Source: Securities Times
Authors: Sun Lulu, Jiang Wei, He Jueyuan, Cheng Dan, Qin Yanling, Zhang Da, Guo Bohao
The key tasks of China's economic work next year have been clarified!
According to Xinhua News Agency, the Central Economic Work Conference was held in Beijing from December 11 to 12. General Secretary of the CPC Central Committee, State President and Chairman of the Central Military Commission Xi Jinping attended the meeting and delivered an important speech. Li Qiang, Zhao Leji, Wang Huning, Cai Qi, Ding Xuexiang, and Li Xi attended the meeting.
In his important speech, Xi Jinping comprehensively summarized economic work in 2023, deeply analyzed the current economic situation, and systematically deployed economic work in 2024. Li Qiang made a concluding speech and put forward requirements for implementing the spirit of General Secretary Xi Jinping's important speech and doing a good job in the economy next year.
According to the conference, this year is the beginning of the full implementation of the spirit of the 20th National Congress of the Party, and a year of economic recovery and development after three years of transition in COVID-19 prevention and control. The Party Central Committee, with Comrade Xi Jinping at the core, united and led the whole Party and the people of all ethnic groups throughout the country to withstand external pressure, overcome internal difficulties, comprehensively deepen reform and opening-up, increase macro-control efforts, and focus on expanding domestic demand, optimizing the structure, boosting confidence, and preventing and mitigating risks. China's economy is picking up for the better, and high-quality development is progressing steadily. Significant progress has been made in the construction of a modern industrial system, new breakthroughs have been achieved in scientific and technological innovation, reform and opening-up have been advanced in depth, the foundation of security development has been consolidated and consolidated, people's livelihood security is strong and effective, and solid steps have been taken to comprehensively build a modern socialist country.
The conference pointed out that further boosting economic recovery requires overcoming some difficulties and challenges, mainly insufficient effective demand, overcapacity in some industries, weak social expectations, and still many hidden risks. The domestic cycle is blocked, and the complexity, severity, and uncertainty of the external environment are rising. It is necessary to raise awareness of worries and effectively deal with and resolve these issues. Taken together, the favorable conditions facing our country's development are stronger than the unfavorable factors. The basic trend of economic recovery and long-term improvement has not changed; confidence and ambition must be strengthened.
It is worth noting that with regard to doing a good job in the economy next year, this conference proposed “5 must be adhered to,” “3 items of coordination,” “9 major priorities,” and “4 to be implemented,” which are rich in content.
The following is an interpretation of the main points of this conference sorted out by the Securities Times reporter.
Strengthen the assessment of the coherence of macroeconomic policy orientations
The meeting called for next year to adhere to stability and progress, promote stability through progress, break first and later, strengthen countercyclical and cross-cycle adjustment of macroeconomic policies, and strengthen innovation and coordination of policy instruments. It is necessary to enhance the coherence of macroeconomic policy orientations. Strengthen coordination and coordination of fiscal, monetary, employment, industrial, regional, scientific, and environmental policies, incorporate non-economic policies into the consistency assessment of macroeconomic policy orientations, strengthen policy coordination, and ensure that they are moving in the same direction and forming joint efforts.
Feng Wenmeng, a researcher at the Development Research Center of the State Council, told the Securities Times reporter that incorporating non-economic policies into the macroeconomic policy orientation consistency assessment means looking at policy effects from a broader perspective, stressing that different policies should form synergies and promote each other.
Zeng Gang, director of the Shanghai Finance and Development Laboratory, told reporters that this is very important. Because market confidence is affected not only by economic policies, but also by other non-economic policies. Therefore, the mention of “incorporating non-economic policies into the macroeconomic policy orientation consistency assessment” this time reflects a general idea centered on economic construction. This can not only enhance the effectiveness of policies, but also help stabilize market expectations.
In terms of strengthening policy innovation, Zeng Gang told reporters that taking promoting price levels to remain at a reasonable level, on the one hand, it is necessary to adopt more active policies to promote effective demand growth, and on the other hand, to guide price expectations through various policies. Zeng Gang believes that this requires many innovative policy tools. Not only should adjustments and changes in monetary policy be more focused on the current blockages, but they also need to be combined with other policies to achieve them.
