Source: New Economist Think Tank is synthesized from GF Securities, Guosen Securities, Ping An Securities, Guangda Securities, SDIC Securities, Zhongtai Securities, Guojin Securities, Yuekai Securities, etc.

17 Institutions Jointly Interpret the Central Economic Work Conference (80,000 Words Long Article) (II)

10. GF Securities

Interpretation of the key points of the Central Economic Work Conference

(Guo Lei)

Summary of the report

Xinhua News Agency reported that the Central Economic Work Conference was held in Beijing from December 11 to 12. Regarding the spirit of the meeting, we Xi understand the following:

First, the meeting summed up the "understanding of the regularity of doing a good job in economic work in the new era". The first key word is "Chinese-style modernization", the meeting pointed out that "it is necessary to promote Chinese-style modernization as the biggest politics"; the second is "high-quality development", the meeting pointed out that "we must adhere to high-quality development as the last word in the new era", "focus on the central work of economic construction and the primary task of high-quality development"; third, the supply-side and demand-side coordination, the meeting pointed out that "we must persist in deepening the supply-side structural reform and focus on expanding effective demand and make concerted efforts"; fourth, reform and opening up, the meeting pointed out " Fifth, we must coordinate development and security, and the meeting pointed out that "we must adhere to high-quality development and high-level security and benign interaction". This series of statements can help us understand the general framework of current policy.

Second, the tone of the meeting for 2023 is "a year of economic recovery and development", and believes that "the economy will pick up and improve" in 2023; on the basis of the above two judgments, the meeting discussed the issue of "further promoting the economic recovery and improvement", pointing out that "some difficulties and challenges need to be overcome", and it should be noted that in addition to "insufficient effective demand" and "weak social expectations", the difficulties and challenges also include "overcapacity in some industries", which implied policy direction deserves further attention. At the same time, however, it was pointed out that, taken together, "favorable conditions outweigh unfavorable factors".

Third, with regard to next year's economic work, the meeting pointed out that it is necessary to "earnestly enhance economic vitality, prevent and defuse risks, improve social expectations, and consolidate and enhance the positive trend of economic recovery." In terms of specific work requirements, in addition to the emphasis of the Politburo meeting on "seeking progress while maintaining stability, promoting stability through progress, and establishing first and then breaking through," the meeting further pointed out that "more policies conducive to stabilizing expectations, stabilizing growth, and stabilizing employment," that is, policies that give priority to positive incentives. The meeting pointed out that "continue to implement a proactive fiscal policy and a prudent monetary policy, and strengthen the innovation and coordination of policy tools", and the expression "innovation and coordination of policy tools" means that there is a certain space for imagination in quasi-fiscal tools.

Fourth, with regard to fiscal policy, in addition to moderately strengthening efforts and improving quality and efficiency, the meeting stressed that "it is necessary to make good use of the fiscal policy space," and whether it corresponds to the expansion of fiscal space remains to be observed and confirmed; one incremental detail is "reasonably expanding the scope of local government special bonds to be used as capital," which logically can bring into play the greater leverage effect of special bonds; and with regard to monetary policy, the meeting pointed out that "the scale of social financing and the amount of money supply should match the expected targets of economic growth and price levels We understand that the main reason is that prices are still at a low level in the short term, and if they are basically matched with the nominal economic growth rate, the money supply will be significantly lower; and the "economic growth and price level expectations are matched", which means that if the GDP target is 5% and the inflation target is 3%, the money supply growth rate can be around 8%, which is a relatively neutral standard that is in line with the "prudent" characteristics of monetary policy. In addition to fiscal and monetary policies, the meeting also proposed to "incorporate non-economic policies into the assessment of the consistency of macroeconomic policy orientations, strengthen policy coordination, and ensure that efforts are made in the same direction and form a joint force", which further highlights the logic of focusing on economic work.

Fifth, in terms of industrial policy, the meeting emphasized that technology leads the industrial trend, pointing out that it is necessary to "lead the construction of a modern industrial system with scientific and technological innovation." It is necessary to promote industrial innovation through scientific and technological innovation, especially to give birth to new industries, new models and new kinetic energy with disruptive technologies and cutting-edge technologies, and to develop new quality productive forces." Specific areas mentioned include digital economy, artificial intelligence, biomanufacturing, commercial aerospace, low-altitude economy, etc.

Sixth, with regard to the policy of expanding domestic demand, the meeting emphasized "potential consumption" and "productive investment." In the field of traditional consumption, special mention was made to boost bulk consumption such as new energy vehicles and electronic products, as well as the trade-in of consumer goods. In the field of new consumption, new consumption growth points such as smart home, entertainment and tourism, sports events, and domestic "trendy products" were specifically mentioned. To put it simply, the policy focus is consumer durables + new service consumption. In addition, the "promotion of large-scale equipment renewal" will help the capital expenditure demand, and the follow-up details are worth looking forward to. In the part of people's livelihood, the meeting pointed out that it is necessary to "accelerate the improvement of the birth support policy system and develop the silver economy", and the next stage of population policy may also bring some policy dividends.

Seventh, with regard to real estate, in addition to meeting the reasonable financing needs of real estate enterprises of different ownership systems and speeding up the "three major projects", the meeting also pointed out that it is necessary to "improve the relevant basic systems and accelerate the construction of a new real estate development model", and next year may be a key year for the formation of a new real estate development model This means that some provinces may have some short-term constraints on government investment during the debt conversion period.

Eighth, with regard to private enterprises, the meeting emphasized that "a number of measures will be implemented in terms of market access, access to factors, fair law enforcement, and protection of rights and interests", which means that there will be policy dividends in the follow-up in the relevant fields of private enterprises.

Ninth, the meeting further emphasized that "seize all favorable opportunities, take advantage of all favorable conditions, and do as soon as you see it, and do more if you can", "pay attention to grasping and handling the relationship between speed and quality, macro data and micro feelings, economic development and improvement of people's livelihood, development and security", "strengthen coordination and linkage in policy implementation, amplify the combination effect, and lay a good amount of advance and redundancy in policy reserves", these expressions can also show the importance of economic work in 2024. In the future, we will pay attention to a series of variables such as the GDP target, the broad fiscal space, the policy framework and implementation rhythm of the three major projects, and the benchmark growth rate of money supply in the first quarter of next year.

Body:

Xinhua News Agency reported that the Central Economic Work Conference was held in Beijing from December 11 to 12. Regarding the spirit of the meeting, we Xi understand the following:

The meeting summed up the "understanding of the regularity of doing a good job in economic work in the new era". The first key word is "Chinese-style modernization", the meeting pointed out that "it is necessary to promote Chinese-style modernization as the biggest politics"; the second is "high-quality development", the meeting pointed out that "we must adhere to high-quality development as the last word in the new era", "focus on the central work of economic construction and the primary task of high-quality development"; third, the supply-side and demand-side coordination, the meeting pointed out that "we must persist in deepening the supply-side structural reform and focus on expanding effective demand and make concerted efforts"; fourth, reform and opening up, the meeting pointed out " Fifth, we must coordinate development and security, and the meeting pointed out that "we must adhere to high-quality development and high-level security and benign interaction". This series of statements can help us understand the general framework of current policy.

