Fiscal policy isn't just about balancing the books; it's about the people

Once again, Liu Shangxi found himself at the center of a media whirlwind at this year's Two Sessions, the annual meetings of China's top legislature and political advisory body—held in Beijing from March 4 to 12. The questions lobbed at him were as eclectic as they were pressing: ranging from tectonic shifts in macroeconomics to the scramble for digital consumer coupons; from safeguarding the dignity of rural seniors by improving pensions to easing the anxieties of youth through employment promotion.

As a member of the 14th National Committee of the Chinese People's Political Consultative Conference (CPPCC), the top political advisory body, and Vice President of the China Society of Macroeconomics, Liu addressed each query with meticulous care. He has a rare gift for breaking down complex economic axioms so that they are digestible for the layperson, transforming cold theory into clear logic.

Such scenes are common wherever Liu appears. In the hallways of China's fiscal academia, his name is omnipresent. In broader economic circles, he is renowned for reconstructing the logic of national wealth flow and systematically articulating the concept of "fiscal risk." Yet, the word most frequently on his lips is not deficit-to-GDP ratio or GDP, but simply—"people."

"Finance is the lifeblood of society," Liu told reporters. "When we trace where fiscal money comes from and where it flows, we are connecting people across different regions, strata and fields."

Safeguarding rural retirees

One of Liu's most resonant efforts during this year's Two Sessions concerned the welfare of China's rural seniors. He presented a poignant historical ledger: For decades, the urban-rural divide and the price gap between industrial and agricultural goods meant that farmers essentially subsidized national industrialization through the public grain quota system. Now, as that generation enters its twilight years, their meager savings from years of labor are insufficient for a dignified retirement.

"Much of the money they earned was poured into building two- or three-story houses in their hometowns," Liu said. "But these houses cannot be traded, valued or mortgaged in a fluid market. They are pure consumer goods that fail to generate property income."

Liu is in support of increasing basic rural pensions, and he is adamant about the source: "This funding should be borne by the central treasury, rather than further straining local budgets."

He also advocates for national coordination of pension insurance, so that senior parents moving to cities to live with their children can access it conveniently. "True national coordination of pension insurance means a social security card should be functional anywhere in the country," he told Beijing Review.

For Liu, horizontal mobility (moving to the city) catalyzes vertical social mobility (climbing the social ladder). "By migrating, a family can sever the intergenerational transmission of poverty. A vibrant society must clear the channels for vertical flow to ensure equality of opportunity."

This empathy is rooted in the soil of his childhood. Born in 1964 into a farming family in Taojiang, central China's Hunan Province, Liu knows firsthand the difficulties of rural life. Later, while many of his contemporaries focused on business development, Liu dedicated himself to academic research, with a particular focus on income distribution and social equity. Deep at heart, he remains a staunch advocate for rural people and rural development.

Bridging gaps

With this year's government work report setting the economic growth target within a range of 4.5 percent to 5 percent, Liu saw a sophisticated macro-policy innovation. In an era of heightened global uncertainty, a range offers the flexibility that a singular, rigid target lacks.

As to measures to boost consumption and growth, he said: "Increased consumption is a result, not a cause." Simple stimulus may fail if low-income groups are too afraid to spend, so the fundamental solution is increasing income through stable growth, according to him.

In Liu's analytical framework, the essence of common prosperity is not merely narrowing the wealth gap, but narrowing the "people's gap."

"The income disparities we see are symptoms. The root cause is the gap in human capability—the ability to acquire knowledge and skills, as well as the capacity for innovation," he noted. As AI raises the barrier to entry for employment, the old growth model relying extensively on physical labor and accumulated experience is becoming outdated. Liu is a vocal critic of vocational training that is "divorced from the market." He advocates for customized training where the government subsidizes enterprises to train employees for specific roles.

"Employment training must be people-centered," Liu said. "When policy is designed with warmth—from the perspective of the low-skilled worker—it becomes more grounded in reality."

Addressing the coupon paradox

Liu's focus on equity extends to the ubiquitous coupons offering discounts for designated goods or services. He points out a paradox: The current fastest-finger-first grab model for digital consumption coupons often favors the tech-savvy while marginalizing the elderly and rural poor.

Coupon distribution mechanisms often face challenges in ensuring fairness and efficiency. Some models have emerged to address the coupon paradox. Liu cited the Hubei model, which offers public lotteries to enhance coupon distribution transparency, and the Hangzhou model, which features automatic price deductions at checkout to eliminate the need for coupon-grabbing.

By shifting from untargeted distribution to precise, needs-based management, public funds can be more effectively channeled to those who truly need assistance.

The solution, Liu believes, is shifting from a commodity-centric logic to a people-centered logic. Government investment should revolve around employment, mobility, health, education and innovation.

"We often focus on result equality—pulling the high down and pushing the low up. That is a static view," he said. "Subsidies might fix the problem today, but if the underlying capacity isn't addressed, the gap will reappear—perhaps even wider—in the next economic cycle."

"Investing in people is different from just spending money on people," Liu explained. "The goal is to ensure everyone has an equal opportunity for development. We shouldn't just count the money spent; we must measure the sense of gain felt by the citizens."