two major “narrative traps” facing current macroeconomic policies
2024-09-02
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chief economist and director of research institute of guangdong securities: luo zhiheng“narrative trap”it is an important concept in narrative economics.it means that micro-subjects are easily influenced by certain widely circulated economic narratives, thus falling into misunderstandings or making judgments that are not in line with long-term interests.these narratives may have been deeply rooted in people's minds for a long time, but have failed to keep pace with the times. they may also be a simplification of complex issues and a one-sided analysis. or they may cater to public sentiment and draw biased conclusions.
macroeconomic policies rely on social consensus in terms of formulation, communication and implementation, and therefore will be interfered with to a certain extent by the "narrative trap". it is the due responsibility of all participants in economic and social activities to build consensus, find the greatest common denominator, and promote reform and progress.1. the current macroeconomic policy faces two major “narrative traps”
(i) for a long time, economic growth has been mainly determined by the real gdp growth rate, while the nominal growth rate determines residents' wages, corporate revenue and government revenue. only looking at the real growth rate leads to a divergence between macro data and micro perceptions, and weakens the urgency of policies to stabilize growth.in the first half of the year, real gdp grew by 5% year-on-year, but nominal gdp only grew by 4.1% year-on-year. the growth rate of nominal gdp has been lower than that of real gdp for five consecutive quarters.from the perspective of enhancing the sense of gain of micro-entities, boosting expectations and confidence, it is necessary to promote the recovery of nominal gdp growth as soon as possible;however, the traditional policy framework is difficult to change in a timely manner. the government’s full-year economic growth target of “around 5%” is anchored on the real gdp growth rate, which is higher than the nominal gdp growth rate, weakening the urgency of policies to stabilize growth.(ii) macroeconomic policies are easily stigmatized and accused of “flooding the market with money”, which limits the effectiveness of policies in stabilizing growth;it is necessary to distinguish normal counter-cyclical regulation from "flooding". high-quality development is not contradictory to counter-cyclical regulation.to some extent, public opinion's excessive exaggeration of the side effects of the "four trillion yuan investment" at the end of 2008 and the monetization of shantytown redevelopment from 2015 to 2018 has led to a significant narrowing of the current policy space.the strong stimulus policy did cause adverse effects such as high inflation, overcapacity, and rapid housing price increases afterwards, but we should also see that under the severe impact of the international financial crisis and high real estate inventory at the time, the strong policy quickly pulled the chinese economy out of the recession and avoided the outbreak of the real estate crisis, without repeating japan's mistakes. the positive and negative effects of the policy should be evaluated objectively and fairly, so as to improve the scientific nature and effectiveness of macroeconomic regulation.2. the fundamental reason for the change in the narrative system is the change in the development stage and the supply and demand situation. china's economy has shifted from "insufficient supply" to "insufficient demand"
1. changes in supply and demand: inflation shifted from “easy to rise but difficult to fall” to “easy to fall but difficult to rise”when the economy develops to a certain stage, production capacity is significantly improved, the supply and demand situation is reversed, and demand becomes the shortcoming that restricts economic development. residents are not eager to consume and hold their money to wait and see; in order to sell their products, companies compete internally, and prices continue to be sluggish. at this time, the focus of macroeconomic regulation is to expand total demand and promote price recovery. the nominal growth rate is more important than the actual growth rate.the change in inflationary pressure also led to a peculiar phenomenon:in recent years, regardless of whether the ppi has been high or low year-on-year, mid- and downstream industrial enterprises have all reported their own operating difficulties.