Looking at the Shift in Macroeconomic Policy Ideas from the Monetary Policy Implementation Report Column

In October last year, Pan Gongsheng, the Governor of the People's Bank of China, stated at the Financial Street Forum that the direction of macroeconomic policy should shift from a past focus on investment to a balanced emphasis on both consumption and investment, with greater attention to consumption. On May 9, the central bank released the Monetary Policy Implementation Report for the first quarter of 2025 (hereinafter referred to as the "Report"), which includes several columns reflecting the shift in macro policy thinking from different perspectives.

First, boosting consumption is the key point for expanding domestic demand and stabilizing growth.

Column 2 of this "Report" focuses on supporting the boost and expansion of consumption, reflecting that macro policy is placing more emphasis on promoting consumption.

Currently, the proportion of final consumption expenditure to GDP in China is still lower compared to countries like the United States and Japan, indicating significant potential to enhance the contribution of consumption to economic growth. In the face of adverse external demand shocks, it is necessary to prioritize the promotion of domestic consumption. In the financial sector, it can be seen that China's consumer finance service system is relatively well-developed, with financial institutions innovating and launching diverse consumer credit products and service models around different consumption scenarios, effectively stimulating market vitality.

The latest news on May 9 indicates that the central bank has officially established a 500 billion yuan "service consumption and pension relending," which is expected to further incentivize and guide financial institutions to increase financial support for key service consumption areas such as accommodation, catering, cultural and entertainment, education, and the pension industry. It should be noted that this policy works from the supply side of consumption, better meeting the demand for consumption upgrades among the public, and in the future, in coordination with fiscal and other industry policies, it can reflect more synergistic effects.

Second, the "Report" shows that China's government debt is supported.

Column 5 compares the government debt situation of China, the United States, and Japan from the perspective of government departments' balance sheets. China's broad government total assets are equivalent to 166% of GDP, total liabilities are equivalent to 75% of GDP, and net assets account for about 91% of GDP, with assets mainly consisting of equity in state-owned enterprises that have good growth potential.

This means that the expansion of China's government debt has corresponding asset support, which is significant for strengthening livelihood security, improving income distribution, promoting economic transformation, and achieving dynamic balance. Especially since the beginning of this year, China's fiscal support has significantly increased, with local new special bond issuance accelerating, with a cumulative issuance of nearly 1 trillion yuan in the first quarter, effectively driving investment growth and boosting confidence.

Third, promoting a reasonable rebound in prices requires addressing some deep-seated supply and demand structural contradictions.

Report Column 6 points out that promoting a reasonable rebound in prices requires balancing economic supply and demand, with the key being to expand effective demand.

Specifically, the current low price operation in China is influenced by multiple factors. On the demand side, there is ongoing pressure from declining consumption, and investment in traditional areas such as local government financing platforms and real estate has significantly contracted, leading to more price declines. On the supply side, some industries are experiencing "involution" competition, and the role of industry self-discipline in "controlling low-price dumping" is difficult to play, while local protectionism affects the effective promotion of a unified national market, resulting in inefficient and ineffective enterprises not being cleared in a timely and effective manner At the same time, market institutions have analyzed that the price changes in different industries also exhibit different characteristics. For example, in recent years, some industries that are highly correlated with traditional backward production capacity have seen significant declines in product prices. The black metal processing industry, primarily represented by building materials, as well as the chemical industry, have generally experienced a PPI decline of over 5% in the past year. The differences in prices across industries can also reflect differences in interest rates between industries and optimize production capacity through market mechanisms.

In this regard, professionals have analyzed that prices primarily depend on the supply and demand relationship of goods, while currency is a secondary factor. Currently, the growth of money supply continues to outpace economic growth, yet prices remain low. Increasing the money supply without improving the supply-demand relationship cannot effectively boost demand; if it is aimed at promoting supply expansion, the prevailing situation of oversupply makes it difficult to change the low price conditions. The approach to price regulation should also shift from previously preventing "price gouging" to preventing "low-price dumping." If companies blindly expand production or engage in price competition, the suppressive effect on prices will persist, which is not conducive to maintaining market order and the stability of business operations in the long run. Moving forward, government price management should shift from encouraging companies to "exchange price for volume" to guiding companies to "win by quality"; companies should identify their operational direction and explore diversified competitive strategies such as technological innovation, brand building, service quality, and market segmentation.

In fact, not only should the rebound in prices focus on deep-seated issues, but efforts to boost consumption and promote domestic demand should also avoid fragmentation and short-sightedness. For example, the next phase of consumption promotion should focus on strengthening top-level planning, exploring the establishment of a comprehensive systematic indicator system to measure consumption development, and publicly declaring it to better play a guiding role.

Author of this article: Ma Meiruo, Source: Financial Times, Original Title: "Observing the Shift in Macroeconomic Policy Ideas from the Monetary Policy Execution Report Column"

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