From this policy, I don't think that the central government wants to raise that level to a much higher level, because it is still controllable, and even we put the central government and the local government together, it is still comparatively lower than many of the economies in the world.
Infrastructure investments, educational investments, and I think this has been a very beneficial thing.
So I think basically the nation as a whole has to pay for that.
How we can maximize the investments, how we can use the similar targets, number one, to maintain the economy stability, the economy growth momentum, but number two, the quality of growth, the quality of the people's life.
The chat lounge unpacks views and opinions on hot issues in a more casual way.
Welcome to the chat lounge.
I'm Xu Yaoben. Joining me to discuss China's 1 .4 trillion debt package are Dr.
Zhou Mi, Senior Research Fellow with Chinese Academy of International Trade and Economic Cooperation, Dr.
David Blair, Vice President and Senior Economist at the Center for China and Globalization, and Professor Yao Shujie, Chongkang Professor of Economics at Chongqing University.
Welcome back to the chat.
China has announced a new debt relief package, a total of 10 trillion yuan or 1 .4 trillion dollars, to ease the financial burden on local governments.
The decision raises the ceiling on local government debt by 6 trillion yuan, and local governments will have access to a separate 4 trillion yuan quota in the form of special local bonds over 5 years.
So Dr. Zhou, let me come to you first.
So China has approved this increase of 6 trillion yuan in the local government debt ceiling that's approximately 840 billion dollars, marking a significant policy adjustment.
So what are the main factors driving this policy, and why was it proposed at this particular time?
Yes, it might seem that the Chinese government is trying to solve these problems of not enough, I mean, the speed of development.
So in the past several years, the Chinese government has a little bit more stable or precultures on these policies.
So we are saying that the United States has put a lot of policies to support the enterprises and recovery of the economy, while some other countries also did the same thing.
Well, for China, I think that most of this time we are in a roughly neutral position in the fiscal policies, and that is also not so helpful or encouraging the enterprises to have a better performance.
So after last month, we see that some of the policies coming from the NDRC, also something to do with real estate, it is a very important continuous package of other policies, including the fiscal policies.
And another reason is that if we are looking back in the past several years, we see that a lot of pressures have been given to the local government while the development of the real estate is not that flourished, compared with several years ago, and also because of the comment that the local government
has paid a lot of money to deal with this problem.
So they have some kind of issues about that.
How can we exchange the space for development and create a better one?
I think that is the reason why we want to give some relates to the local government to have a better space to development and have a better position to do more to encourage the development of the economy.
Dr. Blair, the 6 trillion yuan increase in the debt limit will be spread over three years, with two trillion yuan allocated each year from 2024 to 2026 to help local governments replace various hidden debts.
Why was this annual distribution chosen and what are the policy considerations behind this approach?
Part of it may be just the typical government budgeting system.
I know the U .S. government more fully, but I think it works the same in the Chinese government that any government agency needs to spend the money that it receives within the fiscal year that it receives it.
So it makes more sense to spread it out over several years.
There are several sort of deeper issues though.
I think one is an issue that's called moral hazard, that you want to provide insurance for somebody or sort of back up for a budget, but you also want to be sure that the money is spent wisely and you want to be sure that it doesn't encourage sort of irresponsible spending.
So I think some prevention of moral hazard is probably going on.
But I also think that I'm not saying that the local governments have necessarily been irresponsible in the past.
I think they have a lot of responsibilities.
They've created a lot of great infrastructure around the country.
Some of that infrastructure does not pay off monetarily.
It pays off in improving the lives of the people.
There are lots of great parks in Chinese cities now.
That makes the lives of many of the people in those cities much better.
I mean, I live near a park and I see many, many people every day enjoying that park, socializing, becoming healthier, but it's not going to pay off monetarily.
So I think it's important that these local governments that provide these kinds of services to the people be adequately funded, and I suspect this is the first step toward a reform possibly of the way local governments are funded.
There needs to be some improvement.
There needs to be a change in the way that local governments receive their funding either from their local taxpayers or from the national government because the old system, based on improving land prices, is probably not feasible in the future because land prices have probably reached a peak.
Professor Yao, starting this year, China will set aside 800 billion yuan from each year's new special purpose bonds for local governments for five consecutive years and thereby providing debt relief to replace 4 trillion yuan of hidden debts.
