be enriched. In 2025, fiscal policy will increase the deficit ratio, allocate a larger scale of government bonds, increase transfer payments to local governments, and promote the implementation of implicit debt swap policies at the local level, providing strong support for stabilizing growth, adjusting the economic structure, and preventing risks. In 2026, it is necessary to maintain the necessary fiscal deficit, total debt, and total expenditure, focusing on the present and making full use of fiscal policy space, while also leaving room for future risks to ensure fiscal sustainability.
It must be recognized that in recent years, the interplay of factors such as increased external shocks and growing internal difficulties has significantly impacted the fiscal revenue and expenditure of some local governments, resulting in a decline in available financial resources coupled with a continuous increase in rigid expenditures. It is crucial to address local fiscal difficulties, establish and improve mechanisms for increasing revenue and reducing expenditures, enhance local financial autonomy, and safeguard the basic needs of the people at the grassroots level.
Public funds must not be wasted. Currently, fiscal expenditures are substantial; the national general public budget expenditure is projected to reach 29.7 trillion yuan by the beginning of 2025, with central government transfers to local governments amounting to 10.3 trillion yuan. However, demand from various sectors is also high, making fiscal funds both tight and precious. We must strengthen scientific fiscal management and improve the efficiency of fund utilization. We need to optimize the structure of fiscal expenditures, strengthen financial support for major national strategies, and encourage more investment in people's livelihoods, focusing on improving people's lives, promoting consumption, and enhancing future growth potential. We must make good use of government bonds and other funds, proactively taking the initiative and accelerating the allocation and disbursement of funds to facilitate the rapid formation of actual expenditures and tangible work output. At the same time, we must strictly enforce financial discipline, adhere to the principle of austerity for Party and government organs, and ensure that fiscal funds are used effectively and efficiently.
A moderately loose monetary policy should be flexible and effective.
In 2025, monetary policy will appropriately lower the reserve requirement ratio and interest rates, and will introduce a number of targeted and supportive measures in terms of quantity, price, and structure, providing a suitable monetary and financial environment for promoting economic recovery and improvement.
The Central Economic Work Conference emphasized that promoting stable economic growth and a reasonable recovery in prices should be a key consideration in monetary policy. This is a new formulation. In 2026, monetary policy should strengthen its forward-looking and scientific adjustments, maintain ample liquidity, promote low overall social financing costs, and work in synergy with other policy measures to strive to achieve goals such as economic growth and price recovery.
In recent years, in response to some structural contradictions in economic operation, and in accordance with the principles of focusing on key areas, being reasonable and appropriate, and advancing while retreating, my country has timely introduced a number of structural monetary policy tools, such as relending for technological innovation and technological upgrading, and relending for service consumption and elderly care, which have effectively supported key areas and weak links in economic and social development.
Currently, my country has a relatively rich toolbox of monetary policy tools, including traditional aggregate tools such as reserve requirement ratio cuts and interest rate cuts, as well as other liquidity injection tools and structural monetary policy tools. It is essential to flexibly combine and efficiently utilize these various monetary policy tools, balancing short-term and long-term considerations, supporting the real economy and maintaining the health of the financial system itself, keeping social financing conditions relatively loose, and strengthening financial support for the real economy.
The key to effective macroeconomic policies lies in their precision and effectiveness. Efforts should be focused on smoothing the transmission mechanism of monetary policy, optimizing new investment and revitalizing existing assets, comprehensively addressing the five major areas of financial development, and strengthening support for key sectors such as expanding domestic demand, technological innovation, and small and medium-sized enterprises (SMEs), thereby improving the quality and efficiency of financial services to the real economy.
At the same time, in the face of an increasingly complex and severe external situation, we must continue to balance internal and external relations, uphold the decisive role of the market in exchange rate formation, strengthen expectation guidance, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.
Enhancing the consistency and effectiveness of macroeconomic policy orientation and implementing a comprehensive set of macroeconomic control measures are crucial. Currently, my country's economic environment is becoming increasingly complex, with more and more dilemmas and even multiple challenges in economic work, leading to a greater demand for policy. The more policies there are, the greater the risk of them conflicting with each other. Past economic practices have also witnessed problems such as the "fallacy of composition" caused by inconsistent policy orientations, which not only caused policy effects to cancel each other out but also affected market expectations.
As the toolbox for macroeconomic governance becomes increasingly comprehensive, the need to strengthen policy coordination, enhance consistency in orientation, and prevent and address the "fallacy of composition" or "fallacy of decomposition" becomes more prominent.
To enhance the consistency and effectiveness of macroeconomic policy orientation, it is necessary to strengthen the systemic perspective, incorporating economic and non-economic policies, as well as existing and new policies, into the assessment of macroeconomic policy orientation consistency. This includes strengthening the coordination between fiscal and monetary policies, and between reform measures and macroeconomic policies, ensuring that all policies and measures work in the same direction and form a synergy. Since the meeting of the Political Bureau of the CPC Central Committee on September 26, 2024, the CPC Central Committee has successively deployed a series of policy measures, which are still playing a role. In 2026, new policies will be introduced and implemented based on changes in the situation. It is essential to coordinate the integrated effects of existing and new policies to promote steady and positive economic growth. A market economy is largely an expectation economy; therefore, it is necessary to improve the expectation management mechanism, enhance narrative capabilities, conduct effective economic publicity and public opinion guidance, respond promptly to market concerns, and effectively boost social confidence.
( Zhong Caiping )
