1. Introduction

The digital economy is sweeping the globe at an unprecedented pace, profoundly transforming the way economies and societies operate. The widespread adoption of cutting-edge technologies such as big data, artificial intelligence, and blockchain has permeated all sectors, fostering the emergence of novel business models and economic growth drivers.[1]. This transformation not only reshapes industrial structures but also poses comprehensive challenges to traditional currencies and monetary policies.

In this context, an in-depth research on the adjustment and innovation of China's monetary and economic policies holds significant theoretical and practical importance. This paper aims to analyze the paths of adjustment and innovation in China's monetary and economic policies during the digital economy era. Through a comprehensive literature review, the research examines relevant theoretical and policy research findings both domestically and internationally; Additionally, a case study approach is employed to examine typical policy adjustments, evaluating their implementation processes and economic impacts. By integrating theoretical exploration with empirical analysis, this study seeks to contribute to the ongoing discourse on monetary and economic policy adaptation in the digital era

2. Adaptive analysis of China’s current monetary and economic policies

2.1. Policy objectives review

Traditional monetary and economic policy focus on stabilizing prices, promoting employment, and driving economic growth. However, the rapid evolution of the digital economy has introduced new economic dynamics, challenging these conventional policy objectives [1]. As Peng [1] points out, the gig economy has flourished under the impetus of digital platforms, making job forms more flexible and diverse [1], making it difficult for traditional employment statistics to accurately reflect real employment conditions, thereby increasing the difficulty of achieving full employment.

At the same time, digital technology has altered the mechanisms for setting prices of goods and services. Online platforms frequently adjust prices based on real-time market conditions, making price stability harder to maintain using traditional macroeconomic measures. According to data from the National Bureau of Statistics, By the end of 2022, the number of flexible workers in China had reached around 200 million, accounting for about one-quarter of the total labor force, but official employment data struggles to comprehensively cover this population. Additionally, digital technology has changed the mechanisms for setting prices of goods and services, with price adjustments on online platforms becoming more frequent, presenting challenges to traditional measures of price stability. For example, in the apparel category on e-commerce platforms, the frequency of price changes is five times higher than that in traditional offline stores, with some products experiencing over ten price adjustments within a month.

2.2. Evaluation of the effectiveness of policy tools

Traditional monetary policy tools, such as interest rate adjustments and changes in the reserve requirement ratio, have undergone changes in their transmission mechanisms and effects under the digital economy environment. Research indicates that the rise of financial technology (fintech) has led to an expanded array of financial products and services, diversifying financing channels and reducing market participants' reliance on traditional monetary policy tools.

A notable example is the proliferation of internet finance platforms, which offer micro-loan services that address the funding needs of small and medium-sized enterprises (SMEs). These alternative financing options, to some extent, bypass conventional banking channels, thereby weakening the impact of monetary policy on the real economy. Empirical studies indicate that in regions with advanced digital finance, the coefficient of influence of interest rate changes on corporate investment has decreased compared to the past, highlighting the diminished effectiveness of traditional policy tools in the new economic environment.

3. Policy adjustment and innovation measures

3.1. The launch and development of digital currency

China has been actively promoting the research and development of central bank digital currency (DC/EP) as well as pilot projects. Huang et al. pointed out in their studies that digital currencies have numerous advantages [2]. On one hand, they can significantly enhance payment efficiency, reduce transaction costs, and enable real-time, convenient cross-border payments. Empirical data from pilot regions indicate that the adoption of digital currencies has greatly shortened the time it takes for payments to be credited, accelerating capital turnover. On the other hand, digital currencies provide strong support for precise monetary policy implementation. By monitoring the circulation data of digital currencies, the central bank can more accurately track the flow and usage of money. This improved tracking capability enables policymakers to make more targeted adjustments, strengthening the effectiveness of macroeconomic regulation in the digital economy era.

3.2. Fintech regulatory change

To address the new risks and opportunities brought by fintech, China’s regulatory policies on fintech are continuously evolving. Existing research indicates that it is essential to strengthen the supervision of digital financial platforms, standardize their business scope and operating models, and prevent systemic financial risks. According to pilot data from the central bank, the integration of digital currency tracking mechanisms has improved the accuracy of fund flow monitoring in specific sectors, increasing the tracking precision from 60% to 85%.

At the same time, regulatory authorities are promoting reasonable fintech innovations to advance financial inclusion. The government has introduced relevant policies to support financial institutions in using technological means to expand service boundaries, providing more convenient financial services to small and micro enterprises as well as vulnerable groups.

3.3. Strengthening macro-prudential policies

The digital economy has necessitated further refinements in China’s macro-prudential policy framework. Relevant studies suggest that implementing countercyclical capital buffers and enhancing the supervision of systemically important financial institutions can significantly improve financial system resilience [3]. When financial markets experience excessive volatility, the requirement for countercyclical capital buffers prompts financial institutions to increase their capital reserves, curbing excessive credit expansion and effectively reducing the pro-cyclicality of the financial system. Additionally, stringent regulation of systemically important financial institutions helps prevent risk spillovers from individual institutions, maintaining overall stability in financial markets.

