China's economy in 2023. This Watcher, the second of a five-part series, focuses on China's strategy of prudent monetary and proactive fiscal policy. 

Although the Central Economic Work Conference, meeting in December to set policy guidelines for 2023, prioritized growth, they remain vigilant, advising that monetary policy ought to be precise and stable as well as forceful and strong, providing sufficient liquidity while not stoking inflation. Similarly, while fiscal policy will be proactive, there will be no massive stimulus, so growth can be high-quality and efficient. High-quality development remains a top priority.

China's authorities have good reason to advise caution. Real estate debt is unsustainable, and after three years of strict COVID controls, government resources, like those of households and smaller businesses, have been depleted, limiting the amount of capital available for rapid expansion. Local governments are whipsawed, with high pressure to repay debt when their income from land sales has dropped.

China's leaders are wise to keep financial risk near the top of their watchlist, and they rightly worry that a large stimulus could be exploited by speculators, especially in the finance industry (stock market, banking, fintech), and in real estate, and thus be more harmful than helpful. In fact, the real estate industry needs more deleveraging, not more leveraging.

In signaling a proactive fiscal policy for 2023, with fiscal spending maintaining the necessary intensity, leadership calls for ensuring fiscal sustainability by controlling local government debt risks; optimizing fiscal deficits, special-purpose bonds and interest subsidies which local governments need because they must rely on high-cost financing, and by increasing the central government's transfer payments to local governments.

While China has traditionally kept its fiscal deficit below 3 percent of GDP, which has long been a prudent ceiling, some economists predict the country will breech 3 percent in 2023. It is wise to choose the lesser of the two evils: absorbing a higher fiscal deficit in the short term to ensure the stability of economic growth in the long term.

1. prudent adj. sensible and careful when you make judgements and decisions; avoiding unnecessary risks 谨慎的；慎重的；精明的

2. monetary adj. connected with money, especially all the money in a country 货币的，钱的

3. proactive adj. (of a person or policy 人或政策) controlling a situation by making things happen rather than waiting for things to happen and then reacting to them 积极主动的

4. fiscal adj. connected with government or public money, especially taxes 财政的；国库的例如：fiscal policies / reforms财政政策 / 改革

5. prioritize v. (formal) to treat sth. as being more important than other things 优先处理

6. vigilant adj. (formal) very careful to notice any signs of danger or trouble 警觉的；警惕的

7. liquidity n. (finance 财) the state of owning things of value that can easily be exchanged for cash 资产流动性；资产变现能力

8. stoke v. to add fuel to a fire, etc. 给……添加（燃料）

9. inflation n. a general rise in the prices of services and goods in a particular country, resulting in a fall in the value of money; the rate at which this happens 通货膨胀；通胀率

10. unsustainable adj. that cannot be continued at the same level, rate, etc. 不能持续的；无法维持的。例如：unsustainable growth难以持续的增长

11. deplete v. to reduce sth. by a large amount so that there is not enough left 大量减少；耗尽；使枯竭

12. whipsaw v. 使受双重损失

13. watchlist n. 观察名单

14. fintech n. 金融科技（financial technology）

15. real estate: the business of selling houses or land for building 房地产业；房地产销售业

16. deleveraging 去杠杆化

China's economy in 2023. This Watcher, the second of a five-part series, focuses on China's strategy of (Q1) _________________ and proactive fiscal policy. 

Although the Central Economic Work Conference, meeting in December to set (Q2) ___________ for 2023, prioritized growth, they remain vigilant, advising that monetary policy ought to be precise and stable as well as forceful and strong, providing sufficient liquidity while not stoking inflation. Similarly, while fiscal policy will be proactive, there will be no massive stimulus, so growth can be high-quality and efficient. High-quality development remains a (Q3) ______________.

China's authorities have good reason to advise (Q4) ______________________. Real estate debt is (Q5) _____________, and after three years of strict COVID controls, government resources, like those of households and smaller businesses, have been depleted, limiting the amount of capital available for (Q6) ______________. Local governments are whipsawed, with high pressure to repay debt when their income from land sales has dropped.

China's leaders are wise to keep financial risk near the top of their watchlist, and they rightly worry that a large stimulus could be exploited by speculators, especially in the (Q7) _______________ (stock market, banking, fintech), and in real estate, and thus be more harmful than helpful. In fact, the real estate industry needs more deleveraging, not more leveraging.

In signaling a proactive (Q8) ____________ for 2023, with fiscal spending maintaining the necessary intensity, leadership calls for ensuring fiscal sustainability by controlling local government debt risks; optimizing fiscal deficits, special-purpose bonds and interest subsidies which local governments need because they must rely on high-cost financing, and by increasing the central government's transfer payments to local governments.

While China has traditionally kept its fiscal deficit below 3 percent of GDP, which has long been a prudent ceiling, some economists predict the country will (Q9) _________________ 3 percent in 2023. It is wise to choose the lesser of the two evils: absorbing a higher fiscal deficit in the short term  to ensure the (Q10) ___________________ of economic growth in the long term.

China's economy in 2023. This Watcher, the second of a five-part series, focuses on China's strategy of (Q1) prudent monetary and proactive fiscal policy. 

Although the Central Economic Work Conference, meeting in December to set (Q2) policy guidelines for 2023, prioritized growth, they remain vigilant, advising that monetary policy ought to be precise and stable as well as forceful and strong, providing sufficient liquidity while not stoking inflation. Similarly, while fiscal policy will be proactive, there will be no massive stimulus, so growth can be high-quality and efficient. High-quality development remains a (Q3) top priority.

China's authorities have good reason to advise (Q4) caution. Real estate debt is (Q5) unsustainable, and after three years of strict COVID controls, government resources, like those of households and smaller businesses, have been depleted, limiting the amount of capital available for (Q6) rapid expansion. Local governments are whipsawed, with high pressure to repay debt when their income from land sales has dropped.

China's leaders are wise to keep financial risk near the top of their watchlist, and they rightly worry that a large stimulus could be exploited by speculators, especially in the (Q7) finance industry (stock market, banking, fintech), and in real estate, and thus be more harmful than helpful. In fact, the real estate industry needs more deleveraging, not more leveraging.

In signaling a proactive (Q8) fiscal policy for 2023, with fiscal spending maintaining the necessary intensity, leadership calls for ensuring fiscal sustainability by controlling local government debt risks; optimizing fiscal deficits, special-purpose bonds and interest subsidies which local governments need because they must rely on high-cost financing, and by increasing the central government's transfer payments to local governments.

While China has traditionally kept its fiscal deficit below 3 percent of GDP, which has long been a prudent ceiling, some economists predict the country will (Q9)breech 3 percent in 2023. It is wise to choose the lesser of the two evils: absorbing a higher fiscal deficit  in the short term to ensure the (Q10)stability of economic growth  in the long term.