The meeting held that in recent years, under the strong leadership of the CPC Central Committee, we have effectively coordinated the overall domestic and international situations, coordinated epidemic prevention and control, economic and social development, and coordinated development and security, and deepened the understanding of the regularity of doing a good job in economic work in the new era. We must take high-quality development as the last word in the new era, implement the new development concept completely, accurately and comprehensively, and promote the economy to achieve effective qualitative improvement and reasonable quantitative growth. We must persist in deepening the supply-side structural reform and focusing on expanding effective demand, give full play to the advantages of the super-large-scale market and strong production capacity, so that the domestic cycle is based on the main force of domestic demand, and improve the quality and level of international circulation. We must persist in relying on reform and opening up to enhance the endogenous driving force for development, promote in-depth reform and high-level opening up in a coordinated manner, and constantly liberate and develop social productive forces and stimulate and enhance social vitality. We must adhere to the benign interaction between high-quality development and high-level security, promote high-level security with high-quality development, ensure high-quality development with high-level security, and dynamically balance and complement each other with high-level security. We must take the promotion of Chinese-style modernization as the most important politics, unite the broadest masses of the people under the unified leadership of the Party, focus on the central task of economic construction and the primary task of high-quality development, and turn the grand blueprint of Chinese-style modernization into a beautiful reality step by step.

On the basis of the above two judgments, the meeting discussed the issue of "further promoting the economic recovery and improvement", pointing out that "some difficulties and challenges need to be overcome". At the same time, however, it was pointed out that, taken together, "favorable conditions outweigh unfavorable factors".

The meeting believed that this year is the first year for the full implementation of the spirit of the 20th National Congress of the Communist Party of China, and a year for economic recovery and development after the three-year transition of new crown epidemic prevention and control. The Party Central Committee with Comrade Xi Jinping as the core has 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 macroeconomic regulation and control, focus on expanding domestic demand, optimizing structure, boosting confidence, preventing and defusing risks, and the mainland's economy has rebounded and improved, and high-quality development has been solidly promoted. Important progress has been made in the construction of a modern industrial system, new breakthroughs have been made in scientific and technological innovation, reform and opening up have been promoted in depth, the foundation for safe development has been consolidated and consolidated, people's livelihood has been effectively guaranteed, and solid steps have been taken to build a modern socialist country in an all-round way.

The meeting pointed out that to further promote the economic rebound, we need to overcome some difficulties and challenges, mainly due to the lack of effective demand, overcapacity in some industries, weak social expectations, and many hidden risks. It is necessary to enhance the sense of distress and effectively deal with and resolve these problems. On the whole, the favorable conditions facing the mainland's development are stronger than the unfavorable factors, and the basic trend of economic rebound and long-term improvement has not changed.

With regard to next year's economic work, the meeting pointed out that it is necessary to "earnestly enhance economic vitality, prevent and defuse risks, improve social expectations, and consolidate and enhance the positive trend of economic recovery." In terms of specific work requirements, in addition to the emphasis of the Politburo meeting on "seeking progress while maintaining stability, promoting stability through progress, and establishing first and then breaking down," the meeting further pointed out that "more policies that are conducive to stabilizing expectations, stabilizing growth, and stabilizing employment," that is, policies that give priority to positive incentives. The meeting pointed out that "continue to implement a proactive fiscal policy and a prudent monetary policy, and strengthen the innovation and coordination of policy tools", and the expression "innovation and coordination of policy tools" means that there is a certain space for imagination in quasi-fiscal tools.

The meeting stressed that to do a good job in next year's economic work, we must take Xi Jinping's Thought on Socialism with Chinese Characteristics for a New Era as the guide, comprehensively implement the spirit of the 20th CPC National Congress and the Second Plenary Session of the 20th CPC Central Committee, adhere to the general tone of seeking progress while maintaining stability, and be complete, accurate, and Fully implement the new development concept, accelerate the construction of a new development pattern, focus on promoting high-quality development, comprehensively deepen reform and opening up, promote high-level scientific and technological self-reliance and self-reliance, increase macroeconomic regulation and control, coordinate the expansion of domestic demand and deepen supply-side structural reform, coordinate the comprehensive revitalization of new urbanization and rural areas, coordinate high-quality development and high-level security, and effectively enhance economic vitality, prevent and resolve risks, We will improve social expectations, consolidate and strengthen the positive trend of economic recovery, continue to promote the effective improvement of the quality and reasonable growth of the economy, improve people's livelihood and well-being, maintain social stability, and comprehensively promote the construction of a strong country and the great cause of national rejuvenation with Chinese-style modernization.

The meeting demanded that next year, we should persist in seeking progress while maintaining stability, promoting stability through progress, establishing first and then breaking down, and come up with more policies that are conducive to stabilizing expectations, growth, and employment, and actively forging ahead in changing the mode, adjusting the structure, improving quality, and increasing efficiency, so as to continuously consolidate the foundation for stability and improvement. It is necessary to strengthen the counter-cyclical and cross-cyclical adjustment of macroeconomic policies, continue to implement a proactive fiscal policy and a prudent monetary policy, and strengthen the innovation and coordination of policy tools.

With regard to fiscal policy, in addition to appropriately strengthening efforts and improving quality and efficiency, the meeting stressed that "it is necessary to make good use of the fiscal policy space," and whether it corresponds to the expansion of fiscal space remains to be observed and confirmed; one of the incremental details is to "reasonably expand the scope of local government special bonds to be used as capital," which logically can give play to the greater leverage effect of special bonds; and with regard to monetary policy, the meeting pointed out that "the scale of social financing and the amount of money supply should match the expected targets of economic growth and price levels" We understand that the main reason is that prices are still at a low level in the short term, and if they are basically matched with the nominal economic growth rate, the money supply will be significantly lower; and the "economic growth and price level expectations are matched", which means that if the GDP target is 5% and the inflation target is 3%, the money supply growth rate can be around 8%, which is a relatively neutral standard that is in line with the "prudent" characteristics of monetary policy. In addition to fiscal and monetary policies, the meeting also proposed to "incorporate non-economic policies into the assessment of the consistency of macroeconomic policy orientations, strengthen policy coordination, and ensure that efforts are made in the same direction and form a joint force", which further highlights the logic of focusing on economic work.

The proactive fiscal policy should be moderately strengthened to improve quality and efficiency. It is necessary to make good use of the fiscal policy space and improve the efficiency of funds and the effectiveness of policies. Optimize the structure of fiscal expenditures and strengthen the financial guarantee for major national strategic tasks. Reasonably expand the scope of local government special bonds to be used as capital. Implement structural tax and fee reduction policies, and focus on supporting scientific and technological innovation and the development of manufacturing industry. Strict supervision of transfer payment funds, strict financial discipline. Enhance fiscal sustainability and strengthen the bottom line of the "three guarantees" at the grassroots level. Strict control of general expenditures. Party and government organs should Xi living a tight life.

A prudent monetary policy should be flexible, moderate, precise and effective. Liquidity should be kept reasonably abundant, and the scale of social financing and money supply should be commensurate with the expected targets of economic growth and price levels. We should give full play to the dual functions of monetary policy tools, revitalize the stock, improve efficiency, and guide financial institutions to increase support for scientific and technological innovation, green transformation, inclusive small and micro enterprises, and digital economy. Promote the steady and moderate decline of comprehensive social financing costs. Maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

It is necessary to enhance the consistency of macroeconomic policy orientation. Strengthen the coordination and cooperation of fiscal, monetary, employment, industrial, regional, science and technology, environmental protection and other policies, incorporate non-economic policies into the assessment of the consistency of macro policy orientation, strengthen policy coordination, and ensure that the same direction is exerted and a joint force is formed. Strengthen economic propaganda and public opinion guidance, and sing the bright theory of China's economy.

In terms of industrial policy, the meeting emphasized that technology leads the industrial trend, pointing out that it is necessary to "lead the construction of a modern industrial system with scientific and technological innovation." It is necessary to promote industrial innovation through scientific and technological innovation, especially to give birth to new industries, new models and new kinetic energy with disruptive technologies and cutting-edge technologies, and to develop new quality productive forces." Specific areas mentioned include digital economy, artificial intelligence, biomanufacturing, commercial aerospace, low-altitude economy, etc.

