The Central Economic work Conference after the Party Congress is bound to be interesting, such as the 2017 Central Economic work Conference, which formed the pillars of top-level economic ideas.

Compared with 2017 after the 19th CPC National Congress, the current Chinese economy is obviously facing greater downward pressure, which is why the CPC Central Committee has continued to introduce a series of policy measures to benefit the economy after this year's Congress (figure 1). In view of the fact that 2023 is the first year of implementation after the replacement of the old and the new under the State Council, we believe that at the Central Economic work Conference held this month,Vigorously developing the economy will become the top priority of economic work in 2023, and the important task of stabilizing the economy is about to begin.

When looking forward to this meeting, we should first pay attention to the text structure of the draft, and we expect that this meeting will continue to raise the judgment of the current and next year's overall situation to the first part.

The general draft of the Economic work Conference is usually divided into four parts: take 2021 as an example, the first part is a review and summary, the second part is the key tasks of economic work in the coming year, and the third part is a correct understanding of some economic issues. for example, last year's meeting reorganized the five areas of common prosperity, capital "traffic light", guarantee and supply, major risk prevention and double carbon. The fourth part is the deployment of government work and consensus-building.

At last year's meeting, in the second part of previous years, the judgment on the overall situation of the current and next year was mentioned in the first part.This forward statement of the current and next year's situation, especially in terms of pressure, we expect to present again this year.To show that the central government attaches great importance to the current economic difficulties, so as to continue to strive for progress in the midst of stability under the "economic construction as the center".

In additionCompared with previous years, the part of "correcting understanding" in the general draft of the 2021 conference is added and expanded.And all five of the problems mentioned have improved more or less this year. Therefore, in this month's meeting, the content of this part is worth paying attention to. If the content related to epidemic prevention continues to be retained and appears, then the uncertainty of policy optimization will be greatly reduced.

We expect that China's economic growth target may be set at around 5% in 2023.

This year, China's economy has been affected by the impact of the epidemic and the decline in real estate. We expect China's economy to grow by about 3% this year, which is a far cry from the growth target of about 5.5% set at last year's economic work conference.Does this mean that the economic growth target for 2023 will be significantly reduced?

We don't think so: first, historically, except for the COVID-19 epidemic in early 2020 that led the government to cancel its economic growth target, the government has not lowered its economic growth target by more than half a percentage point in the rest of the economic downward cycle (figure 3). Second, economic growth next year has the advantage of a low base this year, and with the continuous optimization and adjustment of real estate and epidemic prevention policies, according to our calculation, if the additional policy increases to about 2.7 trillion, the economic growth rate can be achieved by about 5%.

We expect China's deficit ratio to be 3% to 3.2% in 2023, and financial development needs the support of tools such as special treasury bonds.

Macro policies tend to be in the first place in the deployment of economic work, taking into account the greater pressure for stable growth in 2023Monetary policy remains loose in the same direction, and "reasonable abundance" is still an important key word.However, as mentioned in our previous report, the key to stabilizing the economy in 2023 will still be government-led spending, especially infrastructure and manufacturing investment led by major projects.

For reasons of fiscal sustainabilityThe government deficit ratio may be around 3% to 3.2% in 2023.According to our calculations, if the issuance of special bonds can be maintained at 4 trillion yuanIf infrastructure growth is about 4.6 to 5.2 per cent in 2023, the gap of 5 per cent in the overall economy will widen to between 3.1 and 3.4 trillion yuan.If we want to play a greater role in stabilizing the economy, we need to use additional fiscal tools, such as issuing special treasury bonds, and making more active use of policy financial instruments, PSL and other quasi-fiscal instruments.

In view of the recent shift in epidemic prevention and control policy, the expression related to epidemic prevention will be paid more attention.

Except for the part that may appear in what we call "correcting understanding" above (or it may not appear in 2023).The contents related to epidemic prevention are most likely to appear in two parts: thinking and deployment of work next year (part II) and consensus-building (part IV).：

The former lies in setting the tone for the relationship between epidemic prevention and economic work, and with reference to the contents of last year's meeting and the relevant arguments of the standing Committee of the political Bureau this year (figure 4), we believe that to co-ordinate epidemic prevention and control and economic development, epidemic prevention is more important; the latter is to unify the thinking of leading cadres at all levels and do a good job in regular epidemic prevention work, not only to avoid "layer by layer" and "across the board", but also to avoid "lying flat".

In terms of industrial policy, we expect to pay more attention to qualitative "effective" improvement.

The 2021 Central Economic work Conference proposed "steady improvement in quality and reasonable growth in quantity".The report of this year's Congress is expressed as "effective improvement in quality and reasonable growth in quantity", and the wording has changed from "steady" to "effective". We expect this tone to continue at this year's Central Economic work Conference.This is also reflected in the industrial policies issued after the conference, including the emphasis on improving system construction, promoting innovation and the healthy development of the industry, such as strengthening the construction of intellectual property protection system and promoting the innovation and development of new and specialized enterprises (Table 1).

In October, the Ministry of Science and Technology issued the "Special Plan for the technological Factor Market in the 14th five-year Plan", which pointed out that by 2025, China's technological factor market system will be basically complete, and the interconnected technical factor trading network will be basically completed. the market service system of technological elements is coordinated and efficient, and the effectiveness of market-oriented allocation of technological elements has been greatly improved.

Security as the key word of this year's conference, how to achieve overall development and security? This year's Central Economic work Conference will hand in the first official answer paper. For investors, what are the implications for investment from the policy tone of stable growth and security?

In conjunction with the Congress and the 14th five-year Plan, we have sorted out the policies in the five major areas of science and technology, biology, energy, food and industrial chain, as shown in Table 2.The main line of investment under stable economy and security focuses on Xinchuang, semiconductors and medicine.We believe that there are three core concerns:

The first is the strategic field to enhance China's core competitiveness.

The 14th five-year Plan proposed that"Frontier fields such as artificial intelligence, quantum information, integrated circuits, life and health, brain science, biological breeding, space science and technology, deep sea, etc."As a forward-looking and strategic national major science and technology project. Concentrate superior resources to tackle key problems"emerging infectious diseases and biosafety risk prevention and control, medicine and medical equipment, key components and basic materials, oil and gas exploration and development, etc."The key core technology of.

Second, it is related to the areas of basic livelihood security and grain and energy supply.

The General Secretary pointed out at the forum on June 2, 2020 that major scientific and technological achievements in the field of life safety and biosafety are the most important instruments of the country and must be in their own hands.Biosafety has been incorporated into the national security system, and medical equipment, medical research and development and other areas have a bright future.In addition, the field of food and energy security that ensures people's livelihood is also worthy of attention, involving energy storage, planting and other industries.

The third is the related fields of industrial chain resilience.

At the seventh meeting of the Central Financial and Economic Commission on April 10, 2020, the General Secretary pointed out that efforts should be made to build independent and safe industrial chains and supply chains, strive to have at least one alternative source for important products and supply channels, and form a necessary industrial backup system. The 14th five-year Plan points out thatConsolidate and enhance the competitiveness of the whole industrial chain in high-speed rail, power equipment, new energy, shipbuilding and other fields, and start with the whole machine products in line with the direction of future industrial reform to create a strategic and overall industrial chain.Digital economy, Xinchuang, power equipment, new energy and other industries are expected to usher in policy dividends.