China’s New Macro-Control Measures

Considering the challenges posed by COVID-19, China’s macro-control has been quite effective. Three policy instruments stand out for their innovation, necessity and foresight, namely, consumer coupons, special government bonds and new infrastructure projects.

Coupons Instead of Cash

Facing the pressure of insufficient consumer demand, Western countries often issue money directly to households to stimulate consumption and maintain the stability of household balance sheets. China, on the other hand, has adopted the method of issuing consumption vouchers to stimulate consumption and serve residents according to its specific national conditions such as a high savings rate and a high ownership rate for housing.

Issuing consumption vouchers brings three natural advantages that direct cash distribution lacks: First, it neither exacerbates the government’s current debt nor needs to be paid by the government in the current period while leveraging the government’s credit to reduce fiscal pressure. Second, it avoids the leakage of direct cash distribution. According to the habits of Chinese residents, if given cash, more funds would go directly into savings or mortgage repayment, minimizing the consumption effects. Third, it eliminates worries about inflation and redistribution of income.

Special Government Bonds

The special national debt plan was put forward at a March 27 meeting of the Political Bureau of the Communist Party of China (CPC) Central Committee. At an April 17 meeting of the Political Bureau, the special national debt program was named “anti-epidemic bonds,” and its attributes, purpose and standards were clarified.

While delivering the government work report on May 22, Premier Li Keqiang announced that one trillion yuan (about US$140 billion) of government bonds for COVID-19 control would be issued. In addition to support for infrastructure, equipment, and medical services in the field of public health, the bonds do not directly interfere with or affect the market in other fields. They support the resumption of production, transformation and upgrading, and innovative growth of the target industries and market entities by leveraging the role of the market, increasing market efficiency and enlarging market mechanisms, as part of a plan to coordinate orderly development of the real economy, modern finance, scientific and technological innovation, and human resources.

New Infrastructure Projects

Because of lingering notions about traditional infrastructure, many market misunderstandings about new infrastructure have emerged. “New” infrastructure is mostly industrial infrastructure with a more mature market operation mode as well as mature investors and operators. The government’s involvement in new infrastructure is mainly from two perspectives: building a foundation as public infrastructure that serves industrial infrastructure and investing in difficult and blind spots in the market, namely, sectors that are difficult to enter, manage or be satisfied by the market. The government’s participation in new infrastructure is mostly as a cooperative partner, and investment comes from special debt, which makes new infrastructure spending a capital expenditure rather than an operating expenditure managed with subsidies. Relevant market investors can obtain direct support from government policies, thus obtaining greater and cheaper funding for the launch and construction of new infrastructure projects.

The author is a researcher at the National Academy of Economic Strategy under the Chinese Academy of Social Sciences.