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China Finance 40 Forum (CF40) Profile picture
@ChinaFinance40
Jun 6, 2020 • 5 tweets • 2 min read • Read on X
THREAD: A recent interview with Xiao Gang and Liu Yuanchun on China’s 2020 growth outlook, employment, fiscal&monetary policies, small&medium-sized banks’ challenge in supporting businesses etc: new.cf40.org.cn/uploads/202006… #covid19 #economicstimuluspackage
While there have been some controversies over whether China’s calling for “developing new monetary policy instruments that can directly stimulate the real economy” is simply a temporary move, Xiao believes these arrangements are extensions of the function of monetary policy …
… and represent a step forward for monetary policy theory, and therefore not just temporary measures. Part of the significance of this call in the 2020 Government Work Report is that it will help improve the transmission mechanism of the monetary policy.
The Report also mentioned M2&social financing should grow “notably” faster than last year.While “notable” is not a precisely measurable indicator,Liu says it’s an important reflection of China’s monetary policy stance, that is, the prudent monetary policy should be more flexible.
The growth of M2 was 2.4% up in April this year from the end of last year, and the growth of the stock of social financing increased by 1.3%, indicating there’s further room for the two indicators to increase, especially for loans and bond securities, according to Liu.

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More from @ChinaFinance40

China Finance 40 Forum (CF40) Profile picture
Feb 22, 2023
According to CF40’s latest macroeconomic quarterly report ‘China's Countercyclical Fiscal Policy and Sustainability of Government Debt’, China has never heavily relied on budgetary spending to provide counter-cyclical stimulus. 1/5
Instead, it mainly adopts a model where local governments, financial institutions and local government financing vehicles work together to boost investment. 2/5
Statistics show that such a model has helped China stabilize its economic growth, but also increased the broad government debt to GDP ratio, raising concerns about the sustainability of government debt. 3/5
Read 5 tweets
China Finance 40 Forum (CF40) Profile picture
Feb 22, 2023
China could consider implementing negative individual income tax (IIT) to boost consumption and employment, advises CF40 research department. 1/4
It means that the government provides taxpayers with a certain amount of subsidy when the level of working income is lower than a given threshold. 2/4
A CF40 policy brief proposes a two-pronged policy scheme consisting of rewards and subsidies for businesses adding new jobs on one hand, and negative IIT on the other hand, which could drive spending and employment without causing excessive fiscal expenditure burdens. 3/4
Read 4 tweets
China Finance 40 Forum (CF40) Profile picture
Feb 21, 2023
The PBC's "benign neglect," an indirect policy tool devised in 2022 to influence the value of the RMB, was quite successful. It allows the market to determine the exchange rate while retaining capital controls as a last resort.1/5
It should be the most effective currency strategy for China's central bank, said CF40 Advisor Yu Yongding in a recent seminar.2/5
China should maintain a floating exchange rate regime to bring out its role as an automatic stabilizer while maintaining necessary capital control as a last resort.3/5
Read 5 tweets
China Finance 40 Forum (CF40) Profile picture
Feb 17, 2023
Despite the shrinking working-age population, there is a tremendous pool of surplus rural labor in China., said Caifang, Chief Expert of National Think Tank of Chinese Academy of Social Sciences. 1/5
Many analysts predict that China will not have a rapid growth rate in the future or emerge as the largest economy in the world because its working-age population and total labor have stopped growing. 2/5
23% of the total labor in China are rural labor. In comparison, the percentage in highincome economies is only 3% or 4%. That means China needs to transfer 20% of its labor from rural to urban industries, which is huge given China’s enormous population. 3/5
Read 5 tweets
China Finance 40 Forum (CF40) Profile picture
Feb 16, 2023
#China could consider implementing negative individual income tax (IIT) to boost consumption and employment, suggests CF40 Research Department in a 2022 policy brief ‘Negative Individual Income Tax: Some Thoughts on Policies to Drive Employment and Consumption’. 1/4
It means that the government provides taxpayers with a certain amount of subsidy when the level of working income is lower than a given threshold. 2/4
The policy brief proposes a two-pronged policy scheme consisting of rewards and subsidies for businesses adding new jobs on one hand, and negative IIT on the other hand, which could drive spending and employment without causing excessive fiscal expenditure burdens. 3/4
Read 4 tweets
China Finance 40 Forum (CF40) Profile picture
Feb 3, 2023
Given China’s macroeconomic environment in December 2022, the following policies should be taken to boost China’s economic growth and deal with potential risks, said ZHANG Bin, CF40 Nonresident Senior Fellow: 1/5
1. Lower interest rate by 25 bps each time until the employment and growth targets are hit.
2. Issue new types of fiscally subsidized bonds and policy loans to support investment in public goods and quasi-public goods infrastructure projects that feature limited returns.2/4
3. Set up special funds to help market entities battered during the pandemic get back on their feet; increase the amount of living allowance for low-income groups. 3/5
Read 6 tweets

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