ZHANG Chengsi: Creating an Accommodative Policy Environment for the Development of New Quality Productive Forces

Zhang Chengsi, Deputy Dean and Professor of the School of Finance at Renmin University of China, published an article titled “Creating an Accommodative Policy Environment for the Development of New Quality Productive Forces” in the journal “Social Sciences in China”. The main points of the article are as follows:

The 2024 Central Economic Work Conference, held amid a complex external environment and internal reform situation, made policy arrangements for the economic work of 2025. The conference emphasized that, while maintaining the way of seeking progress while ensuring stability, active macroeconomic policies should be implemented to promote technological innovation and industrial transformation and upgrading, thus developing new quality productive forces. This is not only a stabilizing growth measure to address short-term fluctuations but it also lays the foundation for long-term high-quality development.

New quality productive forces, through digitalization, greening, and intelligence, will reshape industrial value chains and resource allocation structures, accelerating the transformation and upgrading of traditional industries, and fostering the emergence of new industries, business models, and technologies. In this process, fiscal and monetary policies need to be better coordinated: fiscal policy should focus on enhancing basic support capacity and improving resource allocation efficiency, while monetary policy should aim to optimize the financial ecosystem and financing environment. Through this policy cooperation, new quality productive forces are expected to become the core driving force for a new round of economic growth in China.

First, a more proactive fiscal policy is needed to inject momentum into the development of new quality productive forces. At this stage, fiscal policy should not only conduct counter-cyclical adjustments but also focus on structural optimization, providing long-term support for the development of new quality productive forces. Specific measures include increasing support for technological innovation and basic research; incentivizing the digital and green transformation of industries; optimizing the expenditure structure to promote consumption upgrades; and stimulating domestic demand and consumption by improving people’s livelihoods, thus driving the development of new quality productive forces and achieving a dual drive of technology and market.

Second, a moderately loose monetary policy is essential to energize new quality productive forces. The People’s Bank of China’s monetary policy not only focuses on aggregate economic adjustments but also pays greater attention to structural optimization and the efficient allocation of resources. On the one hand, it appropriately and timely uses tools such as reserve requirement ratio cuts and interest rate reductions to maintain reasonable liquidity, aligning money supply growth with economic growth and price level targets. On the other hand, it further strengthens the structural guidance capability of monetary policy. At the same time, it actively explores expanding the macroprudential management and financial stability functions. This ensures a sound and sustainable financial environment to support the long-term development of new quality productive forces.

Finally, macroeconomic policies must work together to build a fertile ground for the growth of new quality productive forces. In terms of timing, proactive fiscal spending arrangements can lay the foundation for industrial innovation by building infrastructure, public services, and industrial alliance networks, providing a solid foundation for emerging industrial chains. In terms of policy tool allocation, fiscal policy creates external conditions for accelerating technological and industrial innovation through public investment, special funds, and tax and fee reductions. Monetary policy, on the other hand, provides necessary financial support for industrial upgrading by reasonably guiding market interest rates, broadening financing channels in multi-level capital markets, and innovating credit enhancement models. In terms of urban-rural integration and regional coordination, fiscal policy guides the orderly layout of key industrial clusters and national-level innovation platforms, while monetary policy incentivizes local financial institutions to enhance their credit services for county economies, SMEs, and upstream and downstream enterprises in industrial chains. This can help create a favorable institutional environment for the healthy growth of new quality productive forces, providing strong momentum for China to effectively address external shocks and improve internal stability.

 (Translated by ZHANG Yuqing; Proofread by YANG Fanxin)