Professor Zhao Yanjing’s study starts from the micro perspective of the accounting statement, establishes a macroeconomic analysis framework based on the accounting statement, and proposes innovative viewpoints such as that debt levels determine consumption and demand levels, and that the restart of China’s economy cannot reduce debt levels.
As for the sustainability of local debt, Professor Zhao believes that, on the one hand, China's local debt is mortgaged by land, so the sustainability of local debt firstly depends on the sustainability of the value of real estate; on the other hand, the prerequisite for the sustainability of local debt is to find sufficient general sources of income, having stable cash flow returns. However, China faces challenges in both areas currently.
Professor Zhao points out that the central government should help local governments by expanding its own debt side. He also emphasizes that the assistance should be one-time, not continuous, and the central government should take over both local assets and liabilities.
As for the real estate, Professor Zhao thinks that there is no price regulation mechanism in the real estate market, which means pursuing price stability should not be the goal of policy design. In order to address the issue of macroeconomic regulation in real estate, the government should firstly separate its capital market function and living function. Secondly, the price controls of the real estate market should be transformed into quantity controls so as to ensure that the government can maintain good liquidity of the real estate by regulating the quantity.