We know this debt swap is not a central government takeover of local debt, as some investors may have understood.
Instead, it aims to help local governments resolve hidden debts by replacing high -interest, non -transparent local debts with low -interest, transparent government bonds.
So could you firstly explain to us what is the hidden debt, how is it generated, and what role does it play in local government finances?
The hidden debt is a difficult issue.
So it is not through the normal debt, like government bonds or bank borrowing.
It's actually the opposite, borrowing by the local government in formal credit state such as the NDC and other things, which cannot be openly accounted for to the local government.
But the local government has to bear the burden of paying relatively high interest rates, which is a significant burden for the local government.
I think the issue of the, you know, by raising the credit, the local bond limit and also by replacing the so -called informal debt, there are two purposes.
One is to make sure that the so -called informal debt is becoming formal to this, you know, replacement.
And secondly, the cost of the formal or informal credit debt, they have to be accountable to the local government.
So we know how much burden by each of the local governments in the debt, you know, part of it.
And by doing so, I think first of all, it would restrict the informal debt to be expanded, and I think gradually the informal debt will be totally eliminated.
So the local government will be able to have these kinds of formal debts and paying relatively stable interest rates for the following.
Now, this is a fairly fundamental physical reform for the local government.
It will make sure that the local government will have less burden for future investment and ensure that each of the local governments will be responsible for their actions, not only to stimulate local economy expansion, but also to control the risk of local debt.
After so many years, the formal and informal debt is accumulating to the point that even the local government, the central government, they are not 100 percent sure how much debt the government has won.
The investors, whether domestic investors, public investors, private investors, they have a black box for the local government, whether they are able to handle financial stability.
And this is fairly unhelpful for the current financial, local level.
So they buy the short of these kinds of informal debt.
I think it will give a very strong signal that local, as well as foreign investors, they will give more trust in the Chinese local government financial system.
And the trust in the local government is very important for both domestic and foreign investors.
So this is a very important step to enhance the local government, local economic performance.
Dr. Zhou, what's your opinion, Professor Yao's remarks?
How do you view the issues associated with the hidden debt?
And also, how does the debt swap process work with the new policy being rolled out?
So according to this question, I think that it is very important for us to understand that the local government has not so strong in the ability to have more income except for some of the taxes.
For certain provinces in China, maybe they have some transfer from the central government.
And for others, they have to earn more by themselves.
So how can we make that sustainability of the fiscal position of the local government is very important for us?
Because the local government is not only a very important part to support the development of the economy, but also very key, as I agree with Professor Yao, that it is very important for them to deal with the situation and trying to have a better position to attract the investors from different places.
So how can we do a better way not to increase the total debt of the local government while at the same time just trying to give it a more transparent way and responsible way to deal with the problem?
As we all know, that the debt is a kind of a swamp from nowadays and the future.
If we are able to have a better position in the future, we may have to borrow some money from the income of the future.
So from this policy, I don't think that the central government wants to raise that debt level to a much higher level, because as Mr.
has mentioned, it is still controllable.
And even we put the central government and the local government together, it is still comparatively lower than many of the economies in the world.
So we do have the possibilities.
But the problem is that how can we control the development of the debt while at the same time to give the market enough strength and also the local government or authorities more power to do more things like the infrastructure?
So it is a very important time for us to deal with the situation because the world is in such an uncertain status.
We need to give more assurance or certainty to the market.
Dr. Blair, so based on your observation, which provinces, sectors and industries are expected to benefit the most from this debt swap?
If you remember maybe 15 years ago, there was a lot of talk about Chinese growth being just on the coast, being in the rich eastern provinces, the then -rich eastern provinces, and not in the western provinces.
But what we've seen over the last 15 years is huge investments in western provinces.
I mean, I don't know the details of each province, but I think the lives of people in a lot of the western provinces or southwestern provinces, Huizhou, Yunnan, northwestern provinces also, have been transformed by very large investments, infrastructure investments, educational investments.
And I think this has been a very beneficial thing.
So I think basically the nation as a whole has to pay for that.