(ii) the marginal effect of the policy has weakened. the same stimulus intensity, which was considered a strong stimulus in the past, may only be equivalent to a weak stimulus now.when residents have met their basic needs, they gradually turn to upgraded needs; the past development model of enterprises relying on debt expansion for simple scale replication is no longer applicable, but they must achieve product and service upgrades through innovation; local governments have also started a "war for talent" to compete for demand. the endogenous growth momentum of demand is weakening, the difficulty of macro-control to stimulate demand has increased, and the policy effect has also weakened.taking the changes in the real estate market as an example,with the significant changes in the supply and demand of real estate, this round of real estate regulation has continued to relax, and the down payment ratio and mortgage interest rate have dropped to a record low, but it has failed to effectively boost residents' demand for housing, and the balance of personal housing loans has been negative for five consecutive quarters year-on-year. compared with the risk of rapid increases in housing prices caused by the relaxation of real estate regulation, the top priority is to stabilize housing prices as soon as possible and reverse the downward expectation of housing prices.iii. recommendation: reconstruct the macro-control target system and promote the recovery of nominal gdp growth with more forceful policy measures
first, we should attach great importance to price indicators, and the economic growth target should pay more attention to the nominal gdp growth rate. on the basis of retaining the real gdp growth target, we should explore some form of nominal gdp target system to gather forces for stable growth.it is suggested that the nominal gdp growth rate should be maintained near a certain policy target level, which can overcome the asymmetry of the inflation targeting system to a certain extent. for example, the current prices remain low, and the macroeconomic policy is to push prices back up. the public may question why the cost of living of residents should be increased, but if it is explained from the perspective of nominal gdp that the policy is to increase everyone's income, it will be easier to accept.second, fiscal policy should focus more on the growth rate of expenditure rather than the deficit ratio, so as to truly achieve counter-cyclical regulation.due to the limited deficit ratio, my country's fiscal policy has shown procyclical characteristics, weakening the function of countercyclical regulation. in the economic downturn cycle, government tax and land transfer revenues declined, and the government's debt scale was limited, resulting in a decline in the growth rate of fiscal expenditure, making it difficult to effectively support the economy. it is necessary to break through the concept of the 3% deficit ratio warning line and give full play to the countercyclical regulation function of fiscal policy. the 3% deficit ratio is not an "iron rule". european and american countries broke this limit during the international financial crisis.third, monetary policy should pay more attention to real interest rates, that is, nominal interest rates minus inflation levels. the inflation target of monetary policy should be symmetrical. responding to downward price pressure is as important as fighting inflation.my country's monetary policy practice is asymmetric, with less emphasis on low prices than inflation. it is recommended to enhance the transparency of monetary policy and stabilize public inflation expectations. for example, the inflation indicators and targets that the central bank is concerned about should be announced, and the public's medium- and long-term inflation expectations should be anchored at a reasonable level through credible policy operations. in measuring policy intensity, more attention should be paid to real interest rates rather than nominal interest rates. in the second quarter of 2024, the weighted average interest rate of rmb loans of financial institutions was 3.7%, the lowest since 2008; but due to the continued low prices, the real interest rate after deducting the gdp deflator was 4.4%, still at a historical high.2. using more forceful policy measures to boost nominal gdp growthonea proactive fiscal policy should play a greater role in stabilizing growth. we can consider issuing more government bonds, expanding total demand, and ensuring necessary spending.twomonetary policy should assume the responsibility of stabilizing prices. the reserve requirement ratio should be lowered when necessary, and interest rates should be lowered when necessary.the third is to stabilize asset prices such as real estate and stocks as soon as possible, improve the balance sheets of micro-entities, and boost market confidence.fourth, promote reforms in income distribution, fiscal system, household registration system, etc. to resolve the long-term problem of low residents’ consumption rate.risk warning:external shocks exceeded expectations, and policies to stabilize growth exceeded expectations1. the current macroeconomic policy faces two major “narrative traps”
1. for a long time, economic growth has been mainly based on the actual gdp growth rate, which has led to the divergence between the current macro data and micro perceptions, weakening the urgency of policies to stabilize growth.
2. macroeconomic policies are susceptible to stigmatization such as “flooding the market with money”, which limits the effectiveness of policies in stabilizing growth.
