THE PUBLIC DEBATE between two senior researchers, one with the People's Bank of China and the other with the Ministry of Finance, has laid bare how delicate the balance is between money supply and tax reduction. Beijing News comments:

This is actually an academic debate, which has caused a strong social repercussion because the current economy is facing the impact of external uncertainty. When such uncertainty and the domestic financial deleverage "meet", it is a matter of course to reflect on past monetary and fiscal policies.
The argument itself is not important. What is important is that the current debate has touched on the economic pain point.

With the financial deleveraging and the volatility of the stock market, bond market and foreign exchange market, the market wanted a loose monetary policy.

However, a loose monetary policy will lead to the flow of funds into the real estate market and encourage inefficient companies to continue to borrow.

It is not difficult to know that under the pressure of the economic downturn, enterprises are more sensitive to the burden of tax. Therefore, behind the perspective of the debate, we should pay attention to the expectations of enterprises for tax reduction and fee cutting policies. Only in this way can we better implement the innovation-driven strategy, encourage innovation, reduce the costs for the real economy, and optimize the business environment.

Monetary policy and fiscal policy complement each other, and the argument shows both sides have lessons to learn.

The debate has touched a pain spot of the Chinese economy. The authorities must constrain their impulse to print money, as experience shows the excessive liquidity mainly inflates the real property bubble, and they should ease the real economy's operating costs with tax cuts.

If enterprises, as the targets of the policies, do not find it easier to obtain financing or find their burden eased through promised tax cuts, the policies not only fail, but more importantly might guide resources in the wrong direction.