But I think it's a very worthwhile investment because I suspect you'll see a lot of growth opportunities happening in what were previously the poorer provinces, because now they have good 4G capability, they have good railroads, they have excellent road and passenger rail and freight rail system.
So now they're able to compete in the national economy but also in the international economy.
So I think this looks like a debt, but it's also a good investment.
So I think one of the growth opportunities for China in the future is building up formerly poor areas in the west and also rural areas, which now also gives a lot of people opportunities.
Now there's nothing wrong with debt if it's used wisely to create income enhancing opportunities for the future.
So that's my view of what's happened, what's created this debt.
Most of this is governmental debt at one level or the other, but it's debt to other government agencies mostly.
So it should be relatively straightforward to figure out how to reconcile the returns from that debt.
Professor Yao, do you agree with what David just said?
In your view, which industries or sectors are expected to benefit the most from this new policy?
Yeah, I think David is right in terms of the special distribution of national investment.
I want to add to his point about the industrial sector.
I think in actually I think the Chinese domestic economy is under very rapid transformation in terms of dealing from the middle, low level, factoring services to high, medium level industries and services.
So you can see these kinds of trajectory that the industrial transformation is changing from a relatively lower level to a relatively higher level.
Higher level means that the emerging industries, such as new energy vehicles, modern materials and also better infrastructure, high end manufacturing and also the future industries, such as hydrogen, high speed computation and so on and so forth.
So I think this new industry will benefit most because they will lay a better foundation for future economic growth and employment.
However, that doesn't mean that the traditional industry agriculture will be neglected.
There are still a lot of scope for lifting up the traditional manufacturing agriculture sector.
For example, high quality cultivated land improvement, the ecosystem, the forestry and grass expansion to improve the eco environment for the country.
You know, I want to add to this, which is mostly neglected for a long time is the social services.
Although China has invested heavily in not only the central government, but the local government as the individual family in terms of education and medical care, China has still suffered quite significantly in this particular area.
For example, people still complain when they get sick, they go to the hospital, there is a lot of queuing and also the quality of services, far from ideal, from major to political cities to the township and the village level.
So I would suspect that if the central government and the local government is going to identify the new area of investment, which is going to transform China from traditional society to modernized society, lots of investment should remain to improve the medical services and also to make it more equally
distributed across the state.
Education also, I think education is another headache for the Chinese household.
People are worried about their children, whether they can get to a decent school, why from the kindergarten to the university, and still lots of people want to go overseas, which is lots of money spending in overseas education.
So why don't the government have more policy defined to accept the system, the education system so that people become less anxious and quality?
This means that there will be lots of policy -desiring investments into the standing of a very modernized, highly efficient education system.
So I hope the 6th children or the 10th children or even 12 children in a debt, the government, new debt, still be used more effectively to address the newly emerging industry, the future industry, the agricultural sector, the ecosystem, and also the health services, the education system, so that the people
can benefit far more from the investment, the quality of people's likelihood should be significantly improved so that we will give a better foundation for future ecosystem, material system, and also in a spiel demand for the people, which is exactly what the central government and the party look for.
Dr. Zhou, as soon as the new policy was announced, some were comparing the difference between this one and the 4 trillion yuan stimulus plan introduced after the 2008 financial crisis, but we know they're different.
So could you elaborate more on what are the fundamental differences between these two?
Actually, if we are going to compare these two policies, it's definitely very different.
First of all, we know that the background is different.
During that time, the global financial crisis is just about to happen, and there are a lot of pressures internationally.
There are a lot of very big problems due to the crisis of the United States and also the crisis of the Euros.
We know that we are not facing such a good position for the global demand as a whole.
Well, for this time, it is a little bit more stable.
I would not say it's a very good time, but when we're looking at the economy of the world, most of these countries and the economies are going up this year, especially.
So the demand are not shrinking, they are still expanding.
Well, the second difference is about the policies.
I mean, that is different about the input to the society.
Like for the year of 2008, the government are putting a lot of money to this economy of China and trying to put more investment in the infrastructure, especially or new or strategic infrastructure or develop those sectors.
So they want to create a better environment for the better development, not only for those traditional sectors, but for some new ones.
Well, this time, they are just giving the financial support to the local government.
It hasn't decided which areas you need to do.
