China’s macroeconomy: main challenges and countermeasures

Abstract

At the turn of the twenty-first century, the Chinese economy has become a leader from a complete follower in some industries. Thus, without innovation, it will be difficult for China to keep improving its technology further in the twenty-first century. Under the situation that ‘cash is of paramount importance’, the expansionary monetary policy leads to an increasing liquidity. People, with more money at hand, are prone to invest in stocks rather than in industries because it could be harder to withdraw their money from long-term investments. This phenomenon leads to bubbles in stocks and real estates in China. Based on the current situations, Professor Wu advocates an inclusive tax cut policy, as one of the biggest problems many Chinese entrepreneurs face is a lack confidence in the future. The main function of the government is to provide public goods, not to manipulate the market, intervene in the micro economy or ‘adjust the structure’ directly.