Leading the construction of a modern industrial system with scientific and technological innovation. It is necessary to promote industrial innovation with scientific and technological innovation, especially to use disruptive technologies and cutting-edge technologies to give birth to new industries, new models, and new kinetic energy, and develop new quality productive forces. We will improve the new national system, implement high-quality development actions for key industrial chains in the manufacturing industry, strengthen quality support and standard guidance, commercial aerospace, low-altitude economy and other strategic emerging industries, open up new tracks for future industries such as quantum and life sciences, widely apply digital intelligence technology and green technology, and accelerate the transformation and upgrading of traditional industries. Strengthen applied basic research and cutting-edge research, and strengthen the main position of enterprises in scientific and technological innovation. Encourage the development of venture capital and equity investment, and improve the resilience and security of industrial and supply chains. It is necessary to vigorously promote new industrialization, develop the digital economy, and accelerate the development of artificial intelligence. Build biomanufacturing.

With regard to the policy of expanding domestic demand, the meeting emphasized "consumption with potential" and "investment with benefits." In the field of traditional consumption, special mention was made to boost bulk consumption such as new energy vehicles and electronic products, as well as the trade-in of consumer goods. In the field of new consumption, new consumption growth points such as smart home, entertainment and tourism, sports events, and domestic "trendy products" were specifically mentioned. To put it simply, the policy focus is consumer durables + new service consumption. In addition, the "promotion of large-scale equipment renewal" will help the capital expenditure demand, and the follow-up details are worth looking forward to. In the part of people's livelihood, the meeting pointed out that it is necessary to "accelerate the improvement of the birth support policy system and develop the silver economy", and the next stage of population policy may also bring some policy dividends.

Focus on expanding domestic demand. It is necessary to stimulate consumption with potential, expand productive investment, and form a virtuous circle in which consumption and investment promote each other. Promote consumption from post-epidemic recovery to continuous expansion, cultivate and expand new consumption, vigorously develop digital consumption, green consumption, and healthy consumption, and actively cultivate new consumption growth points such as smart homes, cultural and entertainment tourism, sports events, and domestic "trendy products". Stabilize and expand traditional consumption, and boost bulk consumption such as new energy vehicles and electronic products. Increase the income of urban and rural residents, expand the size of middle-income groups, and optimize the consumption environment. It is necessary to improve technology, energy consumption, emissions and other standards as the traction, and promote large-scale equipment renewal and consumer goods trade-in. Give full play to the amplification effect of government investment, focus on supporting key core technology research, new infrastructure, energy conservation, emission reduction and carbon reduction, and cultivate new momentum for development. Improve investment and financing mechanisms, implement new mechanisms for public-private partnerships, and support private participation in the construction of new infrastructure and other fields.

With regard to real estate, in addition to meeting the reasonable financing needs of real estate enterprises under different ownership systems and speeding up the "three major projects", the meeting also pointed out that it is necessary to "improve the relevant basic systems and accelerate the construction of a new real estate development model", and next year may be a key year for the formation of a new real estate development model This means that some provinces may have some short-term constraints on government investment during the debt conversion period.

Continue to effectively prevent and resolve risks in key areas. It is necessary to coordinate and resolve risks such as real estate, local debts, and small and medium-sized financial institutions, severely crack down on illegal financial activities, and resolutely adhere to the bottom line of preventing systemic risks. Actively and prudently resolve real estate risks, meet the reasonable financing needs of real estate enterprises with different ownership systems without discrimination, and promote the steady and healthy development of the real estate market. Accelerate the construction of affordable housing, the construction of public infrastructure for both ordinary and emergency purposes, and the transformation of urban villages. Improve relevant basic systems and accelerate the construction of a new model of real estate development. To coordinate the resolution of local debt risks and stable development, major economic provinces should truly take the lead and make greater contributions to stabilizing the national economy.

Regarding private enterprises, the meeting emphasized that "a number of measures will be implemented in terms of market access, factor access, fair law enforcement, and protection of rights and interests", which means that there will be policy dividends in the follow-up in the relevant fields of private enterprises.

Deepen reforms in key areas. It is necessary to plan major measures to further deepen reform in an all-round way, and continue to inject strong impetus into promoting high-quality development and accelerating Chinese-style modernization. Continuously improve and implement the "two unswerving" system and mechanism, and fully stimulate the endogenous power and innovation vitality of various business entities. We will further implement the deepening and upgrading of the reform of state-owned enterprises, enhance core functions and improve core competitiveness. Promote the development and growth of private enterprises, and implement a number of measures in market access, access to factors, fair law enforcement, and protection of rights and interests. Promote the development of small and medium-sized enterprises. We should speed up the construction of a unified national market and strive to eliminate various forms of local protection and market segmentation. Effectively reduce the logistics cost of the whole society. It is necessary to plan a new round of reform of the fiscal and taxation system and implement the reform of the financial system.

The meeting further emphasized that "seize all favorable opportunities, take advantage of all favorable conditions, and do as soon as you see it, and do more if you can", "pay attention to grasping and handling the relationship between speed and quality, macro data and micro feelings, economic development and improvement of people's livelihood, development and security", "strengthen coordination and linkage in policy implementation, amplify the combination effect, and lay a good amount of advance and redundancy in policy reserves", these expressions can also show the importance of economic work in 2024. In the future, we will pay attention to a series of variables such as the GDP target, the broad fiscal space, the policy framework and implementation rhythm of the three major projects, and the benchmark growth rate of money supply in the first quarter of next year.

The meeting pointed out that it is necessary to profoundly understand the scientific judgment of the party Central Committee on the economic situation, earnestly enhance the sense of responsibility and mission for doing a good job in economic work, seize all favorable opportunities, take advantage of all favorable conditions, get a good grasp of doing things when they see them, do more things if they can, and strive to cope with the uncertainty of changes in the situation with the certainty of their own work. It is necessary to comprehensively implement the overall requirements of next year's economic work, pay attention to grasping and handling well the relationship between speed and quality, macro data and micro feelings, economic development and improvement of people's livelihood, and development and security, and constantly consolidate and enhance the positive trend of economic rebound. It is necessary to accurately grasp the policy orientation of next year's economic work, strengthen coordination and linkage in policy implementation, amplify the combination effect, lay a good amount of advance and leave redundancy in policy reserves, pay attention to effectiveness and enhance the sense of gain in the evaluation of policy effects, and strive to improve the effect of macro policies to support high-quality development. It is necessary to pay attention to the ways and means of advancing the work, grasp the main contradictions, break through the bottlenecks and constraints, pay attention to the forward-looking layout, and ensure the implementation of the key tasks of next year's economic work. It is necessary to always maintain a spirit of hard work, bear in mind the "great man of the country", take the initiative to take action, strengthen coordination and cooperation, actively plan to make good use of the traction and leverage, and solidly promote high-quality development.

Hypothetical risks: changes in the macroeconomic and financial environment exceed expectations, stable growth exceeds expectations, exports improve more than expected, real estate adjustment pressure exceeds expectations, the impact of overseas interest rate hikes exceeds expectations, overseas economies have an unexpected recession, overseas inventory replenishment slope exceeds expectations, and domestic affordable housing construction exceeds expectations.