And it's just a swamp in the financial areas to give the money to the local government for them to make a decision on which direction and very clear signals are not so clear compared with the year of 2008.
And the third, I would think that is also different about the interest in the both sides.
Like for 2008, we know that the interests are not so attractive compared with right now.
So the reason why we are seeing the policies of swamp here, because I think that China's base interest rate is pretty low.
So if we are able to swap the existing debt with a new one and definitely we will reduce a lot of costs on the interest, then we have to pay for the debt.
And that is also a very huge burden if we have a very big or large number of the debt of the stock next.
So these are several differences, but I still have to say that if you are looking at the amount of the fiscal policies, they are really different.
And after several years, the package is much bigger than maybe 18 or 16 years ago.
So we can see that it is more balanced, it is more diversified about the ways of using those policies and trying to have a better support for the better recovery and a more balanced recovery of Chinese economy.
Dr. Blair, Finance Minister Lanfouen says the new policy is expected to reduce the total hidden debt that local governments need to manage from 14 .3 trillion yuan to 2 .3 trillion yuan.
That is a huge amount.
So how will this policy impact local governments' fiscal conditions and debt management?
Well, I think it is obviously beneficial to have a more transparent system for managing the debt.
That is without doubt true.
But I want to go back and answer the previous question that you asked a little bit.
I think that China is in a very different situation now.
The Chinese economy is in a very different situation now than it was in 2008 -2009.
China has had a number of growth drivers for the past, well, since the year 2000.
One has been international exports, which at least at the beginning decade was based largely on low -wage industry, sort of low -quality industry.
And the other is massive investments in infrastructure and also large investments in housing.
Now, all three of those things were beneficial.
The first got China started in being an industrial powerhouse.
Investment in infrastructure has created opportunities around the country.
And investment in housing has made Chinese people a lot better off than they were before.
But now all three of those are now world -class.
Chinese wages have risen often at 11 or 12 percent per year.
So China is no longer a poor country.
People live very well in China.
Many people do. Even working -class people often do.
And the infrastructure is now world -class, maybe the best in the world.
But the marginal benefits from additional investment in infrastructure, they may be some, but they're not going to be as big as they were for the past 20 years.
And in housing, we've reached a peak where China now has more square meters per person than anywhere in Europe and is approaching the United States.
So further investments along this business model are unlikely to be the way to grow, as the Chinese government has recognized.
So I think in 2008, 2009, that funding, that expenditure went to keeping the previous model going.
And there was another good 10 years to go in that previous business model.
But now China needs to be transformed to where it no longer depends on those three growth drivers.
It needs to depend on high -quality industry, as the government stresses, moving toward new types of industry that often take advantage of the old industry.
I mean, China's in a great position because it can use the new technologies to make factories more efficient, to make farming more efficient.
And also, it's in a great position because there's been all this investment in the western areas, in rural areas, which is creating, I see lots of entrepreneurs growing up, and lots of companies growing up in those areas.
So I think that's, and also the dual circulation, where you're going to have to depend on domestic demand.
What I would hate to see is the use of the stimulus to try to preserve the old model.
I think it should be used to finance a transition to the new model.
So what really matters is how the money is spent.
And I don't know in enough detail to say how the money is spent, but I'm sure the government has lots of plans about using that money to transition to the new model.
Unfortunately, I think the examples that you give us warning are the United States and Japan.
Japan had a model that led through growth through the 1980s, and then that stopped.
And instead of transitioning to a new model, they put incredible amounts of stimulus into trying to preserve the old model.
And it did a lot of damage to their economy and also to the environment because they paved over a lot of stuff with concrete.
The United States, instead of transitioning to a different model after 2008, just doubled down on creating an artificially monetary policy driven economy, which I think we're facing the end of right now.
But I think it's important to realize this is a very different situation than continuing the old growth model.
It's transitioning to the new model.
And yeah, there's going to be a lot of challenges in making that transition.
But I think it's important to clearly keep in mind exactly where we are and what needs to be done in terms of transitioning, not continuing.
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Welcome back. Let's continue our discussion.
Professor Yao, what do you make of David's remarks?
And also how do you think that this estimated 600 billion yuan in interest that's going to be saved under this new policy will be used?
I think David pointed the right point of the gross model.
