ZHOU Tianyong | Economic Insights Through Data: Only Reform Can Drive Recovery

     ZHOU Tianyong Senior Research Fellow at the Institute of Global Governance and Development at Renmin University of China

l  The following views are compiled from ZHOU Tianyong’s remarks at the 13th Biweekly Policy Analysis Meeting.

ZHOU Tianyong pointed out that China’s economic growth experienced cyclical fluctuations between 1978 and 1991, with each recovery driven by continuous institutional reforms. Simulation models indicate that without major systemic reforms, short-term stimulus policies are unlikely to sustain economic growth.

At its core, reform involves the processes of marketization and monetization—transforming physical currency into credit currency to enable market-based pricing and promote both transaction value and monetary circulation. The resulting surge in demand for money compels banks to release liquidity. Therefore, expansionary policies on the demand side urgently require structural reform, with macroeconomic regulation reframed within a national demand-side management framework. The current focus of reform should be on optimizing the direction of liquidity allocation, with the primary goal of raising household income levels. In the face of pressure from the U.S. tariff war, macroeconomic policies should concentrate on incentivizing household consumption. It is recommended to implement a three-year fiscal spending plan totaling 10 trillion yuan: in the first year, allocate 2.8 trillion yuan to low- and middle-income groups, accompanied by 1 trillion yuan in spending on education, healthcare, and other livelihood areas; increase the total to 3.2 trillion yuan in the second year and 3.6 trillion yuan in the third year, with a return to the regular fiscal structure starting in the fourth year. Meanwhile, the proportion of fiscal expenditure allocated to people’s livelihoods should be gradually raised to 20% of GDP (currently only 7.7%).

On the supply side, the central task is to build a unified national factor market system. During the upcoming “15th Five-Year Plan” period, key initiatives for factor market reform must be accelerated. The marketization of land factors is of strategic importance and requires enabling land assets to be priced and traded. At present, the administrative-led land management system has resulted in severe resource misallocation. The absence of market mechanisms has left vast land resources underutilized. The country is now at a critical stage of institutional transition. From the perspective of economic circulation, simple policy stimulus can no longer reverse short-term economic downturns. Without fundamental institutional reforms, fiscal and monetary policies are largely ineffective in restoring economic vitality.

(This article is based on ZHOU Tianyong’s speech delivered on March 27, 2025. It is intended solely for academic exchange and does not represent the position of the National Academy of Development and Strategy at Renmin University of China.)