Thread by @ChinaFinance40

Three features of post-#pandemic economic recovery by Peng Wensheng:
mp.weixin.qq.com/s/LEZYtB-JFAVw…
1. #savings gluts, or supply greater than demand, implying weak momentum for economic recovery, lowered interest rate and deflation pressure...1/6

2. expansion of credit has not turned into productive #investment, causing potential financial risk and a drag on the #economy;
3. virus containment measures have changed people’s behavior and the economic structure, with the digital economy gaining strong momentum...2/6

There are 3 ways to work off savings gluts: bank credits, direct financing and fiscal expansion. Each has its own strengths and weaknesses, but #credit expansion wouldn't be a wise choice, while a proper combination of the other two is expected to bring desirable outcomes...3/6

Therefore, in the post-pandemic era, the most ideal macroeconomic policy combination would be tight credit policy, eased monetary policy and expansionary fiscal policy...4/6

Peng also reminds that we need to look beyond the #MMT and take the supply side into account in our policy tradeoffs.

First, except for boosting aggregate demands, fiscal expansion needs to drive the supply-side structural reform and structural adjustments of the economy...5/6

Second, eased fiscal policies should be combined with efforts in boosting direct financing. One possibility is to use government funds to foster new economies, while another is to convert some of the debts into equity investments as part of the relief measures. 6/6