I think we should change the gross model.
In the 2009 financial crisis, China was still just beginning to take off as a major industrialized economy in the world.
So making huge investments in high speed rail, motorway, seaport, aviation, and also rural, low construction, modernization, irrigation systems.
Yes, those are the, for me, I consider it as the so -called hardware of the country.
The hardware of the country is really important for improving employment and also likely for the people.
Now, I want to make a firm make my point about the investment in a different direction.
And this time, I think we should more focus on the people rather than on the infrastructure.
Of course, infrastructure still has some scope to expand.
It's certainly not as big as 16 years ago, but we can still continue with that.
Nothing wrong. But it's not the place where it's going to pump in trillions of them in these kinds of infrastructure.
And also, the housing market, there's lots of transformation to be done, particularly to the economy.
Housing is still critically lacking.
All the people that move into the system.
But what's more important, I think the Chinese government at all levels, they should change the issue of how economy development is about.
Economy development in the end is to improve the people's likelihood to make people happier, healthier, and have more material, as well as non -material demand.
So I think the investment in health care, in research for industry related to people's health and education, and also the digitalization, artificial intelligence to cope with the aging population.
I think this area has got to be heavily respected.
Otherwise, China cannot move from the so -called middle -high -income economy into a high -income economy.
And the so -called developed economy is in the member state of the only thing that is compelling in all the European and the American.
I think this is an ambition, not only for the government but also for the ordinary Chinese people.
I agree that our living standard material has been improved dramatically over the last 15 years.
But there are still a lot of look -books in feeling to the full demand of the people and still income distribution, rural, urban, and Dubai.
There's lots of gaps.
All those things have to be done in a fairly systematic and creative way.
It's more difficult than before, I agree.
You cannot put so much money into a clearly defined area.
For example, like high -spill oil.
We don't do that anymore.
Probably, at best, we're at another 1 ,000 kilometers a year.
But in the past, we're at 10 ,000 kilometers.
Nowadays, we should say how we can maximize the investment, how we can use the similar parts, number one, to maintain the economy stability, the economy growth momentum.
But number two, the quality of growth, the quality of the people's lives.
Better jobs, better security, better environment.
Dr. Zhou, as our panelists have all previously mentioned about the usage of the debt, the significant portion of the debt has been used to create assets like major infrastructure projects, in transportation, like water resources, energy, and so on and so forth.
Many of them are actually generating ongoing revenue.
So how do you think these assets as an important source for repaying local debt and also supporting high -quality economic developments?
Actually, I have attended several seminars for the contracting sectors or industries, and also some of them are to do with designing and investigation from the engineering companies.
So we are talking about the possibilities of how important that we can do more to have a sustainable development.
As we know that infrastructure is a very basic element for the better development when the demand has changed, when the trend has changed, the infrastructure may be also leading this trend.
As you mentioned about transportation, we know that for the new energy transportation, we have to build so many good infrastructure, better infrastructure to adapt it to the new demand.
So I am understanding that all these kinds of practices or solutions are very important conditions for better development.
And that is also one of the most important differences between China and other countries, because we have very good conditions for the development of new energy vehicles, and that is also helpful for the car makers to design a better thing for this.
Actually, it is not only about transportation.
There are so many new things that we have to do, like for the industries like the manufacturing.
How can we have a low -carbon development?
How can we use hydrogen and also other clean energy as a fuel to support the development of manufacturing?
How can we make the logistics more efficient and at the same time do not have many impacts on the environment and biodiversity?
So we have so many conditions to do that, but these are based on the first infrastructure investment and also systematically the design of that.
So I think that it is not only about China ourselves, if we are talking about the fiscal policies, the development of Chinese industries have set some good examples for international cooperation between China and other countries.
So we are able to have more experience than if we are going to support other countries on meeting their commitments or fulfill their commitments for the climate change and also help them to reduce the cost of the transition.
So that is also the reason why we see that international trade has been flourishing in recent years because of China's new three items are so popular in so many countries.
Dr. Blair, among the major economies, Chinese government debt ratio is significantly lower than that of other G20 and emerging market countries, standing at just 67 .5 % of GDP.
