After the Chinese Communist Party (CCP) introduced a 1 trillion yuan debt-for-bond plan, former Deputy Director of the CCP State Council Development Research Center, Liu Shijin, stated that the current focus on stimulus over reform will not solve the problem, as insufficient consumption is a major structural issue.
Since September of this year, the CCP has implemented a series of monetary and fiscal policies, especially after the U.S. presidential election, when the authorities launched the 1 trillion yuan debt-for-bond plan, which the market has not viewed favorably.
On November 9, Liu Shijin, Vice Chairman of the Economic Committee of the 13th National Committee of the Chinese People’s Political Consultative Conference, former Deputy Director of the State Council Development Research Center, and former monetary policy committee member of the central bank, pointed out in his closing speech at the 15th Caixin Summit, “In order to stabilize economic growth and prevent a rapid decline in the economy, it is necessary for us to take moderate stimulus measures. However, there is a tendency now to talk more about ‘stimulus’ and less about ‘reform’. I believe that if we continue in this direction, we will not be able to solve the problems we face.”
Insufficient overall demand is a key concern for Liu Shijin. When discussing the structural issue of insufficient consumption, especially in terms of a lack of service consumption, he said, “The problem cannot be solved through minor measures; it’s not a trivial matter but a fundamental illness, a major structural issue.”
He believes that the problems caused by insufficient total demand, including consumption, employment, and finance, are directly related to the structure of demand, where the proportion of the lower-income group is relatively larger compared to the middle-income group.
“Leveraging development-oriented consumption is not something that can be achieved through individual efforts alone, let alone far from it. It requires the government to lay the foundation and combine government consumption expenditure with household consumption expenditure. However, currently, the level of equalization of basic public health services in our country is not high enough, which hinders the growth of development-oriented consumption,” said Liu Shijin.