2. the fundamental reason for the change in the narrative system is the change in the development stage and the supply and demand situation. china's economy has shifted from "insufficient supply" to "insufficient demand"1. changes in supply and demand: inflation shifted from “easy to rise but difficult to fall” to “easy to fall but difficult to rise”
(ii) the marginal effect of the policy has weakened. the same stimulus intensity, which was considered a strong stimulus in the past, may only be equivalent to a weak stimulus now.
iii. recommendation: reconstruct the macro-control target system and promote the recovery of nominal gdp growth with more forceful policy measures1. the current macroeconomic policy faces two major “narrative traps”
1. for a long time, economic growth has been mainly based on the actual gdp growth rate, which has led to the divergence between the current macro data and micro perceptions, weakening the urgency of policies to stabilize growth.
gdp is a comprehensive indicator to measure the results of economic development and the overall level of social welfare. however, nominal gdp is easily affected by the price level, and severe inflation will exaggerate economic growth. for example, argentina has suffered from economic recession and hyperinflation in recent years. although the real gdp in the first quarter of 2024 was only -5.1% year-on-year, the cpi was as high as 272.8% year-on-year, pushing the nominal gdp up to 245.1% year-on-year, making it completely lose its indicative significance. thereforeall major developed economies and emerging market economies use real gdp growth, which reflects physical quantity, as an observation indicator of economic growth.when my country mentions economic growth rate, it usually refers to the actual gdp growth rate, including the "maintain 8%" in the past and the "maintain 5%" in the past two years.however, against the backdrop of continued low prices, the indicative role of nominal gdp growth has significantly increased.a prominent feature of china's current economy is the divergence between macro data and micro perceptions, which is caused by the divergence between nominal gdp growth and real gdp growth. in the first half of the year, real gdp grew by 5% year-on-year, but nominal gdp only grew by 4.1% year-on-year. the growth rate of nominal gdp has been lower than that of real gdp for five consecutive quarters.on the one hand,nominal gdp is more closely related to micro-entities and is directly related to residents’ wages, corporate revenues and government revenues, which in turn affects market expectations and confidence;on the other hand,the market economy relies on the price mechanism to operate. prices reflect important information such as consumer preferences and market supply and demand. the current economy faces problems such as insufficient effective demand and imbalance between supply and demand in some industries.from the perspective of enhancing the sense of gain of micro-entities, boosting expectations and confidence, it is necessary to push for a rebound in nominal gdp growth as soon as possible; however, the traditional policy framework is difficult to change in a timely manner, and the government’s full-year economic growth target of “around 5%” is still anchored on the real gdp growth rate. the real gdp growth rate is higher than the nominal gdp growth rate, which weakens the urgency of policies to stabilize growth.2. macroeconomic policies are susceptible to stigmatization such as “flooding the market with money”, which limits the effectiveness of policies in stabilizing growth.the current divergence between macro data and micro perceptions, and the divergence between nominal gdp growth and real gdp growth, are directly due to the continued sluggish prices.however, compared with curbing inflation, macroeconomic policies face greater pressure in pushing prices back up.first, there is greater pressure from public opinion.the cost of living increases due to high inflation, and the pain is immediate; while the harm of low inflation is not obvious in the early stage, and may even bring the benefit of lower living costs. tightening policies to curb inflation are less controversial, but loose policies are prone to cause concerns and accusations such as imposing inflation taxes and stimulating asset price bubbles.second, the policy intensity and effectiveness are more difficult to control.to curb high inflation, fiscal and monetary policies need to be tightened. the overall result is relatively certain. the risk is that it may lead to a slowdown in economic growth and an increase in unemployment, but it can be timely and adjusted. once the economy falls into deflation, the expectations and confidence of micro-subjects are weak, which may trigger a "liquidity trap" and a "tax reduction and fee reduction trap", weakening the effectiveness of monetary and fiscal policies, resulting in the need for very large stimulus. however, large-scale stimulus policies face huge policy costs and public pressure, which may prevent them from being introduced in a timely manner or continuously implemented. academics and policy circles generally believe that the "lost three decades" of the japanese economy are largely due to the japanese government's uncertainty about stimulus policies and getting out of deflation.to some extent, public opinion's excessive exaggeration of the side effects of the "four trillion yuan investment" at the end of 2008 and the monetization of shantytown redevelopment from 2015 to 2018 has led to a