China's Macro Policy Is Facing A Rare Embarrassment.

Both the central bank and the NDRC have made great efforts in counter cyclical policies, but the effect is not obvious.

The economic stimulus measures have been introduced continuously, but it seems that the government is singing a one-man show and almost no response from private capital.

In 2010, the government's four trillion stimulus measures went up, and private investment started to rise.

The multiplier effect of stimulus measures is getting worse and worse.

Policy collocation is also interesting.

Obviously, it is a "positive fiscal policy", and its fiscal policy is super robust. It is clearly said to be a "prudent monetary policy" and monetary policy is super active.

The fiscal policy is not positive enough because the growth of revenue has dropped sharply, and the revenue of local land sales has dropped sharply. At the beginning of this year, the budget deficit is 2.3%. If the total caliber is calculated, this year's fiscal deficit will not exceed the warning line of GDP3%.

The financial policy was unable to exert force, so the PBC turned itself into the Ministry of finance, providing liquidity to policy banks and monetizing fiscal policy.

However, these are still unable to make good companies willing to borrow money, so that banks can not afford to borrow money.

Over the past decade, China's macro-control policies have basically focused on demand side, and made counter cyclical adjustment through monetary policy and fiscal policy, including monetary policy contraction in 2005-07, four trillion in 2010-2013 years, and intermittent real estate adjustment as its representative work.

There is no denying that the demand side policy has contributed to easing the cyclical fluctuations of China's economy in adjusting consumption, investment and even export, and has played a mainstay role in the global financial tsunami.

However, the demand side economic policy based on Keynes's economic theory is mainly based on the coordination of the total amount of the economy, but rarely on the economic structure, economic system and productivity.

Although counter cyclical policy has kept up with demand for a long time, it has maintained a relatively high growth rate. However, over time, it has also led to economic imbalance and dislocation.

The author thinks that

The end policy has already been used, not only the decline in policy effectiveness, but also the final stage of strong crossbow, and it is unable to catch up with structural adjustment, and even postpones the necessary adjustment.

Keynes economics once brought more than 20 years of prosperity to the western developed countries through demand regulation after the two World War.

However, it is precisely because we only pay attention to aggregate demand and do not make structural adjustment, which eventually led to stagflation in 70s.

In 70s, the theory of supply school began to rise, emphasizing the improvement of productivity through structural changes.

After the Thatcher revolution, the Reagan revolution and Deng Xiaoping's reform and opening up, all of them sought breakthroughs from the supply side, with the principle of improving production efficiency, and brought a radical reform to the economy, laying the foundation for the prosperity of the next thirty years.

Today, China is not without demand. The purchasing power of nearly one trillion yuan to the overseas market is the actual purchasing power. However, the products currently provided by China are not matched with consumers' needs, whether from the variety of products or the quality of products, so tourists appear to buy toilet cover in Japan and do cosmetic surgery in Korea.

Today's problem in China is not necessarily the total consumption shortage, but the supply does not match the new consumption demand.

Moreover, good products can create demand, and Apple's iPad is an example of product manufacturing demand.

Today, private capital in China is not completely absent.

The main reason is that most of the manufacturing sector has become unprofitable, while the high-end service industries are monopolized by state-owned enterprises, financing difficulties, strict supervision / admittance and heavy tax burden.

If the government can liberate the system and access, reduce costs for enterprises in terms of tax rates and capital costs, as long as enterprises can earn money, private investment will naturally emerge.

The most important basis of demand side policy is maintaining stability and maintaining social stability.

In fact, the maintenance of stability is not necessarily GDP growth, but the job market.

At present, the employment market in China is far more stable and healthy than GDP growth. I don't know how to maintain stability. After all, the demographic structure, the employment of migrant workers and the service market are quite different from those of ten years ago.

Under the thinking of maintaining stability, excess capacity can not be destroyed, making the manufacturing industry deflation and poor local infrastructure projects more and more. The zombie accounts of zombie enterprises and banks continue to occupy the economic space, choking the development of new production capacity and emerging demand.

China's economy has come to the glory of today, and the three supply side policy breakthrough is indispensable.

The first is Deng Xiaoping's reform and opening up, breaking through the old planned economy mode, releasing huge institutional dividends and improving productivity.

The second is the policy of the special economic zone which began in the early 90s, which was in line with the trend of global production at that time, and made China's manufacturing industry jump.

The third time is China's accession to the WTO. On the one hand, Chinese products are pouring into all the markets of the world, and on the other hand, the channels and collaterals in the internal market have been opened up, and the economy has taken off again.

The ideological revolution of the three supply sides brought about a great increase in productivity.

The rapid change brings new productivity and natural demand.

What is particularly commendable is that every change is a policy to stimulate the enthusiasm of private capital investment, rather than the government itself as the main body of investment.

The author believes that the macroeconomic regulation and control of China's demand side has almost come to an end.

It is not that fiscal policy and monetary policy do not expand further. Instead, these policies are essentially seeking structural reforms, promoting innovation and entrepreneurship, improving productivity and guiding new demands.

What China needs today is not more government investment projects, but rather a surge of creativity and investment enthusiasm.

Instead of unconditionally maintaining the existing capacity and industrial layout, we should eliminate excess capacity and induce new consumption demand, thereby driving new investment enthusiasm.

Instead of continuing to enter the country and retire, it is to break the monopoly of state-owned enterprises, break the monopoly of banks, and achieve some of the prosperity of IT enterprises today.