Chinese Macroeconomics Needs to Change its Underlying Logic

Abstract: Abstract: China implemented the policy of reform and opening up at the end of 1970s and gradually established the socialist market economic system with Chinese characteristics. China comprehensively introduced western economic theories, including macroeconomics. Western economics is based on the private ownership of capitalist means of production, without considering state-owned means of production. The government only plays the role of a night watchman. Directly applying western macroeconomic theory to study China's economic phenomenon can not deal with government-owned means of production and government investment issues. This leads to many problems in macroeconomic research today, especially in the field of fiscal policy. To solve these problems, we must consider China's socialist characteristics and reposition the dual role of the Chinese government in economic management: to provide optimal public goods and act as social planners to pursue maximum social welfare. In this way, many problems in current macroeconomic research in China can be solved.