Yao Dongmin, Gao Yang, Xiong Guohao
Studies of International Finance. 2026, 0(6): 34-47.
Fiscal policy and monetary policy constitute the two central pillars of the macroeconomic policy framework, and serve as key instruments for stabilizing aggregate demand, optimizing economic structure, and preventing systemic risks. At present, the imbalance between strong supply and weak demand persists in China, while the economy is undergoing a critical phase of transformation and structural adjustment amid rising external uncertainties. Under such conditions, a single policy instrument is increasingly insufficient to simultaneously achieve multiple objectives, including stabilizing growth, employment, prices, and risks. In practice, China's fiscal position remains under a“tight balance”constraint;, and the transmission mechanism of monetary policy still faces certain bottlenecks, leaving room for further improvement in the overall effectiveness of macroeconomic policies. Against this backdrop, it is necessary to promote a higher level of coordination between fiscal and monetary policies in both countercyclical and intertemporal regulation, so as to enhance the consistency and effectiveness of macroeconomic management and further improve governance capacity.
Since the 2008 Global Financial Crisis and the COVID-19 pandemic, major advanced economies have experienced a marked strengthening of coordination among fiscal expansion, central bank balance sheet operations, liquidity provision, and government bond market arrangements. The role of fiscal policy in macroeconomic stabilization has consequently increased, and the policy toolkit has been continuously enriched. However, these international experiences are grounded in distinct institutional foundations and policy instruments, and therefore cannot be directly applied to China. Although the existing literature has examined issues such as short-term policy coordination, government debt management, the monetary effects of fiscal policy, and the relative dominance of fiscal versus monetary policy, it still lacks a systematic synthesis of the coordinated operation of fiscal and monetary policies within China's institutional context. Further clarification and theoretical refinement are therefore needed.
This paper systematically reviews the evolution of international fiscal-monetary coordination and, drawing on China's practice, examines the institutional foundations, operational mechanisms, and conceptual orientations of such coordination. Firstly, fiscal-monetary coordination has become a prominent policy trend among advanced economies, characterized by the rising role of fiscal policy, the continuous enrichment of policy toolkits, and the strengthening function of government bonds as a key linkage between the two. In the post-pandemic period, such coordination has further deepened, particularly in supporting priority industries. Secondly, in the Chinese context, fiscal-monetary coordination is underpinned by a clear top-level institutional design, with state-owned financial institutions playing an important role in financial markets. In terms of operational mechanisms, coordination is reflected in the alignment of policy objectives, the joint use of policy instruments, and interconnected transmission channels. This paper identifies three key directions for conceptualizing fiscal-monetary coordination in China: strengthening the functional orientation of fiscal policy, reinforcing the public nature of credit allocation, and re-evaluating the space for government borrowing. It further proposes policy recommendations to enhance the effectiveness of such coordination.
