The framework of macroeconomic policy in China

Yiping Huang

China Economic Journal, 2025, vol. 18, issue 1, 21-36

Abstract: In this paper, I explore the macroeconomic policy framework with Chinese characteristics, focusing on its development, distinctive structural features, and the challenges it faces today. Drawing comparisons with conventional practices in market-oriented economies, I highlight three defining features of China’s framework: the use of non-price and non-market-based tools, the unique institutional roles of fiscal and monetary authorities, and the amplifying effect of local governments. Recent trends reveal emerging issues, such as limited fiscal capacity at the local level, weaker macroeconomic policy impacts, and risks associated with low inflation and balance sheet recessions. I argue that China’s macroeconomic regulation should prioritize counter-cyclical measures over cross-cyclical adjustments, improve policy coordination, and utilize sovereign credit to mitigate systemic risks. Finally, I propose practical recommendations to guide future policies, including fostering moderate inflation, accelerating fiscal spending, and shaping market expectations to stabilize the economy and ensure sustainable growth.

Date: 2025
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DOI: 10.1080/17538963.2024.2445445

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