Just now, the Central Economic Work Conference mentioned that a more proactive fiscal policy should be implemented, increasing the fiscal deficit ratio.

Tan Zhu noticed that people’s expectations for fiscal policy mainly manifest in expectations for the intensity and scale of the policy. Some believe that the standard for evaluating the effectiveness of these policies is their scale. Among these, discussions about debt restructuring policies are quite typical.

In the past, due to developmental stage limitations, some local governments lacked sufficient fiscal revenue, leading to financing platforms raising funds, which resulted in an increase in debt scale and the continuous accumulation of hidden debts.

This year, our policies have changed in dealing with this issue.

The most representative measure is the proposed total scale of 10 trillion in local debt resources under a package of new policies. Local governments can incorporate some high-interest, short-term hidden debts into the government’s public debt accounts, converting them into low-interest local government bonds with a more ample repayment period.

This opens up space and time for local government development, shifting the mindset from 'developing through debt restructuring' to 'resolving debt through development.'

Such a shift in mindset can be glimpsed from the direction of specialized bonds issued by local governments.

From January to October this year, specialized bonds were allocated to over 0.03 million projects, supporting a large number of projects with strong economic and social benefits. The funds used as project capital exceeded 300 billion yuan, mainly concentrated in the transportation infrastructure sector, with a focus on major national strategic projects.

From the perspective of structural changes, in the past two years, government spending has not only steadily targeted areas related to people's livelihoods but has also been directed toward the construction of information networks and other places that can generate 'new momentum,' clearly promoting the trend of high-quality development.

In fact, using localized Bonds as an entry point, we can observe that the overall macro policy top-level design is undergoing changes.

Liu Shangxi, a researcher at the Chinese Academy of Fiscal Sciences, told Tan Zhu that since the Central Political Bureau meeting in September this year, a series of measures we have launched in macro policy reflect two changes in understanding.

First, the understanding of debt and risk has changed, shifting from emphasizing the reduction of existing debt to optimizing the debt structure.

In the past, there was a common perception equating 'debt' with 'risk,' believing that debt itself is a risk, thus necessitating a reduction in the amount and scale of debt. After the Central Political Bureau meeting at the end of September, however, the direction of macro policy has released a clear signal:

'Risk' itself is a Concept influenced by complex factors and can change dynamically; existing debt does not directly equate to risk, and only under certain conditions does it constitute risk. Preventing and resolving risks does not only mean reducing current existing debts but can also be achieved through replacement and structural optimization to avoid the possibility of systemic risks.

Moreover, behind this, there is a shift in understanding regarding the goals of fiscal policy—from a past focus on revenue and expenditure balance to gradually emphasizing the sustainability of finance.

Fiscal revenue and expenditure balance, which is not difficult to understand, means that income and expenditure are generally equivalent, for example, insisting that the fiscal deficit rate should not exceed 3%, emphasizing a static result.

So how should we understand the sustainability of finance? It's quite straightforward; it requires maintaining stable economic growth to sustain the growth of fiscal revenue. As long as fiscal revenue continues to grow, as long as interest expenditures are kept within a reasonable ratio of fiscal revenue, it can be considered sustainable.

In this way, the goal of fiscal policy shifts from achieving a static balance to being more directly related to economic growth, which greatly expands the flexibility and scope of fiscal policy. The corresponding risks of debt can also be effectively managed in a dynamic and developmental process.

At the same time, it can be seen that under the unified logic focusing on economic growth, our monetary policy exerts force from the capital side, while fiscal policy works from the debt side, creating better mutual coordination.

The essence of "debt reduction through development" is to resolve risks during the development process.

Therefore, beyond the policy "scale," we need to understand the changes in the deep logic of the policy, which will allow us to identify that we have been adjusting and innovating our ideas in response to new situations and problems arising in economic operations, enabling effective responses.

Observing our policy thinking reveals that any measure that appears to be a so-called short-term incentive actually connects with deeper structural reform measures.

In fact, the overall structure of central government fiscal expenditure has already laid a lot of groundwork.

Statistics indicate that in recent years, our fiscal expenditure structure has become more targeted, with directed investments in GREEN ECONOMY, people's livelihoods, high technology, and other beneficial Industries.

In last year's fiscal expenditure structure, social security employment and Education in the livelihood sector held a significant share. Among them, fiscal investment in social security employment and Medical saw much greater increases than other categories.

Directing policies and investments towards the social livelihood sector can guide the economy towards a more balanced and healthy growth.

Opening up the situation in the short term to create space for long-term and fundamental improvements is the complete idea for solving problems.

As the end of the year approaches, public opinion is discussing the development of the economy and society next year as well as the strength and direction of policies, during which various voices abound, some optimistic and others worried. In fact, as long as we discuss the issues, we are not pessimistic.

Editor/ping