Abstract: With its per capita income reaching the middle level in the world and the momentum of reform gradually declining, the economy of China has entered a new period of development, showing three basic characteristics: the capital has changed from very short to relatively abundant leading to a consistent declining rate of return on capital; the long-term economic growth rate has turned downward. the economic growth has gone from investment driven alone to both investment and innovation driven. The current longest round of economic downward adjustment since 2008 stemming from both the in the long-term growth rate and the short term deviations from the trend implicates that in the new period the heart of China’s macroeconomic policy should turn from fiscal to monetary policy. The focus of fiscal policy should shift from government spending to tax cuts and that of monetary policy should shift from quantity of money to interest rates.