significant narrowing of the current policy space.the strong stimulus policy did cause adverse effects such as high inflation, overcapacity, and rapid rise in housing prices afterwards, but it should also be noted that under the severe situation of the severe impact of the international financial crisis and high real estate inventory at that time, the strong policy quickly pulled the chinese economy out of the recession, avoided the outbreak of the real estate crisis, and did not repeat japan's mistakes.the positive and negative effects of policies should be evaluated objectively and fairly, so as to improve the scientific nature and effectiveness of macro-control.if normal monetary policy operations are labeled as "flooding" or "flooding", it will inevitably go too far, interfere with the formulation and implementation of macroeconomic policies, and ultimately be detrimental to the stable and healthy development of the economy. in contrast, after the outbreak of the epidemic in 2020, the united states decisively implemented quantitative easing of monetary policy and large-scale fiscal stimulus. although it caused a sharp rise in inflation, it still received positive reviews overall.2. the fundamental reason for the change in the narrative system is the change in the development stage and the supply and demand situation. china's economy has shifted from "insufficient supply" to "insufficient demand"the "narrative" that was established in the past has become a "trap" today, and behind this is the transformation of china's economic development stage.with the leapfrog development over the past 40 years since the reform and opening up, china's economy has shifted from a stage of high-speed growth to a stage of high-quality development. the main social contradiction has changed from "the contradiction between the people's growing material and cultural needs and backward social production" to "the contradiction between the people's growing needs for a better life and unbalanced and inadequate development." the real estate sector is particularly typical. the supply and demand relationship in the real estate market has undergone major changes, from "whether or not" to "how good."1. changes in supply and demand: inflation shifted from “easy to rise but difficult to fall” to “easy to fall but difficult to rise”in the early stages of economic development, production capacity is relatively low, but residents' consumption and corporate investment intentions are strong, demand is strong and supply is weak. therefore, macro-control focuses on preventing economic overheating and rising inflation, and economic growth indicators mainly depend on the actual gdp growth rate.however, when the economy develops to a certain stage, production capacity is significantly improved, the supply and demand situation is reversed, and demand becomes the shortcoming that restricts economic development. residents are not eager to consume and hold their money to wait and see; in order to sell their products, companies compete internally, and prices continue to be sluggish. at this time, the focus of macroeconomic regulation is to expand total demand and promote price recovery. the nominal growth rate is more important than the actual growth rate.the change in inflationary pressure has led to a peculiar phenomenon: in recent years, regardless of whether the ppi is high or low year-on-year, mid- and downstream industrial enterprises have all reported their own operating difficulties.this is inconsistent with historical experience. it is generally believed that the revenue and profits of industrial enterprises are positively correlated with the year-on-year ppi. the higher the year-on-year ppi, the better the enterprise's performance, and the lower the year-on-year ppi, the poorer the enterprise's performance.in the past, it was a stage of insufficient supply. if demand factors caused the ppi to rise year-on-year, the revenue and profits of mid- and downstream industrial enterprises would increase due to strong terminal demand. if supply factors caused the upstream raw material prices to rise, it could also be smoothly transmitted to the downstream terminal prices, thus ensuring the profit margins of mid- and downstream industrial enterprises.however, now is a stage of insufficient demand. when the rising prices of upstream raw materials drive the year-on-year increase in ppi, mid- and downstream industrial enterprises face the dual pressures of rising production costs and insufficient terminal demand, and their profit margins are greatly narrowed; and when the falling prices of upstream raw materials drive the year-on-year decline in ppi, although the production costs have fallen, mid- and downstream industrial enterprises are still facing the dilemma of sluggish terminal demand, and their operating conditions have not improved significantly. since 2019, the five-year rolling correlation coefficient of the year-on-year prices of consumer goods and means of production in ppi has declined rapidly and is at a low level, reflecting the poor transmission of upstream and downstream prices.