By Zhang Shasha
Extremely extraordinary.” This was the top policymakers’ conclusion on 2020 as they took part in the Central Economic Work Conference in Beijing from December 16 to 18, 2020, the annual meeting held to review the year’s performance and lay out the goals for the next.
With economic achievements hard won amid control of the novel coronavirus disease (COVID-19) but not yet consolidated, and 2021 being a crucial year marking the beginning of the new five-year plan period, the meeting set forth macro policies as well as specific tasks.
In 2021, the macro policies will remain consistent, stable and sustainable, the fiscal policy proactive and the monetary policy prudent. On one hand, the economy is expected to return to normal track in 2021, so the supportive policies instituted in response to the epidemic would be withdrawn in a gradual and orderly manner. But on the other hand, uncertainties still remain in the form of the ongoing pandemic in the rest of the world and sporadic cases in China.
“The proactive fiscal policy will be tightened up, but not too much,” Zhao Quanhou, Director of the Financial Research Center, Chinese Academy of Fiscal Sciences, told 21st Century Business Herald. He said it is expected that fiscal revenue would increase by over 5 percent in 2021 with a high pace of economic growth. Last October, the International Monetary Fund estimated it would rise by 8.2 percent. As production resumes overall, the deficit-to-GDP ratio could be reduced to 3 percent from more than 3.6 percent in 2020.
Zhang Yongjun, deputy chief economist of the China Center for International Economic Exchanges, told the media that fiscal support including more public investment helped enterprises cope with the impact of the epidemic. However, the projects cannot be finished short term, so the policy support should remain consistent.
Currently some local governments are facing funding pressure. The money for major national tasks should be spent still, while non-essential expenditure should be reduced to prevent debt risks, Dong Yu, Executive Vice President of the China Institute for Development Planning at Tsinghua University, told Xinhua News Agency.
The meeting also said it’s essential to keep the monetary policy flexible, targeted, reasonable and moderate, stabilize the leverage ratio and balance the relations between economic recovery and risk prevention. It stressed that the increase of money supply and social financing should basically match the nominal economic growth. Since the acceleration of money supply in 2020 was higher than the nominal GDP growth rate, Zhang said it should be lower than the nominal rate this year.
– The Daily Mail-Beijing Review News Exchange Item
