On May 22, Li Yang, member of the Chinese Academy of Social Sciences and chairman of the National Finance and Development Laboratory, pointed out at an online event that increased government deficits and excessive debt issuance will be the new normal for a long time to come .

The government work report stated that a proactive fiscal policy should be more proactive and promising. This year’s deficit rate is planned to be set at more than 3.6%. The fiscal deficit scale will increase by 1 trillion yuan compared with last year. At the same time, 1 trillion yuan of special anti-epidemic government bonds will be issued.

Increasing debt will be the new normal

Li Yang analyzed that during the economic downturn, fiscal revenue is its decreasing function, which means As the economy goes down, fiscal revenue decreases even more. But it is precisely when the economy is going down that the government needs to spend more money, so the problem of spending more money together with the problem of reduced income is the problem of fiscal gaps. In this context, Li Yang pointed out that an increase in government deficits and a large debt issue will be the new normal for a long time to come. This will not only be the state of this year, but the new normal that will be faced for many years to come. China may be on the track of large-scale fiscal and financial policies such as Japan and the United States at once, and everyone needs to be prepared psychologically.

Recently the topic of “Monetization of Fiscal Deficit” has been hotly discussed. Li Yang bluntly stated that this is already a fact, first recognize the fact, and then discuss it slowly.

The bottom line of the 3% fiscal deficit rate is a condition for joining the EU in the past. Li Yang said that it is actually a bit misunderstood to treat it as an international practice. To understand the government ’s fiscal deficits, it is important to note that in the past few years, there was a sentence about economic system reforms and fiscal policy reforms, that is, expenditure products turned to policies. The orientation of macro policy is a basic starting point. Then during the economic downturn, macro-policy stimulus is needed.

Li Yang summarized and emphasized that the increasing debt in the next few years will be a new normal. We must learn to live in the environment of increasing deficits and increasing debts. Debt itself is not a devil, but if it is used by someone with a ghost in its heart, it will become a devil. The current issues that should be faced are the effectiveness of debt management and where debt revenue is spent. In the future, China’s entire economy will need to increase its deficit in general. The next serious challenge is how to manage it so that it can truly provide positive energy for the recovery of the macro economy and future growth.

Price increases are inevitable, and prices need to be managed

Will expanding debt cause inflation?

Li Yang believes that prices have risen compared to last year because the economic downturn has reduced demand while reducing supply. Inflation is simpler, too much money is pursuing too few products, and now too few products are already a fact. However, if more liquidity is invested in society through deficits and the demand is increased, the relationship between demand and supply will be reversed, and price increases may be inevitable.

Li Yang further pointed out that this epidemic poses a comprehensive challenge to China, and also poses new challenges to price management. In this complex situation, we must ensure that prices do not rise too much. Li Yang took the United States as an example and said that when he went to a supermarket in the United States, he found that its eggs, vegetables, and meat would almost never increase in price. For such a completely market-oriented country, it regulates prices related to the lives of the lowest people.