Zhang Bin from the Chinese Academy of Social Sciences: In the short term, the most important thing for consumption growth is to enlarge the nominal GDP cake

Zhang Bin, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, stated that at the current stage, expanding consumption can not only boost domestic demand but also promote a more balanced structure of investment and consumption, leading to a more balanced allocation of resources. Zhang believes that in the short term, the most important aspect of consumption growth is to enlarge the nominal GDP cake. The growth of nominal GDP means that residents' income, government revenue, and corporate profits can all increase, which will naturally lead to an increase in consumption.

"The GDP deflator index for China in 2024 is -0.7%. If we can adjust policies counter-cyclically to raise the price level and bring the GDP deflator index to 2%, this could result in a 2.7 percentage point increase in nominal GDP," Zhang analyzed, stating that based on historical patterns, this could lead to a 1.5 percentage point increase in real GDP.

What specific policy tools can most quickly enlarge the nominal GDP cake? Zhang indicated that stronger counter-cyclical fiscal and monetary policies should be used, by more fully lowering policy interest rates and significantly increasing government spending. (Tencent Finance)