11. Guosen Securities

Seek progress in stability, promote stability with progress, and first establish and then break

(Wang Kai, Li Chenguang)

Matters

Xinhua News Agency reported that the Central Economic Work Conference was held in Beijing from December 11 to 12. Xi Jinping, General Secretary of the CPC Central Committee, President of the People's Republic of China and Chairman of the Central Military Commission, attended the meeting and delivered an important speech, summarizing the economic work in 2023, analyzing the current economic situation, and deploying the economic work in 2024.

unscramble

According to the press release of the Central Economic Work Conference released by Xinhua News Agency. The meeting stressed that to further promote the economic rebound, it is necessary to overcome some difficulties and challenges, mainly due to the lack of effective demand, overcapacity in some industries, weak social expectations, there are still many hidden risks, there are blockages in the domestic cycle, and the complexity and severity of the external environment are rising. On the whole, the favorable conditions facing the mainland's development are stronger than the unfavorable factors, and the basic trend of economic recovery and long-term improvement has not changed. The meeting pointed out that next year, it is necessary to adhere to the principle of seeking progress while maintaining stability, promote stability with progress, establish first and then break down, strengthen the counter-cyclical and cross-cyclical adjustment of macroeconomic policies, strengthen the innovation and coordination of policy tools, and moderately strengthen the positive fiscal policy to improve quality and efficiency. It is necessary to optimize the structure of fiscal expenditure, strengthen the financial guarantee of major national strategic tasks, implement the structural tax and fee reduction policies, enhance fiscal sustainability, and strengthen the bottom line of the three guarantees at the grassroots level.

At the same time, the meeting deployed nine key tasks for next year: First, lead the construction of a modern industrial system with scientific and technological innovation. Second, efforts should be made to expand domestic demand. The third is to deepen reforms in key areas. Fourth, we will expand high-level opening up. Fifth, we will continue to effectively prevent and resolve risks in key areas. Sixth, make unremitting efforts to do a good job in the "three rural" work. Seventh, promote the coordinated development of urban-rural integration regions. Eighth, we will further promote the construction of ecological civilization and green and low-carbon development. Ninth, we should earnestly protect and improve people's livelihood.

The Central Economic Work Conference has pointed out the direction for the general trend and structure of the economy next year. The fiscal policy, monetary policy and nine key tasks involved in the meeting are full of positive signals to boost market confidence, which undoubtedly lays a solid foundation for the stable recovery and high-quality development of the economy next year, so we are optimistic about the A-share market next year. In terms of industry development trends, according to the observation of the Central Economic Work Conference in the past few years, the industries that the conference emphasizes and supports the development of are often the industries that are subject to policy focus, and usually have excellent market performance in the following year, which is expected to surpass the market and achieve excess returns. Based on this year's Central Economic Work Conference, which proposed to accelerate the development of artificial intelligence, digital economy, and strategic emerging industries, we expect that under the theme of transformation and development next year, the high-tech industry is expected to usher in major development opportunities.

Table: Review of market performance after the Central Economic Work Conference over the years

First of all, as far as the overall market trend is concerned, according to the average situation in the past ten years, the A-share market tends to experience volatility and strength after the Central Economic Work Conference, even if it occasionally experiences a period of volatility in the first five trading days under a specific scenario, it will still usher in a wave of upward movement within 10 to 20 trading days. The Shanghai Composite Index on the first trading day, 5 trading days, 10 trading days, and 20 trading days after the Central Economic Work Conference is the statistical standard, and it can be found that there are many scenarios where the first trading day after the meeting rises slightly, and in the 20 trading days after the meeting, there will be a significant increase in most years, with an average increase of 0.28%.

Secondly, in terms of market style, the Central Economic Work Conference has limited impact on market style in the short term, and is more of a clarity on the main line of investment in the following year. Changes in market style are often influenced by a variety of factors, including the macroeconomic environment, policy changes, and more. The Central Economic Work Conference pointed out the direction of economic focus in the coming year, but it did not directly promote the change of market style in the short term. Considering that it usually takes a certain amount of time for the introduction of supporting policies to be implemented, it is difficult to control the spillover effect of reversing the market style in the short term. In order to further explore the impact of the Central Economic Work Conference on market style, we backtested the relative trend of each style index and Wind All A before and after the Central Economic Work Conference in the past five years. The specific results are shown in Figure 3 to Figure 8, and it can be found through the backtest results that after the Central Economic Work Conference, the trend of the five types of styles in the short term either maintains the original trend or has a new switch, but the regularity of style rotation is not prominent.

Finally, as far as the main line of the industry is concerned, the industries that emphasized support for development in the Central Economic Work Conference are mostly industries that are protected by industrial policies, which usually perform well in the following year and are expected to outperform the market and obtain excess returns. We have sorted out the industries mentioned in the Central Economic Work Conference in the past five years, as well as the performance of these industries in the following year, and the specific results are shown in Figures 9 to 14. From the trend point of view, the industries mentioned in the Central Economic Work Conference converged with the market in the first half of the following year, accompanied by the introduction and implementation of a series of supporting policies. These industries began to gradually outperform the market in the second half of the following year, and generally achieved excess returns at the end of the year, with the average annual excess return of the industry being 4%, and the proportion of outperforming time was 57% based on the trading day.

It is worth noting that as far as the real estate industry is concerned, housing is not speculation is the main line of policy in recent years. In the past few years, the policy statement has focused on "promoting the steady and healthy development of the real estate market", "ensuring the delivery of buildings" and "promoting the smooth transition of the real estate industry to a new development model". If the real estate industry is not considered, the average annual excess return of the industry highlighted by the Central Economic Work Conference is 10%, and the proportion of outperforming the market reaches 69%.

Risk warning: the impact of overseas geopolitical conflicts, U.S. inflation and monetary policy, etc.

12. Ping An Securities

Understand the six major proposals of the Central Economic Work Conference

(Zhong Zhengsheng, Chang Yixin, Fan Chengkai)

Key takeaways

Matters: On December 11-12, 2023, the Central Economic Work Conference was held. Focus on the six major formulations.

1. "Consolidate and enhance the positive momentum of economic recovery". The full text mentions "development" 50 times, indicating that "we should persist in seeking progress while maintaining stability, promote stability through progress, and establish first and then break down", which shows that the priority of "stable growth" in 2024 is still high. We suggest that China's economic growth target for 2024 continue to be set at around 5%. The meeting mentioned that "more policies are conducive to stabilizing expectations, stabilizing growth and stabilizing employment", and macroeconomic policies will escort the realization of economic goals, and more attention will be paid to the "efficiency" of the policy itself and the "coordination" between policies.

2. "Form a virtuous circle in which consumption and investment promote each other", and the best combination point may be in the service sector. As the "fourth pole" of fixed asset investment, the investment in the emerging service sector has grown rapidly, and the continuous improvement of service facilities will help drive the growth of consumer demand through supply-side reform. Looking ahead to 2024, service consumption and investment in emerging service sectors are expected to form a virtuous circle and become an important driving force for China's economic growth.

3. "Moderate strengthening, improving quality and efficiency", and the tone of fiscal policy in 2024 is still relatively positive. We believe that in 2024, the fiscal deficit ratio in the narrow sense may increase or decrease by 0.2 percentage points at 3.8%, and the scale of special bond issuance may be 3.8-4 trillion yuan. Specifically: 1) "Improving quality and efficiency" is intended to reform the expenditure structure. In 2024, fiscal spending will be more focused on people's livelihood, reducing general expenditures and eliminating inefficient and ineffective expenditures. 2) Strict fiscal discipline, strengthen supervision and control of transfer funds, and increase fiscal sustainability by increasing revenue and reducing expenditure. 3) Special bonds may be more invested in urban villages, affordable housing and other fields.