The conference also pointed out that efforts should be made to increase the effectiveness of macroeconomic policies in support of high-quality development by setting aside sufficient quantities and redundancy in policy reserves, focusing on effectiveness and enhancing the sense of acquisition in evaluating policy effects.
Increased fiscal strength, more quality and efficiency reforms and debt conversion are worth looking forward to
On the basis of “increasing efficiency” last year, this year's Central Economic Work Conference put forward further requirements for active fiscal policies: policies should be strengthened but “moderate,” and not only should efficiency be increased, but also “quality improvement.” Overall, the fiscal policy in 2024 will maintain a more positive trend, while paying more attention to the efficiency and effectiveness of the policy to ensure that the fiscal situation is more sustainable.
Under the positive trend of economic recovery next year, there is little need for a sharp fiscal boost. Tao Chuan, assistant director of the Soochow Securities Research Institute and chief macro analyst, told reporters that “moderate strengthening” means that future fiscal policy expansion may be cautious. The 2024 fiscal year is likely to maintain a deficit rate target of 3% at the beginning of the year. However, if the downward pressure on the economy is strong, it can still be strengthened by raising the deficit or “quasi-finance” in the middle of the year.
“'Improving quality and efficiency' is determined by the tight balance of the current financial situation.” Luo Zhiheng, chief economist of Guangdong Securities and director of the Research Institute, pointed out that this requires tax cuts and fees on the revenue side to shift from pursuing quantity and scale to efficiency and effectiveness; on the expenditure side, optimizing the fiscal expenditure structure.
In the new year, the financial system must not only continue to do a good job of steady growth and the “Three Guarantees,” but also plan a new round of fiscal and taxation system reform. Wang Dehua, a researcher at the Institute of Financial Strategy of the Chinese Academy of Social Sciences, pointed out that at present, China's modern financial system framework has basically been established. Specifically, the tax system is basically stable, and specific tax reforms have yet to be carried out; budget management reform is progressing the fastest, and the basic framework has already been established; the government's fiscal relationship has clarified the direction of adhering to the tax sharing system, but the specific system still needs to be optimized; and the direction of reform of the social security system, which is closely related to finance, has already been established and is focusing on implementation.
Furthermore, preventing and resolving the risk of local government debt will continue to be a major responsibility next year. After local governments have vigorously issued special refinancing bonds this year, it is worth looking forward to the further participation of the financial system in assisting in debt consolidation.
The level of inflation may become an important factor in judging whether monetary policy is “effective”
Regarding next year's monetary policy, “maintaining reasonable and abundant liquidity, and the scale of social financing and money supply in line with the expected goals of economic growth and price levels” proposed at the conference is a new statement. Unlike “keeping the growth rate of money supply (M2) and the scale of social financing basically in line with the nominal economic growth rate,” which has been mentioned many times before, this conference added the need to “match the expected price level target”. In the current context of China's low price level, this may mean that next year's monetary policy will push the level of inflation back moderately.
As for what is the expected target of the price level? Major international central banks all set medium- to long-term inflation targets at around 2%. In contrast, according to the latest data from the National Bureau of Statistics, in November of this year, the national consumer price (CPI) fell 0.5% year on year, and the year-on-year decline was 0.3 percentage points higher than the previous month.
Li Peijia, a senior researcher at the Bank of China Research Institute, believes that price trends are an important factor affecting monetary policy. Currently, prices in China are constantly falling, which has created conditions for China to implement a steady and loose monetary policy. Combined with the Federal Reserve, the interest rate hike cycle may end, and the internal and external constraints facing China's monetary policy have been further reduced. In the future, whether to further ease or lower interest rates will mainly depend on trade-off choices for multiple development goals such as “economic development and risk prevention.”
Wen Bin, chief economist at Minsheng Bank, also said that the conference focused on emphasizing the important role of monetary policy in stabilizing price level expectations, and that inflation may become an important factor in judging whether monetary policy is “effective” in the next stage. Prices have continued to be low since 2023. Monetary policy is expected to be moderately strong in 2024, driving a moderate rise in price levels.
