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Liu Shangxi: Deficit monetization can be one of the options for monetary policy operations
Sauna, Yewang (Gu Zhijuan and Cheng Weimiao) On May 22, Sauna Yewang held a series of national “Two Sessions Economic Policy” salons to challenge China’s economy, and invited CPPCC members to interpret the freshly released government work report today.  Liu Shangxi, member of the National Committee of the Chinese People’s Political Consultative Conference and dean of the Chinese Academy of Fiscal Sciences, once again discussed the topic of monetizing fiscal deficits.He said that the monetization of the fiscal deficit has long existed in reality. About once in 1997 and one in 2007, one was to inject capital into commercial banks, and the second was to set up a CIC company. In fact, the deficit was monetized.The practice, but did not take any form of direct purchase, but borrowed from a commercial bank, from the perspective of the form is not a monetization of the deficit, but it is monetized, which had little impact on the financial market at that time.The shed reform is actually a monetization of the deficit, because the funds are given to the CDB, which is operated by the CDB. However, the shed reform has a strong public welfare and is not a completely market-oriented behavior.He believes that the talk about deficit monetization depends on both form and substance. In the public domain or projects with strong public attributes, through transfer operations, although there is no financial participation and no budget, but from the perspective of the country as a whole, it is stillMonetization of the deficit is only relatively invisible.  Liu Shangxi said that the implementation of the monetization of the fiscal deficit is under certain circumstances, and now is also a special period, there is enough, but whether to make such a choice, that is necessary to replace multiple factors and high-level decision-making.In fact, there are strict legal procedures for the monetization of fiscal deficits. Government departments cannot do whatever they want. Monetization of deficits is not a “wild horse” under the requirements of the statutory budget. In fact, it is easy to control risks in the clear.In addition to the legal constraints, the finance also has market constraints. The market will constrain the scale of debt issuance and financing costs.  In theory, many countries have issued a lot of currencies, and the currency stock has multiplied, but there has been no hyperinflation. This means that traditional monetary theory, especially the quantity theory of money, may not be fully applicable to today’s situation.Liu Shangxi believes that the current currency should not only focus on quantity, but also on status.In the past, observing liquidity only looked at quantity, and its condition was currency homogeneity.In the quantity theory of money, money is homogeneous, but to explain the current phenomenon, the assumption of homogeneity may be unreasonable, and adjustment is necessary.The state of the currency, especially the state of the holder, has a great influence on liquidity.The traditional monetary policy theory needs to be updated, and the relationship between the deficit and the currency also needs to have a new understanding, which cannot be viewed in accordance with the traditional concept, so that it may be “conventional and incomplete.”  Liu Shangxi concluded that the monetization of the fiscal deficit already exists in practice, and further discussion is needed in theory.Therefore, the monetization of the deficit can become one of the options in the future operation of monetary policy, and there will be no situation of “cannot take it once the gate is opened”.He said: “Don’t think of the monetization of fiscal deficits as a beast of floods, just like discussing deficits in the 1980s is harmful and harmless. At that time, most of the views were that deficits are harmful, but now, most old-fashioned ones have deficits. Of course, deficits are not unlimited.One degree of control, and the monetization of the deficit also have a degree of control.”Reporter Gu Zhijuan Cheng Weimiao editor Sun Yong proofread He Yan