4. "Flexible, moderate, precise and effective. maintain reasonable and abundant liquidity", and the tone of monetary policy in 2024 is still relatively loose. 1) The conduction of "valence" is more important than "effectiveness". In 2024, the necessity of monetary policy "cost reduction" will not be reduced, and the path to achieve this will depend more on the reduction of policy interest rates, and it is necessary for deposit rates to continue to fall sharply. 2) The placement of "volume" pays attention to the "expected target of price". If it is matched with the expected price target of about 2%, rather than the actual operation, the consensual center of social finance and M2 growth in 2024 can be raised by 1 percentage point compared with before, and the demand for a RRR cut of more than 0.5 percentage points for the whole year will be strengthened. 3) The coordination between monetary policy and fiscal policy will be further strengthened. At key points, fiscal afterburners and monetary RRR and interest rate cuts may occur at the same time, and fiscal interest discounts and monetary relending in key areas may go hand in hand.

5. "Continue to effectively prevent and resolve risks in key areas", which will help to open up the domestic internal circulation blockages. 1) Turning debt into debt does not change the "progress" of government investment. While the "debt package" plan is being promoted, the supervision of debt borrowing in 12 key provinces has been tightened. The meeting proposed to "coordinate the resolution of local debt risks and stable development", emphasizing that the major economic provinces should make greater contributions, which will help dispel the concerns about the "debt" restricting government investment. 2) The "three major projects" will help the "stability" of the real estate industry. The meeting proposed to "actively and prudently resolve real estate risks", and the attitude was more pragmatic. Looking forward to 2024, the internal vitality of the development of the real estate industry is still insufficient, there is still downward pressure on sales, the pull of the completion of the "guaranteed delivery of buildings" has come to an end, the financial problems of private real estate enterprises need to be solved, the digestion cycle of commercial housing inventory is long, and the "three major projects" need to play a greater role.

6. "Consolidate the basic market of foreign trade and foreign investment". The meeting deepened and refined the strategy of opening up to the outside world, and intended to combine foreign trade with key areas and emerging formats of domestic priority development to help the development of domestic advantageous industries.

On December 11-12, 2023, the Central Economic Work Conference was held in Beijing. In the deployment of the Central Economic Work Conference for 2024, it emphasizes "consolidating and enhancing the positive trend of economic recovery", "actively making progress in changing the mode, adjusting the structure, improving the quality and increasing the efficiency", and the importance of "quantity" and "quality" of high-quality development has been increased, and the path to achieve this goal lies in expanding consumption and investment demand. Looking at the press release of the meeting, 50 times "development", 21 times "quality", 12 times "consumption", and 6 times "investment" were mentioned, all of which were increased compared with last year. In our view, the six formulations in this meeting deserve attention.

1. "Consolidate and enhance the positive trend of economic recovery"

The meeting affirmed the achievements of economic work in 2023 and faced the difficulties and challenges. When reviewing the economic work in 2023, the meeting pointed out that "the mainland's economy has rebounded and high-quality development has been steadily promoted". Since 2023, China's economic recovery and development has withstood the downward pressure of external demand and overcome the internal difficulties of continuous adjustment of the real estate market. China's economy got off to a good start in the first quarter and was weaker than market expectations in the second quarter, but the Politburo meeting in July made arrangements and actively responded with counter-cyclical and cross-cyclical policies, which brought the economy back to the recovery channel in the third quarter, recording a real GDP growth rate of 5.2% in the first three quarters. We expect the annual GDP growth rate in 2023 to be around 5.3%, and the annual growth target of about 5% is well assured.

The meeting also pointed out that some difficulties and challenges need to be overcome to further promote the economic rebound, including "insufficient effective demand, overcapacity in some industries, weak social expectations, still many risks and hidden dangers, there are blockages in the domestic cycle, and the complexity, severity and uncertainty of the external environment are rising". At present, the blockage of the domestic cycle is concentrated in the real estate sector, and its lack of demand has exacerbated the overcapacity pressure of the raw material industry, affecting the confidence and expectations of residents' consumption, and pushing up potential economic and financial risks. The external risks are mainly reflected in the downside risks of the overseas economy, the instability of the global supply chain, the strengthening of fluctuations and spillover effects in the international financial market, and the switching of overseas political cycles and the highly complex geopolitical situation.

For the economic work in 2024, the meeting first reiterated the proposal of the Politburo meeting in December 2023, "adhere to the principle of seeking progress while maintaining stability, promoting stability with progress, and establishing first and then breaking down". Here, we try to take industrial demand as the starting point to explain the "establishment" and "breaking" in the adjustment of economic structure. Based on the input-output table and the data of the National Bureau of Statistics, the direct and indirect pull of the real estate sector (real estate services and residential construction, decoration, furniture and household appliances consumption and other related industries) to the total industrial demand in 2020 was about 24%, and it has fallen by 7 percentage points to 17% in the first 10 months of 2023; The total driving effect of the electrical machinery (with new energy as the main body) manufacturing industry on the overall industry increased by 1.8 percentage points to 14.6%. It can be seen that in the current transformation of China's economic structure, the drive of "Li" is not enough to fully hedge the drag of "breaking", which is also the reason why China's real GDP growth in the past two years is lower than the potential level. Only on the basis of the "establishment" and "advancement" of new kinetic energy, and the "stability without stalling" of traditional kinetic energy, can we speak of "backward breaking". In particular, the meeting pointed out that "consolidating and enhancing the positive momentum of economic recovery" and "effectively enhancing economic vitality", and the full text mentioned "development" a total of 50 times, which shows that the priority of stable growth in 2024 is still high. We recommend that the growth target of China's economy in 2024 continue to be set at around 5%.

For macro policies in 2024, the meeting proposed to "strengthen counter-cyclical and cross-cyclical adjustment of macro policies" and "more policies conducive to stabilizing expectations, growth and employment", which will escort the realization of economic goals. At the same time, more attention is paid to the "efficiency" of the policy itself and the "coordination" between policies. The Central Economic Work Conference in December 2022 mentioned that "it is necessary to better coordinate economic policies and other policies, enhance the overall view, and strengthen the consistency assessment with the macro policy orientation", and this meeting is more detailed in this deployment, mentioning that "fiscal, monetary, employment, industry, regional, science and technology, environmental protection and other policies are coordinated and cooperated, and non-economic policies are included in the macro policy orientation consistency assessment", hoping to achieve the best effect of "strengthening policy coordination, ensuring that the same direction is forced, and a joint force is formed".

2. "Forming a virtuous circle in which consumption and investment promote each other"

The conference put "focusing on expanding domestic demand" at the top of the priority work, followed by "stimulating potential consumption, expanding profitable investment, and forming a virtuous circle in which consumption and investment promote each other".

The best combination of a "virtuous circle" of consumption and investment may be in the service sector. We believe that service consumption has full potential and is expected to form a virtuous circle with investment in emerging service sectors, which will become an important driver of China's economic growth in 2024.

After the optimization of epidemic prevention and control in 2023, China's residents' service consumption ushered in a recovery growth. Considering that the recovery of overseas service consumption after the epidemic can reach more than 8 quarters, the proportion of China's service consumption in household consumption has increased year by year from 2014 to 2019, and the proportion of service consumption in the middle-income stage of overseas economies (per capita GDP exceeding 10,000 US dollars) tends to accelerate from the perspective of transformation, and there is a foundation for further recovery of China's household service consumption in 2024 (see China Economic Outlook 2024: East Wind and Rain).

At the same time, investment in the emerging services sector has grown rapidly in recent years. We estimate that in the first 10 months of 2023, investment in emerging services accounted for 18% of fixed asset investment, making it the "fourth pole" of fixed asset investment in addition to the three major sectors of manufacturing, infrastructure and real estate. From 2018 to 2022, the compound growth rate of fixed asset investment in high-tech services, education, health and social work, culture, sports and entertainment was 11.7%, 10.8%, 16.9% and 8.0%, respectively.

