ABSTRACT

Learning from experiences garnered over the past few years, we now know that we

must strengthen macro-controls while invigorating micro aspects in the process of

economic restructuring, in order to balance aggregate supply and demand. Before,

when the mandatory Plan was applied, such administrative means as lowering gov-

ernment appropriations could be adopted. Later, when Directive Plans were insti-

tuted, the powers of local governments and enterprises were expanded and most

investment in fi xed assets started to rely on local-government funds as well as bank

loans to enterprises. At that time, controls over investment in fi xed assets mainly

focused on bank credit. Bank credit cannot be allocated via administrative meas-

ures. Our country’s macroeconomic controls must be carried out primarily by eco-

nomic means rather than administrative means. “Economic means” refers to price,

fi scal revenue and bank credit. Price adjustment is an important way to regulate the

production and sale of various products, and to reduce investment in fi xed assets.