(ii) the marginal effect of the policy has weakened. the same stimulus intensity, which was considered a strong stimulus in the past, may only be equivalent to a weak stimulus now.in the stage of insufficient supply, residents' consumption and housing needs have not been basically met, enterprises face broad market prospects and investment opportunities, economic growth brings political achievements and tax revenue, and encourages local governments to actively attract investment and invest in infrastructure. therefore, when the economy faces temporary downward pressure, macroeconomic regulation only needs moderate stimulation to play a greater leveraging role. moreover, due to limited production capacity, the substantial increase in demand under policy stimulus is likely to cause economic overheating and inflation.in the stage of insufficient demand, residents have met their basic needs and gradually turned to upgraded needs; the past development model of enterprises relying on debt expansion for simple scale replication is no longer applicable, but they must achieve product and service upgrades through innovation; local governments have also started a "war for talent" to compete for demand. when the endogenous growth momentum of demand weakens, it becomes more difficult to stimulate demand through macroeconomic regulation, and the policy effect also weakens accordingly.the changes in the real estate market are a typical example.in the past, housing supply was insufficient, and the fluctuation of the real estate market depended on the fluctuation of residents' demand for housing, which was in turn affected by real estate regulation policies. therefore, the previous rounds of real estate cycles were typical policy cycles. when regulation was tightened, the housing market went down, and when regulation was relaxed, the housing market went up. with many people and few houses, the narrative of "beijing and shanghai will always rise" was established in the previous rounds of cycles.however, with major changes in the supply and demand of real estate, this round of real estate downturn is significantly different from previous rounds:second-hand housing prices in first-tier cities have fallen sharply. as of july 2024, they have fallen 10.4% from their peak. real estate regulation has continued to relax, and down payment ratios and mortgage rates have fallen to historic lows, but have failed to effectively boost residents' demand for housing. the balance of personal housing loans has been negative for five consecutive quarters year-on-year. compared with concerns about the risk of rapid increases in housing prices due to the relaxation of real estate regulation, the top priority is to stabilize housing prices as soon as possible and reverse the downward expectations of housing prices.iii. recommendation: reconstruct the macro-control target system and promote the recovery of nominal gdp growth with more forceful policy measures1. attach great importance to price indicators. the economic growth target pays more attention to the nominal gdp growth rate. on the basis of retaining the real gdp growth target, explore the nominal gdp target system.after the 2008 international financial crisis, developed economies discussed changing the central bank's "inflation targeting system" to a "nominal gdp targeting system," that is, maintaining the nominal gdp growth rate near a certain policy target level. although it was not implemented in the end for various reasons, it still has strong reference significance.the nominal gdp targeting system can overcome the asymmetry of the inflation targeting system to a certain extent.for example, current prices remain low and macroeconomic policies are intended to push prices back up. the public may question why everyone's cost of living should be increased, but if it is explained from the perspective of nominal gdp that the policy is intended to increase everyone's income, it will be more easily accepted.my country's macro-control objectives include economic growth and price stability, which together form a form of nominal gdp target system. it is now necessary to express them more clearly so that policymakers and the general public can better understand them, thereby building consensus, uniting forces and enhancing the trend of sustained economic recovery.2. fiscal policy should focus more on expenditure growth targets rather than deficit ratio targets, and truly achieve counter-cyclical regulationadhering to fiscal discipline and keeping the deficit rate below 3% has played an important role in preventing inflation and government debt risks. however, it has also brought some negative effects.due to the limited deficit ratio, my country's fiscal policy has shown procyclical characteristics, weakening the function of countercyclical regulation.during an economic downturn, government tax and land transfer revenues decline, and the government's debt scale is limited, resulting in a slowdown in the growth rate of fiscal expenditure, making it difficult to effectively support the economy.according to the deployment of this year's "government work report", the proactive fiscal policy continues to increase its effectiveness. the deficit, special bonds and ultra-long-term special treasury bonds totaled 8.96 trillion yuan, exceeding the deficit and special bonds of 7.68 trillion yuan last year, and also exceeding the deficit, special bonds and additional treasury bonds of 8.68 trillion yuan last year. considering that the additional treasury bonds of 1 trillion yuan issued in the fourth quarter of last year for disaster reduction and prevention construction were mainly used this year, the actual fiscal expenditure this year will be significantly strengthened, becoming an important force to accelerate economic recovery.however, since the beginning of the year, fiscal expenditure has been weak overall due to the impact of fiscal revenue growth that was lower than expected and the slow progress of special bond