4. Policy adjustment and innovation effect evaluation

4.1. Promotion of economic growth

Policy adjustments and innovations have a positive impact on economic growth. The promotion of digital currency has stimulated consumption and enhanced market vitality. Data from pilot regions indicate that consumption growth rates in these areas surpass those in non-pilot regions, particularly in the retail and catering sectors. The convenience of digital currency transactions has encouraged more frequent consumer spending, thereby accelerating overall consumption growth. Regulatory reforms in fintech have driven innovation and optimization in financial services, broadening financing channels for small and medium-sized enterprises (SMEs), alleviating their difficulties and high costs in obtaining loans, and injecting new momentum into the real economy. Data shows that both the scale and volume of loans obtained by SMEs have significantly increased after policy adjustments, promoting production and investment activities. As Wang emphasized, innovative monetary policy tools have played a crucial role in supporting the real economy [3].

4.2. Maintain financial stability

The innovation and enhancement of monetary policy regulation frameworks have significantly optimized the countercyclical adjustment mechanisms of macro-prudential policies, effectively anchoring economic operations within a reasonable range while reinforcing systemic risk resilience [4]. Notably, the standardized supervision of digital financial platforms aligns with the global regulatory trends in central bank digital currency (CBDC) development, as evidenced by over 80% of surveyed central banks advancing CBDC technical research and legal framework design [5]. This regulatory paradigm not only suppresses cross-border illegal financial activities through intelligent monitoring systems but also creates stable monetary policy transmission channels for open economies by optimizing the substitution elasticity between CBDC and traditional currencies [6]. Furthermore, the digital economy's dual effects on price stickiness necessitate regulatory innovations, with empirical studies showing that adaptive digital supervision tools can mitigate the 22.3% attenuation effect of digitalization on conventional monetary policy transmission efficiency. These coordinated measures collectively safeguard investor rights and maintain financial market stability through multi-dimensional risk prevention mechanisms. Against the backdrop of increased volatility in global financial markets, China's financial market has maintained relative stability, demonstrating the effectiveness of policy adjustments and innovations in maintaining financial stability. This innovative monetary policy tools have played a crucial role in supporting the real economy [6]

4.3. Possible problems and deficiencies

Despite the achievements in policy adjustments and innovations, several challenges remain. The promotion of digital currency faces challenges such as low user acceptance and technical security risks. Some users lack sufficient understanding of digital currency and are concerned about financial safety, which affects its popularization rate. Similarly, the balance between innovation and risk prevention in fintech regulation needs further optimization; excessive regulation may stifle innovation vitality, while insufficient regulation could trigger financial risks. Moreover, the international coordination mechanism for macro-prudential policies to address cross-border digital financial risks is not yet well-established, making it difficult to effectively respond to global financial shocks. During the global financial market turmoil in 2022, China's major financial market indices exhibited significantly lower volatility compared to international markets, with the Shanghai Composite Index fluctuating by 21.2% throughout the year, far below the S&P 500's 24.6%. This reflects the effectiveness of policy adjustments and innovations in maintaining financial stability. This aligns with existing research on the importance of macro-prudential policies.

5. International experience and reference

5.1. Introduction to international policy practices

The monetary and economic policies adopted by various developed countries in the digital economy era provide valuable insights. For example, the Swedish central bank has actively promoted the development of e-cron, aiming to reduce cash usage and improve payment efficiency. Its experience in technology research and pilot promotion provides a reference for Chinas digital currency development.

The United States adopts a "regulatory sandbox" model for fintech regulation, encouraging financial innovation in a risk-controlled environment, balancing innovation with regulation. Meanwhile, the EU has strengthened cross-border regulatory coordination for digital currencies, reducing the risks of cross-border transactions through the establishment of unified regulatory standards [7].

5.2. Lessons and recommendations

Drawing from international experience, China should focus on balancing technological innovation and security assurance in the development of digital currencies, enhance user education, and improve acceptance of digital currencies. In terms of fintech regulation, China may explore the establishment of a "regulatory sandbox" mechanism suitable for China’s national conditions to provide a more relaxed environment for financial innovation. Additionally, actively participate in international financial regulatory coordination, strengthen cooperation with other countries on cross-border digital finance risk prevention, and jointly address global financial risks and challenges [8]

6. Conclusion

This paper has examined China’s monetary and economic policies in the digital economy era, summarizing the key achievements and challenges of policy adjustments and innovations. The findings indicate that policy measures have achieved significant results in promoting economic growth and maintaining financial stability. However, there are still shortcomings in the promotion of digital currencies, the balance of fintech regulation, and international coordination. To further improve monetary and economic policies, the following suggestions are proposed: continuously optimize the promotion strategies for digital currencies, strengthen technology research and development as well as security protection, and conduct extensive user education; improve the fintech regulatory system, establish an innovation-friendly regulatory mechanism that effectively prevents risks while encouraging innovation; actively participate in international financial cooperation, enhance international coordination of macro-prudential policies, and jointly address cross-border digital financial risks. Future research could focus on the profound impact of digital currencies on the international monetary system and how to build a more adaptive financial regulatory framework for the development of the digital economy [9]. Additionally, as the digital economy continues to evolve, new economic trends and challenges will emerge, necessitating continuous monitoring and in-depth analysis of dynamic policy adjustments and innovative pathways [10].