The State Council policy briefing will interpret the economic situation, focusing on deflation, the RMB exchange rate, local finances, etc

Reporter Xin Yuan

Since August, in the face of difficult challenges such as insufficient momentum for world economic recovery and the intertwining and superposition of domestic cyclical structural contradictions, all relevant parties have increased the implementation of macro policies, including continuing to optimize a number of phased policies, studying and introducing a number of highly targeted new measures, and actively planning a number of reserve policies, and systematically playing a set of policy "combined fists".

At the State Council's regular policy briefing on Wednesday, Cong Liang, deputy director of the National Development and Reform Commission, said that as the effect of the policy combination continues to appear, positive factors in China's economic operation are accumulating, bright spots are increasing, and social expectations have improved.

"With the superposition of stock policy and incremental policy, the accumulation of policy effects and the increasing positive factors, we have every reason to believe that the mainland economy will recover and improve in the long term." At present, there are many internal and external noises about bearish China and singing about China, and I want to say that this argument has never been realized in the past, and it is not destined to be realized now and in the future. Cong Liang said.

At the policy briefing, the National Development and Reform Commission, the central bank, the Ministry of Finance and the Ministry of Industry and Information Technology responded to the current hot topics of external concern, such as whether there is a risk of deflation, the pressure of RMB exchange rate depreciation, and local fiscal difficulties.

NDRC: There is no so-called deflation in China's economy

Cong Liang said that since the beginning of this year, mainland prices are still running at a low level, which needs to be paid attention to. However, judging from factors such as price level, demand recovery, economic growth, and money supply, there is no so-called deflation in China's economy, and there will be no deflation in the later period.

He pointed out that from the August data, household consumption continued to recover, supply and demand continued to improve, the national consumer price (CPI) rose slightly month-on-month, from falling to rising year-on-year, and industrial producer prices (PPI) also turned from falling to rising, narrowing year-on-year, and there were positive changes.

According to data from the National Bureau of Statistics, in August, the CPI turned from a year-on-year decrease of 0.3% in the previous month to an increase of 0.1%, and a month-on-month increase of 0.3%; PPI decreased 3.0% y/y and rose 0.2% qoQ.

"Price indicators are lagging indicators of economic operation, and as demand recovers steadily, market confidence gradually strengthens, economic operation continues to improve, and the low base effect gradually weakens, the overall price level of the mainland is expected to continue to recover and gradually rise to near the annual average level." Cong Liang said.

Central banks: A basket of currencies with exchange rates can more fully reflect changes in the value of the currency

Recently, the exchange rate of RMB against the US dollar has fluctuated greatly, causing market concern. Zou Lan, director of the Monetary Policy Department of the People's Bank of China, said that the bilateral exchange rate of the renminbi against the US dollar is usually discussed more, but in fact, the renminbi can more fully reflect the change in the value of the currency against a basket of exchange rate currencies.

"The exchange rate of the renminbi against the US dollar is very important, but it is not the whole of the renminbi exchange rate, and it should be viewed comprehensively and pay more attention to the changes in the exchange rate of the renminbi against a basket of currencies." He emphasized.

He pointed out that from the perspective of macroeconomic operation, exchange rate fluctuation is mainly to regulate trade and investment in the real economy, trade and investment are multilateral, involving multiple countries and currencies, so the change of RMB against a basket of currencies can more fully reflect the impact of the exchange rate on trade and investment and the balance of payments.

Zou Lan said that recently, domestic policies to stabilize the economy and stabilize expectations have been introduced one after another, and there have been more positive marginal changes in macroeconomic operations. As the mainland's economy continues to stabilize and improve, there is a solid foundation for the RMB exchange rate to remain basically stable at a reasonable and balanced level. At the same time, in the process of coping with multiple rounds of external shocks, the People's Bank of China and the Foreign Exchange Bureau have also accumulated rich experience in coping with them, and have sufficient reserves of policy tools, so we have the ability, confidence and conditions to maintain the smooth operation of the foreign exchange market.

He also said that in the next stage, the central bank and the State Administration of Foreign Exchange will aim to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level, comprehensively implement policies, correct deviations, stabilize expectations, resolutely correct unilateral and pro-cyclical behaviors, resolutely deal with behaviors that disrupt market order, and resolutely prevent the risk of exchange rate overshoot.

Ministry of Finance: will increase fiscal sinking

Under the background of reduced income from land sales and unabated rigid expenditure pressure, local finances are facing greater pressure.

Li Xianzhong, director of the Treasury Department of the Ministry of Finance, said that since the beginning of this year, China's economy has generally shown a good trend, but some local economic development has insufficient stamina, and fiscal operation has shown a tight balance. In order to support the smooth operation of local finances, especially at the grassroots level, the central government has mainly taken the following three measures.

First, increase the intensity of transfer payments. In 2023, the central government will arrange 10.06 trillion yuan in transfer payments to local governments, and after the National People's Congress approves the budget, the Ministry of Finance will quickly issue transfer payments from the central government to local governments. By the end of August, 9.55 trillion yuan had been allocated to local government transfer payments.

Second, make full use of the mechanism of direct financial funds. This year, the central government has included about 4 trillion yuan of transfer payment funds into the management of the direct delivery mechanism. From January to August, 3.83 trillion yuan of direct funds have been issued, except for some actual settlement projects, accounting for 95.1% of the total annual direct funds in 2023.

The third is to strengthen the monitoring of financial operations nationwide. Relying on the integrated operation and management system, the Ministry of Finance has established a national financial operation monitoring center to implement "T+1" penetrating monitoring of the financial operation status of various regions, so as to achieve early detection, early reporting and early disposal of emerging problems and hidden risks, and firmly consolidate the bottom line of the "three guarantees" at the grassroots level.

Li Xianzhong said that in the next step, the central finance will continue to do a good job in relevant work, guide local governments to coordinate central transfer payments and local own financial resources, increase the sinking of financial resources, and effectively ensure the smooth operation of grassroots finance.

Ministry of Industry and Information Technology: Systematically promote the development of emerging industries such as 5G and intelligent networked vehicles

Among the recently released series of macroeconomic data, the industrial economy is one of the highlights. In August, the added value of industries above designated size increased by 4.5% year-on-year, an increase of 0.8 percentage points faster than the previous month. From January to August, manufacturing investment increased by 5.9% year-on-year, and the growth rate rebounded for the first time in the year.

Tao Qing, director of the Operation Monitoring and Coordination Bureau of the Ministry of Industry and Information Technology, said that the next step will be to start from three aspects to promote the effective improvement of quality and reasonable growth of the industrial economy.

The first is to strengthen the coordinated implementation of policies, step up the implementation of the work plan for stable growth in ten key industries, and promote the implementation of stable growth policies.

The second is to accelerate the recovery and expansion of demand. Tao Qing said that it is necessary to strengthen the construction of quality brands, promote supply-side innovation, and lead the creation of demand with high-quality supply. Guide enterprises to expand the international market according to local conditions and further tap export potential.

The third is to step up efforts to enhance development momentum. She said that she will deeply implement intelligent manufacturing projects and accelerate the transformation and upgrading of traditional industries. The system will promote the development of emerging industries such as 5G, intelligent networked vehicles, and new materials, open up new fields and new tracks, cultivate a number of new growth engines, and create new competitive advantages.