Wang Yifeng, chief financial analyst at Everbright Securities, said that credit expansion is expected to “steadily decline in volume and steady pace” in 2024, and new RMB loans are expected to be around 23-24 trillion yuan. Furthermore, in order to optimize the capital supply structure and revitalize existing financial resources, it is expected that the growth rate of monetary social finance will be close to the nominal GDP growth rate next year. The M2 growth rate may decline somewhat, and the “scissor gap” between M2 and social finance growth is expected to gradually narrow.
“In order to make the policy effect more 'effective', the next step will also be to strengthen coordination between monetary policy and fiscal, industrial, regional, scientific and technological policies, etc., to actively revitalize financial resources that have been used inefficiently and ineffectively, to achieve a 'increase and decrease in the credit structure' and a 'rise and down' in the financing structure, improve the efficiency of capital use, and inject new impetus into high-quality economic development.” Wen Bin said.
The capital market has great potential to support technological innovation
The Central Economic Work Conference emphasized that scientific and technological innovation should lead the construction of a modern industrial system. It is necessary to promote industrial innovation through scientific and technological innovation. In particular, disruptive technology and cutting-edge technology should spawn new industries, new models, and new momentum, and develop new types of productivity. Implement high-quality development actions for key industrial chains in the manufacturing industry to enhance the resilience and safety level of the industrial chain supply chain.
Specifically, it is necessary to vigorously promote a new type of industrialization, develop the digital economy, and accelerate the development of artificial intelligence. Build a number of strategic emerging industries such as bio-manufacturing, commercial aerospace, and the low-altitude economy, open up new tracks for future industries such as quantum and life science, and widely apply digital intelligence technology and green technology to accelerate the transformation and upgrading of traditional industries. Strengthen applied basic research and cutting-edge research, and strengthen the dominant position of enterprises in scientific and technological innovation. Encourage the development of venture capital and equity investment. Promote the specialized and innovative development of small and medium-sized enterprises.
Qin Peijing, chief strategist at CITIC Securities, said that scientific and technological innovation was highlighted in the Economic Work Conference. Combined with this year's high-level research and instructions on scientific and technological work, it shows that the importance the Party Central Committee attaches to scientific and technological work may have reached a new level in history.
Looking at specific goals, on the one hand, scientific and technological innovation is an important force leading the construction of a modern industrial system, injecting surging momentum into development; on the other hand, scientific and technological innovation, breaking through “stuck neck” technology, is an important measure to improve the resilience and safety level of the industrial chain supply chain. Looking at specific measures, to promote self-reliance and self-improvement in high-level science and technology, a new nationwide system is still needed to carry out scientific research in key areas, focusing on the four aspects of financial support, talent development, project subjects, and the R&D environment.
The capital market has outstanding characteristics of “risk sharing and benefit sharing”, and has a natural advantage in promoting the formation of innovative capital and supporting scientific and technological innovation. Since this year, marked by the launch of comprehensive registration system reform, the Securities Regulatory Commission has increased its support for key areas such as self-reliance and self-improvement in high-level technology and the construction of a modern industrial system to help accelerate the goal of building a strong financial nation.
As of December 12, about 300 companies entered the capital market during the year, raising more than 343.1 billion yuan in capital. Among them, the Science and Technology Innovation Board and the GEM Board won over 70% of the fund-raising share, and the “main position” of the double innovation sector was full of innovation and vitality, and the information technology, materials, healthcare and other industries ranked high in capital raised. The construction of a multi-level capital market system has placed more emphasis on serving the real economy and supporting scientific and technological innovation.
The reporter learned that the Securities Regulatory Commission has initially formed a “1+N+X” policy framework by focusing on high-quality development and building a modern capital market system project with Chinese characteristics. One of the “N” is being formulated, namely, the capital market service and the construction of a modern industrial system. The plan focuses on closely focusing on the construction of modern industry, agriculture, services and infrastructure. Through differentiated system arrangements, priority is given to supporting the expansion and strengthening of “chain owners” in the industrial chain supply chain and specialized new enterprises, helping to build world-class enterprises, build strategic modern industrial clusters, promote the transformation and upgrading of traditional industries, and promote industrial intelligence, greening and integration.
Qin Peijing said that based on the role of scientific and technological innovation in the industrial system and supply chain, it is expected that specific measures to support scientific and technological innovation will continue to be strengthened.