The continuous improvement of service industry facilities will help drive the growth of consumer demand through supply-side reform. The high-tech service industry is represented by information transmission, software and information technology services, and related investments will help improve digital infrastructure, strengthen the integration of service consumption and digital economy, and then meet the diversified, diversified and multi-level needs of consumers. In the fields of education, health and social work, culture, sports, and entertainment, the government is leading the way, and the expansion of investment will also help improve the current situation of tight public resources such as quality education and medical care, and alleviate residents' worries about consumption.

3. Fiscal policy "moderately strengthened, improved quality and efficiency"

From the perspective of controlling the overall situation, this meeting set the tone for the active fiscal policy in 2024 to "moderately strengthen, improve quality and efficiency", focusing on "making good use of fiscal policy space", "optimizing the structure of fiscal expenditure", "reasonably expanding the scope of special government bonds as capital", "enhancing fiscal sustainability" and other content.

First, the fiscal tone for 2024 is still relatively positive, and the deficit ratio target is expected to be between 3.6% and 4%. The tone of the fiscal policy in 2024 at this meeting is to "moderately strengthen and improve quality and efficiency".

• Looking back at the deployment of the Central Economic Work Conference since 2015, the tone of the fiscal deficit ratio reduction years tends to focus on "quality and efficiency" and avoid talking about "strength". For example, "improving quality and efficiency" (the 2020 meeting deployed the work in 2021, and the deficit rate was lowered by 0.4 percentage points in the following year), "improving efficiency" (the 2021 meeting deployed the work in 2022, and the deficit rate was lowered by 0.4 percentage points in the next year), "the orientation remains unchanged" (the 2017 meeting deployed the work in 2018, and the deficit rate was lowered by 0.4 percentage points in the next year), and "more active and effective" (the 2016 meeting deployed the work in 2017, and the deficit rate was flat in the following year). In contrast, the term "afterburner" is more positive, corresponding to the year when the fiscal deficit rate increased, but the qualifier "moderate" slightly weakens its positivity.
• Considering that the central government needs to play a greater role in making up for the gap between revenue and expenditure, preventing debt and financial risks, and stabilizing economic growth, we believe that the fiscal deficit will remain at a relatively high level in 2024, corresponding to a narrow deficit ratio of 3.8% or 0.2 percentage points, and the scale of special bond issuance may be 3.8-4 trillion yuan.

Second, "improving quality and efficiency" is aimed at reforming the structure of fiscal expenditure. In October 2023, the National People's Congress approved the issuance of an additional 1 trillion yuan of national bonds, broadening the imagination space for the mainland to implement a proactive fiscal policy. However, under the drag of the real estate industry, the contradiction between the mainland's fiscal revenue and expenditure is still relatively severe, and only by optimizing the expenditure structure and improving the efficiency of funds and policy effects can we "make good use" of the fiscal space. In 2022, the total proportion of mainland public finance expenditure in education, social security and employment, and health care will reach 44.6%, which is still lower than that of the United States, Britain, Germany, France, Japan, Australia and other countries in terms of spending more than 60% in related fields, and related areas have a significant "crowding effect" on household consumption. We believe that there is room for further optimization and improvement in the direction of fiscal expenditure in 2024, and will be more inclined to focus on people's livelihood areas such as education, medical and health services, and social security levels, reduce "general expenditures", and cancel "inefficient and ineffective expenditures".

Third, we should strictly enforce fiscal discipline and enhance fiscal sustainability. At present, the contradiction between fiscal revenue and expenditure in various localities is relatively prominent, and the risk of local debt has risen sharply. In 2023, according to the budget, the central government will arrange transfer payments of 10.06 trillion yuan to local governments, of which 2.3 trillion yuan will be allocated to balanced transfers, an increase of 10.3 percent, and 410.7 billion yuan will be awarded and subsidized by the basic financial guarantee mechanism at the county level, an increase of 8.7 percent. Looking ahead, on the one hand, it is necessary to strengthen the supervision of transfer payment funds, and on the other hand, it is necessary to make good use of the mechanism of direct access to financial funds, ensure that financial funds reach the grassroots level, and promote better financial resources. To enhance fiscal sustainability, it is necessary to open up sources and reduce expenditures, and party and government organs should take the lead in living a tight life, reduce the proportion of general expenditures in total fiscal expenditures, strictly enforce fiscal discipline, strengthen the accountability mechanism of officials, and strengthen the appraisal of fiscal performance.

Fourth, it is proposed to reasonably expand the scope of special government bonds used as capital. Expanding the scope of special bonds as capital can better align with the tilt of fiscal funds towards areas such as affordable projects and infrastructure. It is expected that in 2024, more special bond funds may be invested in people's livelihood areas such as urban village renovation and affordable housing, which will not only improve the flexibility of the use of local fiscal funds, but also help better play the role of special bonds in stimulating investment. Ideally, if the financial funds are fully supported, the investment related to the transformation of urban villages may reach about 800 billion yuan in 2024, and the pull of real estate investment can reach 6 percentage points.

4. Monetary policy is "flexible, moderate, precise and effective"

The tone of monetary policy at this meeting is still relatively loose. The meeting pointed out that "a prudent monetary policy should be flexible, moderate, precise and effective." Maintain reasonable and abundant liquidity". Looking back at the statement of monetary policy at the Central Economic Work Conference in recent years, "maintaining reasonable and abundant liquidity" corresponds historically to 2016, 2019, 2020, 2022 and 2023, all of which were relatively loose years of monetary policy.

In terms of the transmission of "price", monetary policy pays more attention to "effectiveness". From the second half of 2019 to 2022, the dividends of LPR reform have been continuously released, and the annual decline in general lending rates has been higher than that of MLF and LPR. However, since 2023, there has been a "discount" in the transmission of policy interest rates to lending rates, with policy interest rates falling sharply by 25bp in the first three quarters, and the weighted average interest rate on general loans falling only slightly by 6bp. We believe that from the perspectives of cooperating with the government, stimulating the financing demand of the private sector, and maintaining a reasonable and moderate real interest rate, combined with the expression that "the comprehensive financing cost of the society is stable and decreasing", the necessity of "cost reduction" of monetary policy in 2024 will not be reduced. The realization of "cost reduction" depends more on the reduction of policy interest rates, and it is necessary for deposit rates to continue to fall sharply to enhance the "effectiveness" of monetary policy interest rate cuts.

In terms of "volume", monetary policy pays more attention to the "expected target of price".

• The meeting proposed that the scale of social financing and money supply need to "match the expected targets of economic growth and price levels", and most of the time between 2018 and 2023 was expressed as "matching the growth rate of nominal GDP".
• In the first three quarters of 2023, China's GDP deflator was -0.78%, far below the historical pivotal level of around 2%. In 2024, we expect the CPI growth center to rise to around 0.5%, and the PPI growth center to around 0.2%, and the corresponding GDP deflator may hover around 0.5%. If it is matched with the expected price target (around 2%), rather than the actual price operation, the consensual center of social finance and M2 growth in 2024 can be raised by more than 1 percentage point compared with 2023, which means that the demand for a RRR cut of more than 0.5 percentage points for the whole year will be strengthened.

In order to "form a synergy" and "amplify the combination effect", the synergy between monetary policy and fiscal policy will be further strengthened in 2024. In addition to ironing out the impact of daily fiscal revenue and expenditure and supporting the centralized issuance of government bonds, it may also be reflected in three levels: First, at the critical point when the necessity of policy force increases, fiscal afterburner and monetary RRR and interest rate cuts may occur at the same time; second, to promote the coordination of economic restructuring and optimization, "fiscal first, monetary complement". It is expected that in 2024, the structural monetary policy tools will strengthen support for private enterprises and the "three major projects" of real estate, and fiscal interest discounts and monetary relending in key areas may go hand in hand. The third is to coordinate the prevention and resolution of local debt risks. The central bank will "coordinate and coordinate financial support for debt risk resolution of local financing platforms", and the relevant liquidity support tools (SPVs) may be put into use in 2024.