issuance, resulting in "expectation gap". from january to july, the national general public budget revenue was -2.6% year-on-year, and the national government fund budget revenue was -18.5% year-on-year (of which, the revenue from the transfer of state-owned land use rights was -22.3% year-on-year). as a result, the sum of the general public budget revenue and the government fund budget revenue from january to july was -5.3% year-on-year; at the same time, the special bond issuance progress from january to july was only 45.5%, which was lower than the same period in recent years. the fiscal revenue growth and special bond issuance that were lower than expected resulted in the sum of general public budget expenditure and government fund budget expenditure being -2% year-on-year, which was lower than the nominal economic growth rate.it is necessary to break the conceptual perception of the 3% warning line for the deficit ratio and give full play to the countercyclical adjustment function of fiscal policy.the 3% deficit ratio is not an “iron rule”; european and american countries broke through this limit during the international financial crisis. breaking through 3% does not mean that fiscal discipline is not respected, because the main force of fiscal discipline is the fiscal incentive constraint mechanism and management system.3. the inflation target of monetary policy should be symmetrical. dealing with low prices is as important as fighting inflation. the intensity of policy should pay more attention to the real interest rate.although objectively, compared with fighting inflation, the central bank will face more resistance and greater pressure when dealing with downward price pressure; but from the original intention of macro-control, there is no difference between the two. the policy implications of the optimal inflation level are symmetrical, that is, when inflation is high, policy should be tightened to curb inflation, and when inflation is low, policy should be expanded to stimulate inflation, so as to maintain the inflation level near the policy target.my country's monetary policy practice is asymmetric, with a clear lack of attention paid to low prices.although the cpi growth target set in the government work report is "around 3%", in reality it is not to exceed 3% and should be kept below 3%. since 2012, the cpi and core cpi have long been hovering below 3% or even 2% year-on-year. the cpi only briefly exceeded 3% in 2019 due to the "super pig cycle" caused by african swine fever and environmental protection restrictions.developed economies pay more attention to the harm of low prices.for example, in response to the persistently lower than 2% inflation target before and during the early stages of the pandemic, the federal reserve proposed the "average inflation target system" in august 2020, which would tolerate inflation moderately above 2% for a period of time thereafter. if it were not for large-scale fiscal stimulus and supply factors such as the russia-ukraine conflict that pushed up u.s. inflation, the fed's monetary policy would have remained loose. after suffering from deflation, the bank of japan also clearly stated in early 2013 that it would take about two years to push inflation to 2%. however, if the short-term impact of the consumption tax increase in 2014 is excluded, it will not be until 2022 that the target will be barely achieved due to the combined effect of various factors.it is recommended to enhance the transparency of monetary policy and stabilize public inflation expectations.for example, the "prudent monetary policy" can be changed to a more explicit expression such as loose, neutral, or tight, and the inflation indicators and targets that the central bank is concerned about can be announced, so as to anchor the public's medium- and long-term inflation expectations at a reasonable level through credible policy operations. in order to better stabilize residents' inflation expectations and communicate policies with the public, major western central banks usually specify the overall cpi as the anchor indicator of inflation targets, and the federal reserve has also chosen the overall pce, which is more relevant to residents' consumption experience.when measuring policy intensity, more attention should be paid to real interest rates rather than nominal interest rates.monetary policy continues to increase financial support for the real economy. in the second quarter of 2024, the weighted average interest rate of rmb loans of financial institutions was 3.7%, the lowest since 2008; but due to continued sluggish prices, the real interest rate after deducting the gdp deflator was 4.4%, still at a historical high, which has suppressed residents' consumption and corporate investment, indicating that monetary policy should be further strengthened.2. using more forceful policy measures to boost nominal gdp growth