And if we look at the IMF's data, the average government debt to GDP ratio for G20 countries was 118 .2 % at the end of last year, with Japan at nearly 250%, Italy at nearly 135%, and the U .S.
at 118%. Given the current global economic situation, what advantages does China's lower debt ratio provide for its fiscal policy?
Well, obviously, China has a lot of financial room to issue bonds, either bonds domestically or bonds internationally, which I think would be very well received in the market, is my guess.
But I think you do have, China needs to be worried not to follow the Japanese path, because Japan, when it first started in about 1990, had very low levels of debt and now has extremely high levels of debt.
And that would be okay if they used the money to create wealth.
But basically, they just saw it as fiscal stimulus, and it never really transformed the economy of Japan.
So I think that's not a good path to follow.
The real question is, what's the debt spent on?
I think, first of all, in financing infrastructure, in financing lifestyle improvements, in no place in the world, do those kind of investments finance themselves directly?
They have very large benefits for society.
Some of them return no monetary reform returns, like I mentioned, parks, but have great benefits for society, and some of them have some monetary reform returns, like infrastructure.
But they have a lot of spillover benefits for society that cannot be captured as part of the ticket price.
So maintaining a great infrastructure network around the country and further in the BRI is very valuable, and each part of that is part of the infrastructure.
But now, in terms of the finance, the question is, what did you spend the money on?
If I look at China, what was the debt spent on?
It was spent on creating real wealth infrastructure, but also educational improvements.
There are lots of things that the wealth can be spent on in the future to create the future borrowing to create more real wealth.
But I'm not a fan of John Maynard Keynes saying.
Keynes said, if you have to, it'd be good if you could use government spending for something productive, but if you have to, just have people dig a hole and fill it back in.
So it's completely wasted, but at least it gives people money.
I think it's much more important to focus that investment on things that are going to pay off.
And I look at my own country.
We're in significant debt now, and what did we get for it?
We didn't really create any real wealth.
We spent it on stupid wars, and we spent it on a lot of consumption, which people will forget about within five years.
So I think the focus on figuring out what kind of investment opportunities there are in the future that will create a further transformation in the economy is the thing that people should really be focused on in the future.
And I want to say something about consumption.
I hear a lot about consumption.
People say Chinese consumption needs to increase.
Well, over the last 20 years, U .S.
consumption has been about 70 percent of GDP, and Chinese consumption has been 40 to 50 percent of GDP.
There's no reason to believe that 70 percent is better.
When there are good investment opportunities, people should take advantage of those opportunities and maybe constrain consumption.
I agree with the previous statement that the whole purpose of the economy is to improve people's lives.
And I'm looking around at the way people live in China, and it's a pretty good life.
I mean, I live in a small city in Yunnan Province, and I think people live as well here.
Average people live as well here as they do in any Western country.
And I think further investment in education, in health care, in lifestyles, in creating entrepreneurial opportunities, those will really pay off.
And that's the kind of expenditure that I'm hoping to see over the next 10 years.
Professor Yao, Finance Minister Lan also mentioned that the central government still has significant borrowing space and plans to strengthen counter -cyclical adjustments.
What do you think will be the key measures in the future fiscal policies to support stable economic growth, and how much more fiscal space does the Chinese government have for further transformation of the economy?
I think we have to separate two issues here.
The first issue is how much we can borrow, how much we can increase the debt.
I think if we compare the very single figure of China and the rest of the world, yes, we still have plenty of room.
But I think it is really necessary to make sure that any additional debt, as David just pointed out, has got to have some purpose, rather than a debt for that purpose.
Just printing the money and drawing the GDP up is nothing.
I think we've got to spend the money very wisely.
For example, the money has to be investigated by creating more production capability, innovation capability, as well as the quality of the manufacturing, agriculture system, and the people's life, the people's education level, the kinds of hardware, software facilities for further economy and social
development. So, in that regard, if the money is spent wisely, we can identify areas where the money can be spent, and that got to have a future perspective of driving the country forward.
Yes, we can borrow more.
But if the money is invested in a very wasteful manner, it cannot have a long -term social society return, then we have to be cautious.
This actually refers to the point that we mentioned earlier, why the $6 trillion debt limit has to be spent in three years.
It's precisely reflecting the awareness of the central government of how to spend the money more wisely.