Form a virtuous cycle where consumption and investment promote each other
Since the end of last year, focusing on expanding domestic demand has become an important entry point for the formulation and introduction of many macroeconomic policies. Unlike previous macroeconomic policies, which played the “fundamental role of consumption” and “the key role of investment,” the 2023 Central Economic Work Conference further emphasized the need to “stimulate consumption with potential, expand effective investment, and form a virtuous circle where consumption and investment promote each other.”
In response, Zhang Yu, deputy director of the Huacheng Securities Research Institute and chief macro analyst, believes that investment is both current demand and future supply. The current year-on-year price growth rate is negative pointing to the problem of overcapacity. If investment is increased excessively in order to expand demand in the current period, it may further worsen the future supply and demand pattern. Therefore, this session further emphasizes the mutually reinforcing cycle of the two, and places greater emphasis on the balance between the two.
Looking specifically at the investment sector, the conference made it clear that it is necessary to “give full play to the driving and amplifying effects of government investment,” and at the same time, “implement a new mechanism for cooperation between the government and social capital to support the participation of social capital in the construction of new infrastructure and other fields.”
On November 8, the National Development and Reform Commission and the Ministry of Finance jointly issued the “Guiding Opinions on Regulating the Implementation of the New Mechanism for Cooperation between the Government and Social Capital”. “Standardizing the implementation of the new mechanism for government and social capital cooperation is to adhere to the original intention, return to the roots, and encourage the participation of private enterprises to the greatest extent possible.” Li Chao, deputy director of the Policy Research Office of the National Development and Reform Commission and press spokesman, pointed out a few days ago that the new mechanism clearly prioritizes the participation of private enterprises, which will further motivate private investment and promote the continuous optimization and adjustment of the private investment structure.
Promoting the development and growth of private enterprises
Looking at the key areas where macroeconomic policies have been strengthened this year, promoting the growth of private economic development is also an important focus.
The conference continued to emphasize the need to “continuously improve and implement the 'two unswerving' institutional mechanisms to fully stimulate the endogenous motivation and innovative vitality of various business entities”, and further, to “promote the development and growth of private enterprises and implement a number of measures in the areas of market access, factor acquisition, fair law enforcement, and protection of rights and interests.”
Ning Gaoning, the former party group secretary and chairman of China Sinochem Holdings Co., Ltd., publicly stated a few days ago that whether it is a state-owned enterprise or a private enterprise, it is necessary to truly improve the management level and management level to form a world-class industry. In this process, it is necessary to strictly protect private property rights, adhere to “two unwavering”, and enhance the confidence of the business community, including private enterprises, state-owned enterprises, and foreign-funded enterprises.
Strict financial supervision and upgrading continues to focus on risk prevention
Since this year, China has comprehensively strengthened financial supervision, closely followed reforms, and continued to focus on risk prevention. This conference also proposed continuing to effectively prevent and mitigate risks in key areas, including the integrated resolution of risks in real estate, local debt, small and medium-sized financial institutions, etc., and severe crackdown on illegal financial activities.
In terms of preventing and mitigating the risks of small and medium-sized financial institutions, the Central Financial Work Conference held earlier proposed that entry standards and supervision requirements for small and medium-sized financial institutions be strictly enforced, and that specialized operations be carried out on a local basis. Handle the risks of small and medium-sized financial institutions in a timely manner
Li Guangzi, director of the Banking Research Office at the Institute of Finance of the Chinese Academy of Social Sciences, recently stated that the risks of small and medium-sized financial institutions are affected by various factors. Policies should be classified according to the state of development of different institutions. Among them, for most small and medium-sized financial institutions that are in a normal state of operation and have relatively low risk, the focus of the policy is to increase support and enhance their competitiveness. For small and medium-sized financial institutions that generate certain signs of risk, it is necessary to strengthen early intervention and treatment to prevent risk from worsening further. Where serious financial risks occur, some high-risk institutions should be guided to exit the market in an orderly manner on the basis of a clear division of responsibilities for risk management.
According to the latest research report by the Bank of China Research Institute, looking ahead to 2024, financial supervision will be strengthened across the board, further strengthening institutional supervision, behavioral supervision, functional supervision, penetrating supervision, and continuous supervision, and effectively improving the effectiveness of supervision.
