Xinhuanet Beijing, July 4 (Reporter Li Yanxia, Wang Yu) On June 29, the National People's Congress Standing Committee (NPCSC) approved the proposal of the Ministry of Finance to issue 1.55 trillion yuan of special treasury bonds to purchase foreign exchange. This is another effort of fiscal policy to solve the problem of excess liquidity. Previously, fiscal policies to alleviate excess liquidity, such as increasing stamp duty and adjusting export tax rebate, have appeared one after another. Monetary policy "confronts" excess liquidity. At present, excess liquidity has become a prominent problem in China's economy. The so-called "excess liquidity" usually refers to the abundant funds at the economic level and the strong impulse of bank credit. Against the background of international economic imbalance, in recent years, China's international balance of payments has been showing a double surplus in current account and capital account, with rising foreign exchange reserves and excess liquidity. This problem has spread to all levels of the economy, leading to increased trade friction and inflationary pressure. In view of the problem of excess liquidity, the central bank frequently uses monetary policy as a direct and flexible macro-control means, raising the statutory deposit reserve ratio, raising interest rates and issuing central bank bills in turn. Since the beginning of this year, the central bank has raised the deposit reserve ratio five times and raised interest rates twice. Especially on May 18, the central bank stepped up policy control and adjusted the reserve ratio, interest rate and exchange rate, which showed the government's determination to alleviate excess liquidity. In addition, the central bank restarted the three-year central bank bill at the end of this year 1 and extended the term of the central bank bill in due course. The issuance of central bank bills has also been further strengthened. As of June 2 1 day, the accumulated central bank bills issued this year have exceeded 2.5 trillion yuan. Fiscal policy is gradually exerting its strength. While monetary policies are frequently introduced, fiscal policies such as increasing stamp duty, adjusting export tax rebate and issuing national debt are gradually moving towards the macro-economic foreground of China. On May 30th, the Ministry of Finance adjusted the stamp duty rate of securities (stocks) transactions from 1 ‰ to 3 ‰. On June 18, China officially issued a notice, stipulating that the export tax rebate policy for some commodities will be adjusted from July 1 2007. * * * The adjustment involves 283 1 items, accounting for about 37% of all goods in the customs tariff. "The main goal of this policy adjustment is to reduce the surplus," Wang Xiaohua, deputy director of the Department of Taxation and Administration of the Ministry of Finance, said in an exclusive interview with the Chinese government website a few days ago. Experts believe that the adjustment of export tax rebate will play a positive role in curbing the excessive growth of foreign trade exports and alleviating excess liquidity. The National People's Congress Standing Committee (NPCSC) voted to amend the individual income tax law on June 29th, authorizing the State Council to stop or reduce interest tax according to the needs of national economic and social development. "This is a good way to adjust the economy by combining fiscal policy with monetary policy." Cai, a researcher at Peking University National Accounting Research Center, said. He pointed out that the adjustment of interest tax directly points to the problem of excess liquidity, and the direct effect and purpose is to recover liquidity. On June 29th, the National People's Congress Standing Committee (NPCSC) approved the proposal of the Ministry of Finance to issue 1.55 trillion yuan of special treasury bonds to purchase foreign exchange. "This will help curb currency liquidity and ease the hedging pressure of the People's Bank of China." Minister of Finance Jin Renqing said. Yin Jianfeng, Ph.D., Institute of Finance, China Academy of Social Sciences, believes that issuing special treasury bonds to buy foreign exchange can withdraw funds from the money market, which will help reduce the pressure on the central bank to hedge liquidity, thus having an impact on the current pattern of excess liquidity in the money market. To eradicate excess liquidity, two policy "combination punches" are needed. To eradicate excess liquidity, we can't just rely on the central bank to solve it through monetary policy. Although various monetary policy measures such as deposit reserve ratio, interest rate and central bank bill have played a certain role in shrinking excess liquidity, the operating space of monetary policy has gradually narrowed after the reserve ratio and interest rate have been raised several times, which requires fiscal policy to keep up in time and cooperate with monetary policy. The executive meeting of the State Council held on June 13 proposed that efforts should be made to alleviate the contradiction of excess liquidity. Comprehensive use of financial and fiscal means to guide and adjust the flow of funds. When the Monetary Policy Committee of the central bank recently held a meeting to study the orientation and measures of monetary policy in the next stage, it also pointed out that we should continue to implement a prudent monetary policy, keep it moderate, and further strengthen the coordination between monetary policy and fiscal, industrial, foreign trade, financial supervision and other policies. Experts believe that behind China's excess liquidity is the imbalance between investment and consumption. In the case of insufficient domestic consumption, overcapacity will inevitably seek a balance of external demand, which will lead to a huge trade surplus. Therefore, we must expand domestic demand and increase consumption to reduce excess. In this regard, Fan Gang, a member of the Monetary Policy Committee of the Central Bank, suggested that China should implement the fiscal and taxation reform of "paying dividends, collecting rents and reducing taxes". Dividend is to pay dividends to state-owned enterprises, and collecting rent is to collect resource taxes. Tax reduction means reducing personal income tax or increasing social security investment, thus increasing per capita disposable income, increasing consumption and reducing savings rate. Fiscal policy and monetary policy, as two major policy tools of national macro-control, have their own advantages. In terms of macro-control, China will use more "combination boxing" of fiscal policy and monetary policy to make macro-control more effective.