Because if the $6 trillion that we just spent this year in a hate, we may not be able to get the best benefit of it.
But by spending step -by -step, we can explore the way that the money can be used for a wide future.
We already have a long discussion about where to put the money in, like healthcare, education, the future industries, emerging industries, like the search and innovation capabilities, the natural environment, and also reducing the urban -rural development gap, the regional gap between the west and the center
of the eastern part.
Yes, there is still a lot of scope.
I mean, there are good things about China, and China is a big country.
It's a very diversified country, not only geographically, but also in NATO endowment.
The source endowment is very different.
So the investment at the local level has got to be reflecting the local reality, the local capability of how to digest the money more efficiently into a productive and environmental system in the local area.
So this is why the central government hasn't actually imposed a unified or a fairly universal policy of what to do.
Actually, it leaves a lot of scope for the local government to identify where the money can put it more widely.
I think this is a fairly important point.
I think the central government is right in giving more autonomy to the local government.
We are not going to buy back all your debts, but we can swap, and I have a limit.
I control the total amount so that the systematic risk is controllable.
But the local government has found the mistake to think more carefully of how you estimate the local economy.
Who's the point? If you get better, the country gets better.
Lastly, Dr. Zhou, if we look at the whole situation in a long -term perspective, how will the debt swap measures impact China's economic structural adjustments in the coming years?
Does this suggest that future fiscal policy will place greater emphasis on balancing economic growth and risk prevention?
Actually, I don't think that the Chinese government has changed its attitudes towards the fiscal policies.
And the fiscal policies would be a little bit more active according to the situation right now, but it will not be so open to have so loose or so strong impacts on the economy.
Because in my understanding, that for China, we are transferred from the planning economy to the market economy, so we are not trying to interfere with the market until March compared with decades ago.
So we are trying to give the space and the prices to the market even more in the coming future.
We welcome the investments from other countries.
We are also trying to give more space for the private sectors in China to discover about the possibilities.
So we know that in most of these conditions, the innovation can only be flourished when we see a lot of fray or very few interruption or interference from the government.
So I believe the market is still the most important thing for us to deal with the situation.
But the fiscal policies are opening at start.
It is trying to set some target or have paved the first step of the building.
So I would say that fiscal policies are still very related to the financial situation like the fiscal income and also about the expenditures.
China is such a big country.
We are still in the process of the urbanization and industrialization.
We do need a lot of more fiscal resources.
I think it's not only about the national levels.
All the cities, all the provinces are having their own conditions.
They are going to improve their abilities for the better development.
So that means that we still need so many input from the fiscal policies.
And we have to consider about this.
And in the recent months, we see that the Chinese government are putting more systematic ways of using different policies and trying to make a better and more correlated impact when we are using these policies together.
That may be the trend in the future.
We are trying to use the policies and trying to define a scope and make it more efficient to not just trying to substitute the market to make the decision.
And we are still going to open our market to attract more private sector investments, not only from China, but also from out of China, from the international market.
Dr. Blair and Professor Yao, do you have anything to add?
And what's your assessment on China's economy going forward?
The government has to quickly identify where the direction will go, where the focus industry or the service sector needs to be done in order to leave the country in this kind of step forward.
This is a very important point now.
Dr. David, please go ahead.
Well, the Chinese government has a number of categories of plans, and they have terms for them, dual circulation, industrial upgrading, rural revitalization.
There are lots of programs like that, and I think they're all aimed at making a transformation to a new type of growth model.
And I think they make a lot of sense economically.
So I think focusing on accomplishing those goals is the important thing in the future, focusing on using fiscal and monetary policy and any kinds of resources to accomplish those goals.
Where countries get in trouble is when they try to preserve an old model which doesn't work anymore.
And I've seen that in many countries, and it's important to avoid that danger going forward.
With that, we're wrapping up this episode of Chat Lounge.
I've been speaking with Dr.
Zhou Mi, Senior Research Fellow with Chinese Academy of International Trade and Economic Cooperation, Dr.
David Blair, Vice President and Senior Economist at the Center for China and Globalization, and Professor Yao Shu De, Changka Professor of Economics at Chongqing University.
Thank you so much for listening.
Bye for now.