Actively and steadily mitigating real estate risks is an important task next year
The Central Economic Work Conference's statement on real estate this time placed a lot of emphasis on preventing and mitigating risks in key areas, showing that the Party Central Committee attaches great importance to risks in the real estate sector and is determined to mitigate real estate risks.
The conference emphasized actively and steadily mitigating real estate risks and treating them equally to meet the reasonable financing needs of real estate enterprises with different ownership systems. Chen Wenjing, director of market research at the China Index Research Institute, believes that actively and steadily mitigating real estate risks is still an important goal for 2024, and corporate financial support policies are expected to be further implemented and effective.
Chen Wenjing pointed out that at present, real estate risks are mainly reflected in housing enterprise debt settlement, project guarantee delivery, etc. It is expected that the 2024 enterprise-side financial support policy will continue to be refined and implemented. It is expected that the implementation of “no less than three” will help improve the corporate financing environment if implemented substantially. In addition, to mitigate the risks of housing enterprises, it is still necessary to push enterprises to restore their own hematopoiesis. Substantial restoration of market sales is the key to improving corporate capital, while improvements in the sales market still require continued support for demand-side policies. It is expected that in 2024, first-tier cities will continue to optimize purchase restriction policies. Core second-tier cities are expected to completely lift purchase restrictions, and more low-energy cities may promote the release of demand for housing purchases by issuing housing purchase subsidies, etc.
The conference also proposed speeding up the “three major projects”, such as the construction of affordable housing, the construction of “dual use and emergency” public infrastructure, and the renovation of urban villages. Improve relevant basic systems and accelerate the construction of a new model for real estate development.
Li Yujia, chief researcher at the Housing Policy Research Center of the Guangdong Provincial Urban Planning Institute, believes that the “three major projects” are not only a starting point for the new model, but also a focus for stabilizing and advancing real estate. Among them, urban village rehabilitation addresses the housing needs of new citizens, young people, and the foreign population, mainly low-cost, rent-type housing needs with a balance of employment and residence; affordable housing solves the place-type security needs of unregistered households, talent groups, and wage earners, and the working class, and solves the problem of the shortage of commercial housing demand; and “dual-use” public infrastructure solves the demand for supporting facilities for living safety in the new era. The “three major projects” of the housing and construction system in the new era are all supply-side reforms written to match demand, and are combined with expanding domestic demand for real estate.
Furthermore, the conference also proposed that the promotion of a new type of urbanization and comprehensive rural revitalization should be organically combined.
In response, Lu Ting, the chief economist of Nomura China, believes that the real estate industry still has quite a bit of room for development. Urbanization has not yet been completed, and there is still huge demand for urban housing and infrastructure. If the urban housing problem of migrant workers entering the city is to be solved in the next ten to twenty years, the demand for new housing units is likely to be over 5 million units each year. Furthermore, China currently graduates about 10 million university students every year, and these future white-collar workers are also highly mobile, thus creating new housing needs. Among the current urban registered population, there is also a large demand for improved housing.
Jin Jing, chief analyst of the real estate industry at Guosheng Securities, believes that against the backdrop of China's slowing urbanization, declining birth rate, and rising aging rate, the real estate industry has reached the top of the historical cycle, promoting the construction of a new type of urbanization or becoming one of the important implications of a new model for the development of the real estate industry.
The pace of opening up to the outside world has continued to effectively overcome the blockage of foreigners coming to China
The conference also emphasized “expanding high-level opening-up to the outside world,” speeding up the cultivation of new momentum in foreign trade, consolidating the basic market of foreign trade and foreign investment, and expanding trade in intermediate goods, trade in services, digital trade, and cross-border e-commerce exports. Benchmark high-standard international economic and trade rules, continue to build a market-based, rule-of-law, and international first-class business environment, and build the “Invest in China” brand.
Since this year, China has helped continuously optimize the allocation of resource factors through a high level of opening-up to the outside world, effectively improving the quality and level of trade and investment cooperation, and focusing on strengthening the resilience and security level of the industrial chain supply chain.
