Economist Zhang Yansheng is a researcher with the China Academy of Macroeconomic Research. He is also a former secretary general of the academic committee of the National Development and Reform Commission, China’s top economic planner. Zhang has presided over or taken part in research projects for several of the country’s five-year plans, and published more than 20 books on international finance and trade.
In this interview, Zhang discusses Beijing’s response plan for tariffs and trade encirclement during Donald Trump’s second White House term and what Chinese companies should look out for when expanding overseas. This interview first appeared in SCMP Plus. For other interviews in the Open Questions series, click here.
China’s Politburo recently laid out its economic strategy for 2025, which includes a more proactive fiscal policy and a “moderately loose” monetary policy. What are your thoughts on these developments?
Next year is crucial to the Chinese economy, as it marks the transition from the 14th to the 15th five-year plan. The combination of a more proactive fiscal policy and moderately loose monetary policy, along with “unconventional” countercyclical adjustments, suggests that despite the numerous policies introduced since September, the market, businesses and academics believe these measures have been insufficient.
Next year’s focus will be on increasing central fiscal spending and adjusting the deficit ratio, which is essential for addressing financial shortages among local businesses and the public. This year’s fiscal deficit ratio in the US was estimated to be 7.8 per cent compared to China’s 3.8 per cent, indicating room for a potential increase in China – though not implying we need to immediately catch up to the US.
There will be a stronger emphasis on local transfer payments and the use of special local government bonds as capital to help improve local government asset and liability conditions. This is vital for resolving debt problems among businesses, which can stimulate the national economic cycle.
The core issue with the “moderately loose” monetary policy is how to effectively utilize both broad and targeted monetary policies. Targeted policies will likely focus on sectors like technological innovation and green transformation. Fiscal measures are seen as crucial because they directly inject capital into the economy, while monetary policies need to address currency stability and deflationary pressures.