5. "Continue to effectively prevent and resolve risks in key areas"

In this meeting, the fifth key work is to "continue to effectively prevent and resolve risks in key areas", and "there are still many risks and hidden dangers" is one of the blocking points of the domestic circulation. Preventing and resolving risks, realizing the "progress" of government investment, and the "stability" of the real estate industry are also important supports for "consolidating the momentum of economic improvement".

Resolve the hidden debt risk and do not change the "progress" of government investment. Since 2020, local governments have increased their responsibilities to "increase expenditure and reduce revenue", hidden debts have expanded again, land revenues have tended to decline, and interest payments on broad debts have further eroded their financial resources. Since the meeting of the Political Bureau of the CPC Central Committee in July 2023, the "package of bonds" plan has been promoted, which has helped the credit spreads of urban investment bonds to decline rapidly, but it has been accompanied by stricter supervision of debt borrowing in 12 key provinces. To this end, this meeting proposed to "coordinate the resolution of local debt risks and stable development", emphasizing that major economic provinces should make greater contributions, which will help dispel the market's unnecessary worries about "turning debts" from restricting government investment and "expanding domestic demand". In terms of the direction of government investment, the meeting mentioned that it will focus on supporting "key core technology research, new infrastructure, energy conservation, emission reduction and carbon reduction", which are all "effective" investment areas.

The "three major projects" have been implemented to help the "stability" of the real estate industry. In the past two years, the sales of commercial housing and real estate investment have continued to adjust significantly, which has had an impact on the demand for post-cycle consumer goods such as upstream raw materials and downstream furniture and household appliances, and has also pushed up potential financial risks through channels such as the land market and the credit of real estate enterprises. The meeting proposed to "actively and prudently resolve real estate risks", with a more pragmatic attitude, and reiterated the proposals of "meeting the reasonable financing needs of real estate enterprises with different ownership systems without discrimination", "three major projects", and "accelerating the construction of a new model of real estate development".

Looking forward to 2024, the internal vitality of the development of the real estate industry is still weak. First of all, based on the trend of the potential center of real estate sales area, the further reduction of potential home buyers in the future, and the trend of second-hand housing transactions squeezing new houses, it is expected that the growth rate of new housing sales area may drop by another 10% to about 950 million square meters in 2024. Secondly, based on the estimated progress and construction period of the implementation plan, it is expected that the pull of "guaranteed delivery of buildings" on the completion of real estate will come to an end in the first half of 2024, and the support for construction will no longer be supported. Finally, the financial problems of private real estate enterprises need to be solved, and the digestion cycle of commercial housing inventory is long, which will inhibit the recovery of new construction flexibility. In this context, the "stability" of the real estate industry depends on the implementation of the "three major projects" and the support of state-owned capital.

6. "Consolidate the basic market of foreign trade and foreign investment"

In terms of high-level opening up, this meeting emphasizes the development of new foreign trade momentum compared with 2022. For example, intermediate goods trade, service trade, digital trade and cross-border e-commerce exports. At the same time, the meeting attached importance to relaxing market access in the field of telecommunications, medical and other service industries, benchmarking international high-standard economic and trade rules, and striving to solve issues such as cross-border data flow and equal participation in government procurement. This reflects the deepening and refinement of China's opening-up strategy, and its intention to combine foreign trade with key areas and emerging business formats that are priority for domestic development, so as to help the development of domestic advantageous industries.

This meeting newly proposed "consolidating the basic plate of foreign trade and foreign investment". Since 2023, central banks in advanced economies have generally raised interest rates to around 5% to curb inflation, the highest interest rate level since the 2008 international financial crisis. The spillover impact of the high overseas interest rate environment on emerging market countries, including China, is mainly reflected in the pressure of capital outflows and the risk of currency depreciation. According to the Institute of International Finance (IIF), emerging markets experienced net outflows (non-resident sector portfolios) for three consecutive months from August to October 2023. Under the SAFE, China's net outflow of direct investment (on the liabilities) in the balance of payments in the third quarter of 2023 was US$11.8 billion, the first time since quarterly data began in 1998.

However, at present, most overseas central banks have entered the end of interest rate hikes, and it is expected to start a cycle of interest rate cuts in 2024, and the pressure on emerging market capital outflows is expected to ease. From January to October 2023, the average monthly net inflow of funds into emerging markets was US$13 billion, which is significantly higher than the 2022 average of US$8.1 billion, and is expected to move towards the 2021 average of US$23.1 billion. The recent upward pressure on the US dollar is easing, and the CFETS RMB exchange rate index has remained relatively stable since 2023. From this perspective, the focus on "foreign investment" at this meeting is relatively limited (only one mention of "foreign investment" in the full text, compared to five in 2022), and there does not seem to be excessive concern about the pressure of foreign capital outflow.

Risk warning: the effect of the steady growth policy is less than expected, the degree of overseas economic recession exceeds expectations, and the credit risk of real estate enterprises spreads.

13. Everbright Securities

Chinese-style modernization is the biggest political Xi of the Central Economic Work Conference

(Gao Ruidong, Zhao Gege, Liu Xingchen, Gu Haoyang, Zha Huili, Zhou Xinping)

Key takeaways

From December 11 to 12, 2023, the Central Economic Work Conference was held in Beijing to comprehensively summarize the economic work in 2023, deeply analyze the current economic situation, and systematically deploy the economic work in 2024.

The meeting proposed that "we must take the promotion of Chinese-style modernization as the biggest politics, unite the broadest masses of the people under the unified leadership of the party, focus on the central task of economic construction and the primary task of high-quality development, and turn the grand blueprint of Chinese-style modernization into a beautiful reality step by step." In October 2022, the report of the 20th National Congress of the Communist Party of China (CPC) elaborated on the Chinese characteristics and essential requirements of Chinese-style modernization, pointing out that high-quality development is the primary task of Chinese-style modernization, and development is the first priority of the Party in governing and rejuvenating the country. Only by achieving a solid material and technological foundation, "making the cake bigger" through high-quality development, and continuously optimizing the distribution mechanism to benefit all the people can we take the path of peaceful development and modernization with Chinese characteristics, and skip the problem of polarization between the rich and the poor caused by the traditional capital-centered modernization model in Western society (for details, please refer to our report "High-quality Development is the Primary Task of Chinese Modernization" issued on October 16, 2022<二十大报告>). Xi of Spirituality, Part II).

Under the great changes unseen in a century, promoting high-quality development is inseparable from a sustainable and stable security environment. The meeting proposed that "we must adhere to the benign interaction between high-quality development and high-level security, promote high-level security with high-quality development, ensure high-quality development with high-level security, and develop and security should be dynamically balanced and complement each other". In the Central Economic Work Conference, "high-level security" and "security" appeared 4 and 14 times respectively, and the importance of scientifically coordinating the dynamic balance between development and security has increased significantly.

Next, in the form of a series of reports, we will study and interpret in detail the overall tone of the Central Economic Work Conference on next year's economic work in Xi. As the first in a series of interpretations, this report will focus on the "progress" of "promoting stability through progress" - we understand that the "progress" of "scientific and technological innovation, expansion of domestic demand, and major reforms" will be mainly used to achieve "stability" of the economy.

Risk warning: the domestic economy is not recovering as expected, geopolitical risks are rising, and US inflation has lasted longer than expected.

First, scientific and technological innovation should be "advanced" to promote the construction of a modern industrial system

The Central Economic Work Conference regards scientific and technological innovation and the construction of a modern industrial system as the top priority of economic work in 2024, and its importance has been enhanced compared with the Politburo meeting in July 2023 and the Central Economic Work Conference in 2022. On the one hand, the supply side should accelerate scientific and technological innovation, strengthen source innovation and disruptive innovation, and on the other hand, increase support from the policy side, including monetary policy and fiscal policy.