1. active fiscal policy should play a greater role in stabilizing growthcompared with monetary policy, fiscal policy not only has the effect of counter-cyclical regulation, but also has the function of structural adjustment and reform. more importantly, the current monetary policy is difficult to play an effective role, and it is easy to have a situation where liquidity is loose but the scale of social financing is sluggish.in the next stage, the proactive fiscal policy can be strengthened and improved in the following three aspects:the first is to issue more government bonds, expand total demand, and ensure necessary spending.1) fully study and consider whether to increase the budget deficit within the year. the new deficit can be achieved by issuing more treasury bonds to make up for the reduction in expenditure arrangements due to the decline in tax and land transfer income, and ensure the necessary expenditure intensity. 2) accelerate the issuance of special bonds and form physical workload as soon as possible to promote a rapid recovery in the growth rate of fiscal expenditure.the second is to optimize the "debt reduction" policy and promote local governments to return to normal from emergency status.1) as some local governments are under great pressure to reduce debt, they can consider adopting three methods, such as the central government issuing treasury bonds and re-lending them to local governments, policy-based financial institutions lending to local governments, and continuing to issue special refinancing bonds, to ease local pressure, avoid liquidity risks, ensure the "three guarantees" expenditures, and trade time for space. 2) formulate and implement debt reduction policies based on districts and counties, pay more attention to refined management and differentiated policies; strictly control the regional scope of new government investment projects from provinces to cities and counties, and avoid accidentally hurting some municipal (county) government investments. 3) strengthen coordination and cooperation between policies, especially strengthen cooperation with environmental protection, planning, auditing and other departments, to avoid the phenomenon that there are resource assets, but they are restricted by other systems, making it difficult to activate resource assets. 4) adhere to debt reduction in development, study the extension of the time for clearing hidden debts, and avoid the rigid debt reduction of local governments in 2028, which will bring about the contraction of the economy. 5) further strengthen the responsibility of local governments, actively mobilize resources, strengthen resource coordination capabilities, improve expenditure efficiency, establish an incentive and constraint system for debt reduction, commend and provide political promotion incentives for good local practices and innovative cases, and mobilize the creativity of all parties in debt reduction.third, from a long-term perspective, we will optimize the implementation methods of fiscal policy, shift fiscal policy from focusing on investment to giving equal importance to investment and consumption, better play the role of fiscal policy and promote high-quality development; promote a new round of fiscal and taxation system reforms and stimulate the vitality of various entities.2. monetary policy should assume the responsibility of stabilizing pricesa prudent monetary policy should be flexible, moderate, precise and effective, and keep the scale of social financing and money supply in line with the expected targets of economic growth and price levels. maintaining price stability and promoting a moderate price recovery should be important considerations in grasping monetary policy. policy coordination and cooperation should be strengthened to keep prices at a reasonable level.first, there is relatively sufficient policy space for lowering the reserve requirement ratio and interest rates.the current weighted average deposit reserve ratio of financial institutions is 7%, and the 7-day reverse repurchase rate is 1.7%, which still has room for downward adjustment. the federal reserve is likely to start a rate cut cycle in september, and the us treasury yield and the us dollar index will tend to decline, which will reduce the pressure on the rmb exchange rate, thereby reducing the constraints on domestic reserve requirement ratio and interest rate cuts.second, actively use structural monetary policy tools to increase financial support for large-scale equipment upgrades, old-for-new consumer goods, and local governments' acquisition of existing commercial housing.as of the end of the second quarter, only 0 and 12.1 billion yuan of the 500 billion yuan re-loan for scientific and technological innovation and technological transformation and the 300 billion yuan re-loan for affordable housing had been used, respectively.the third is to study policy measures for increasing reserves, enhance the coordination and cooperation of macro policies, and support the proactive fiscal policy to better exert its power and achieve results.for example, enrich the monetary policy toolbox, enrich and improve the methods of injecting base money, and gradually increase the buying and selling of treasury bonds in the central bank's open market operations; fully consider the impact of the issuance of ultra-long-term special treasury bonds on the supply and demand of liquidity, and maintain a reasonable level of liquidity in the banking system.3. stabilize the prices of real estate, stock market and other assets as soon as possible, improve the balance sheets of micro-entities, and boost market confidencethe key to stabilizing the real estate market at present is to ensure supply, promote demand and stabilize housing prices.the first is to lift unnecessary purchase restrictions and release potential housing demand.currently, only beijing, shanghai, guangzhou, shenzhen, tianjin and hainan province are still implementing the purchase restriction policy, and it is necessary to further relax it. for example, relax the purchase restriction in suburban areas, large-sized housing purchase restriction, commercial and residential purchase restriction, reduce the social security years