On July 15th, The State Council Information Office of People’s Republic of China held a press conference. According to the data published by the National Bureau of Statistics, in the first half of the year, Gross Domestic Product (GDP) has grown by 5.3 percent year-on-year, with economic performance improving steadily and new progress made in high-quality development. However, despite the remarkable achievement in mitigating external challenges and proceeding the optimization of economic structure, our country is still in face of some pain points that are yet to be resolved. That how we adjust monetary policy, how we optimize the allocation of resources, how we promote domestic demand growth, and thus boost the confidence of world-wide investors will be determining whether or not China is able to steadily proceed the structural reforms in the next phase. Lijian SUN, the director of the Finance Research Center, Fudan Development Institute wrote an article for the 21st Century Business Herald to give us an interpretation on relating issues.

Professor SUN believes that, based on the financial data of the first-half year, our country has significant achievements in mitigating external tariff shocks and internal structural challenges, which can be proved in four aspects: stabilization of exports and foreign investment in China, monetary and fiscal policy synergies to promote consumption growth and price recovery, the key role of monetary policy and credit support in the liquidity glut and precision trickle-down, and the central bank's policy to ease the monetary policy transmission mechanism and synergize it with other macro policies. The monetary policy of the last-half year should coordinate with Counter-cyclical macro-control policy deepening, seize opportunities (e.g. when FED opens a channel for rate cuts) to cut interests rates, increase the strength and breadth of structural policies, and direct funds for rising long forces in the stock and property markets, ensuring capital allocation efficiency aligns with building new productive forces and safeguarding social welfare. The focus must shift from “investing in things” to “investing in people.” Properly manage the relationship between money, finance, and the economy to leverage finance's lubricating function, promoting virtuous capital cycles in areas like the Belt and Road Initiative and industrial services. Simultaneously, guard against excessive RMB appreciation and the transformation of long-term patient capital into speculative capital. While considering potential passive RMB depreciation due to global economic uncertainties, China's stable financial system limits its impact on monetary policy. If monetary policy of the last-half year focuses on “timely monetary deployment, precise financial services, and selecting tools to ensure smooth capital circulation,” it will help counter the impact of trade protectionism. This approach will also enhance international investors' confidence in China's long-term development prospects, encouraging them to proactively adopt a patient capital mindset when investing in China and share in the sustainable wealth effects of high-quality development.

Translated by Ruihan CHEN

Full text in Chinese available at:

https://fddi.fudan.edu.cn/57/02/c18965a743170/page.htm