The construction of a strong trading nation continues to accelerate. Since this year, China has actively promoted the optimization and upgrading of trade in goods, actively expanded imports, and accelerated the development of new forms of trade; innovated the development mechanism for trade in services to promote total volume growth, structural optimization and efficiency improvement of trade in services; seize the opportunities of the digital economy, cultivate new formats and models of digital trade, and establish and improve the digital trade governance system.
The pace of opening up finance to the outside world is accelerating. With the advancement of a high level of financial openness to the outside world, many restrictions on foreign investment entering the Chinese industry have been lifted.
Take Standard Chartered Securities, the first wholly foreign-owned brokerage firm, as an example. On December 11, the brokerage firm obtained the “License to Operate Securities and Futures Business” issued by the Securities Regulatory Commission, and plans to officially launch in the first half of 2024.
At the opening ceremony of the 3rd “Belt and Road” International Cooperation Summit Forum, China announced “complete lifting of restrictions on foreign investment entry in the manufacturing sector” and “actively comparing high-standard international economic and trade rules and further promoting high-level opening up of cross-border trade in services and investment”, pointing out the direction for opening up to the outside world and utilizing foreign capital in the coming period. It can be expected that China will continue to create a market-based, rule-of-law, and international first-class business environment, and the pace of promoting high-level opening-up to the outside world will not stop.
Accelerate the construction of new energy systems to meet the demand for clean energy consumption
Currently, China is in an important period of comprehensive construction of a modern socialist country. Demand for energy consumption will continue to grow rigidly in the next stage. It is important to accelerate the construction of a resilient, strong and reliable energy supply chain. The conference proposed speeding up the construction of a new energy system, strengthening resource conservation, intensive recycling and efficient use, and improving energy resource safety and security capabilities.
The energy industry has a large scale, long chain, wide coverage, and strong driving effect, and is an important pillar of the national economy. According to data from the China Electric Power Construction Enterprise Association, the amount of clean energy investment completed in the third quarter of this year was 192.6 billion yuan, an increase of 26.63% over the previous year and an increase of 9.37% over the previous year. The contribution index of increased investment in clean energy construction to the country's GDP growth continued to rise year on year and month on month.
Ding Yanzhang, party committee secretary and chairman of China Power Construction Group Co., Ltd., believes that vigorously promoting the construction of renewable energy infrastructure such as hydropower, pumped storage, wind power, photovoltaics, etc., can not only meet the demand for clean energy consumption brought about by rapid economic and social development and people's desire for a better life, but also effectively expand domestic investment space, drive the development of related industrial chains such as planning and construction, equipment manufacturing, etc., and have played a significant driving role in optimizing the economic structure, increasing fiscal revenue, and creating employment opportunities in regions rich in renewable energy, making an outstanding contribution to stabilizing the macroeconomic market.
Give more prominence to employment priorities and consolidate the “ballast stone” of social stability
Employment is the biggest livelihood project. Doing a good job of stabilizing employment concerns people's livelihood, welfare, and social stability, as well as economic development and the modernization process. Since this year, the policies of various departments in various regions to promote stable employment have continued to show results, but the current overall pressure on employment and structural problems still exist. The conference emphasized giving more prominence to employment priorities to ensure stable employment for key groups.
Wang Xiaoping, Party Secretary and Minister of the Ministry of Human Resources and Social Security, believes that solving the employment problem fundamentally depends on economic development. The GDP growth in the first three quarters of this year was 5.2% year-on-year, which is the key to driving employment growth. At the same time, the recovery of the service sector accelerated. The value added of the service sector in GDP increased 1.4 percentage points over the same period last year to 55.1%, and the driving force for economic and social development and employment continued to increase.
“The digital economy has created new jobs and industries, and increased a large number of employment opportunities.” Zeng Xiangquan, director of the China Employment Research Institute at Renmin University of China, believes that facing the future, all parties concerned should work in five areas, including raising awareness about the development of the digital economy, improving standardization and science of management, enhancing the quality and ability of professionalizing talents, improving platform employment and social security, and strengthening the construction of human resources data platforms to promote the joint development of the new economy, new business formats, and new employment.
Feng Shuaizhang, dean of the Institute of Economic and Social Research at Jinan University, also pointed out that the new type of flexible employment has become an important part of the labor market. In the future, all parties should explore and guide the new flexible employment in the direction of long-term, stable, and standardized development.
Editor/jayden