for non-local residents to buy houses, and increase the purchase quota for families with multiple children.the second is to reduce the cost of purchasing houses for residents and enhance their willingness and ability to purchase houses.there is still room for the current mortgage interest rate to be lowered. in the second quarter, the personal housing loan interest rate was 0.68 percentage points lower than the general loan interest rate, which is a big gap compared with 1.46 and 1.13 percentage points in the fourth quarter of 2009 and the third quarter of 2016. there is also room for adjustment of transaction taxes and fees, such as reducing the deed tax for house purchases, reducing the value-added tax and personal income tax for second-hand house transactions, and canceling the standards for ordinary and non-ordinary residences in first-tier cities. in addition, local governments can also provide housing subsidies according to their own circumstances to further reduce the burden on residents to buy houses.the third is to increase the central government’s financial support to local governments and promote the smooth progress of government storage work.it is recommended that the central government issue special treasury bonds and lend them to local governments to alleviate local government liquidity risks; expand the scope of use of local government special bond funds, and allow special bonds to be used to support local government storage.fourth, guide and encourage the development of high-quality residential products to meet the reasonable needs of residents with high-quality supply.it is suggested that, based on the sales cycles of different cities and the popularity of residential properties in different locations, some commercial land in core areas be converted into residential land to meet residents' demand for high-quality commercial housing in good locations; the 1.0 floor area ratio restriction for suburban land supply be lifted, and the indicator calculation rules for spaces such as mezzanines and balconies and community public supporting facilities be optimized; high quality and high prices be encouraged, and price guidance for newly built commercial housing will no longer be implemented.fifth, we will do a good job in ensuring the delivery of houses, resolve the debt risks of real estate companies, and dispel residents' concerns about buying houses.on the one hand, we will further leverage the role of the urban real estate financing coordination mechanism, with local governments, real estate companies, and financial institutions each fulfilling their respective responsibilities and making every effort to promote the disposal of commercial housing projects under construction, sold, and difficult to deliver, and safeguard the legitimate rights and interests of home buyers. on the other hand, we will support high-quality real estate companies in revitalizing existing assets, resolving debt risks, and enhancing market confidence. for example, we will support real estate companies in applying for bank loans or issuing reits (real estate investment trusts) and abs (asset-backed securities) with land reserves, commercial real estate, property management fees, etc. as collateral or underlying assets to improve liquidity.in the stock market,we should improve the quality of listed companies, ensure smooth entry while increasing the intensity of delisting and strengthening the punishment for illegal and irregular behavior; continue to strengthen the dividend orientation, optimize the dividend and repurchase system, and improve the long-term attractiveness of the market; increase the efforts to introduce long-term funds, etc.4. promote reforms in income distribution, fiscal system, household registration system, etc. to resolve the long-term problem of low resident consumption rateconsumption fundamentally depends on three aspects: consumption capacity (income), consumption willingness (the degree of perfection of social security systems such as medical care, pension, education, etc.) and the adaptability of supply. if these fundamental problems are not solved, it will be difficult to significantly increase consumption.consumption is the purpose of economic development, not a tool. economic development is to satisfy residents' better consumption needs, not to make consumption a tool.boosting consumption cannot rely solely on stimulus, but on promoting reform and improving mechanisms:first, further improve the national income distribution structure, and increase the proportion of residents, especially low- and middle-income groups, in the national income distribution by improving the tax system, increasing transfer payments, and accelerating the market-oriented circulation of rural land. second, optimize the fiscal expenditure structure, reduce the proportion of fiscal-supported personnel and infrastructure expenditure, and shift the expenditure structure from being mainly "material" to being mainly "people". third, accelerate the reform of the household registration system, accelerate the process of urbanization of migrant workers, stabilize the expectations of migrant workers, and increase their marginal propensity to consume. fourth, work from the supply side, optimize the supply structure, and further increase the proportion of high-end manufacturing in the manufacturing industry. fifth, relax market access in service consumption areas such as tourism, culture, medical care, elderly care, and domestic services, while strengthening standard construction and effective supervision.