The supply side accelerates scientific and technological innovation. From the perspective of specific policy guidance, this meeting clearly mentioned important tasks such as "developing new quality productivity" and "promoting new industrialization", and the core idea is still to take source innovation and disruptive innovation as the underlying support, improve the security level of the industrial chain and supply chain, strengthen the digital and intelligent transformation of the industry, and then promote the construction of a modern industrial system.

From the perspective of key areas, this meeting proposed to "accelerate the development of artificial intelligence", which is more positive than the statement of "promoting the safe development of artificial intelligence" at the Politburo meeting in July, and relevant policy support is expected to be further increased. In addition, the conference also mentioned that strategic emerging industries such as biomanufacturing, commercial aerospace, and low-altitude economy, as well as new tracks of future industries such as quantum and life sciences, may become key support areas that contribute to economic growth in the future.

The policy side is making precise efforts, focusing on fiscal tax cuts and fee reductions, and structural monetary policy tools are expected to be expanded.

In terms of monetary policy, the meeting proposed to "revitalize the stock, improve efficiency, and guide financial institutions to increase support for scientific and technological innovation, green transformation, inclusive small and micro enterprises, and digital economy". The Central Financial Work Conference at the end of October 2023 pointed out that more financial resources should be used to promote scientific and technological innovation, advanced manufacturing, green development and micro, small and medium-sized enterprises. Under the guidance of vigorously supporting the modern industrial system, it is expected that the follow-up structural monetary policy tools to support "scientific and technological innovation" will be increased, and the introduction of new tools is also expected to be accelerated.

In terms of fiscal policy, the meeting proposed to "optimize the structure of fiscal expenditure and strengthen the financial guarantee of major national strategic tasks... Implement the structural tax and fee reduction policies, and focus on supporting scientific and technological innovation and the development of the manufacturing industry". Next year, fiscal resources will be tilted towards new drivers such as scientific and technological innovation, new infrastructure, and green development, and the vitality of micro entities will continue to be stimulated through tax cuts and fee reductions.

Second, the expansion of domestic demand "advances" to form a virtuous circle of consumption and investment

The meeting proposed that "it is necessary to stimulate potential consumption, expand profitable investment, and form a virtuous circle in which consumption and investment promote each other." Constrained by factors such as the expected decline in household consumption, the uneven recovery of income, and the insufficient consumption scenarios, the overall recovery of household consumption after the epidemic is weak, and some midstream equipment manufacturing industries have overcapacity due to the continuous expansion in the early stage. Since the beginning of this year, the phenomenon of reducing the price of durable consumer goods such as household appliances, automobiles, and electronic products has continued to occur, and the continuous decline in product prices has led to the loss of corporate profits, which will not only reduce the willingness of enterprises to produce and invest, but also affect the growth of residents' income, thereby weakening residents' consumption capacity, further suppressing the vitality of enterprises, and making it difficult for consumption and investment to form a virtuous circle, which hinders the smooth flow of domestic circulation to a certain extent (for details, please refer to the domestic chapter of our annual strategy report issued on November 7, 2023). Domestic Economic Outlook 2024).

Therefore, the meeting proposed to "form a virtuous circle of mutual promotion of consumption and investment", which means that consumption and investment will achieve closer cooperation in the future and break the blockage of the domestic cycle. On the one hand, it is necessary to strengthen supply-side structural reform with "profitable investment" and to meet the expanding consumption demand of residents and stimulate "potential consumption" by improving the quality of supply; on the other hand, in the process of expanding investment, it will also be transmitted through the chain of purchase of goods or services, so as to effectively drive the increase of residents' income. In addition, by optimizing the income distribution structure and expanding the size of the middle-income group, it will also help to enhance the overall consumption willingness of the society and promote the increase of investment.

Specifically, the expansion of domestic demand next year will focus on the following points:

The first is to promote large-scale equipment renewal and consumer goods trade-in, so as to achieve a benign interaction between consumption and investment. The meeting proposed that "to improve technology, energy consumption, emissions and other standards as the traction, to promote large-scale equipment renewal and consumer goods trade-in", is expected to be through special re-lending, financial discounts, tax exemptions and other ways, to encourage enterprises around technological renewal and green transformation of equipment updates, at the same time, on the consumer side, it is also expected to introduce replacement subsidies, preferential loans and other policies to stimulate residents' willingness to trade in the old for the new.

Second, in terms of consumption, we will boost bulk consumption such as new energy vehicles and electronic products, and vigorously develop new consumer demand such as digital, green and health. Since the beginning of this year, residents' consumer confidence has been relatively weak, and automobiles, electronic products, etc. have generally reduced prices and gone to the warehouse, which has restricted the transformation, upgrading and development expectations of the manufacturing industry. It is expected that bulk consumption will continue to be stimulated next year through purchase subsidies, trade-ins, and active second-hand cars. In addition, the meeting proposed to "vigorously develop digital consumption, green consumption, and healthy consumption, and actively cultivate new consumption growth points such as smart homes, cultural and entertainment tourism, sports events, and domestic 'trendy products'", that is, through innovative consumption supply, conform to the trend of consumption upgrading, and stimulate new consumer demand of residents.

Third, in terms of investment, we will strengthen investment in new drivers such as science and technology, new infrastructure, and green development. The meeting proposed to "give full play to the driving and amplifying role of government investment, focus on supporting key core technology research, new infrastructure, energy conservation, emission reduction and carbon reduction, and cultivate new momentum for development". In terms of implementation, government investment is expected to play a key guiding role. The meeting proposed to "reasonably expand the scope of local government special bonds used as capital...... We will improve investment and financing mechanisms, implement new mechanisms for public-private partnerships, and support the participation of private capital in the construction of new infrastructure and other fields." It is expected that by increasing the scale of special bonds as capital, more social capital will be introduced, and the role of special bonds in leveraging investment will be better played.

Fourth, it is necessary to increase residents' incomes and expand the size of middle-income groups. From the perspective of the structure of residents' income, since the beginning of this year, the recovery of wage income and net operating income has accelerated, but the net income from transfer and net property income have been significantly dragged down, due to the increase in local fiscal pressure and the decline in asset prices. In the first three quarters of this year, net property income increased by 3.7%, down from 4.9% in 2022, and net transfer income increased by 5.8%, compared to 5.5% in 2022, well below the average growth rate of 8.6% in 2019-2021. It is expected that next year, policy arrangements will be strengthened in terms of adjusting the income distribution structure and stabilizing the employment situation, so as to increase residents' spending power.

Third, major reforms should be "advanced", and major measures to comprehensively deepen reform should be planned

In terms of reform in key areas, the meeting proposed to "plan major measures to further deepen reform in an all-round way". During his recent inspection tour in Shanghai, General Secretary Xi Jinping stressed that "we must comprehensively deepen reform and opening up from a higher starting point and enhance development momentum and competitiveness." It is necessary to vigorously promote pioneering reform and leading opening up in an all-round way", releasing a clear signal. As the reform and opening up has entered the "deep water area", in order to solve the difficulties and constraints that the economy is currently facing in terms of "insufficient effective demand, overcapacity in some industries, weak social expectations, and still many risks and hidden dangers", it is necessary to further release the dividends of growth through reform. According to the deployment of the meeting, a new round of comprehensively deepening reform and opening up is worth looking forward to, and it is expected to further break down the obstruction points that restrict development and solve the structural problems encountered by the economy.

In terms of specific reform directions, the meeting focused on three aspects:

First, adhere to the two unswerving, and promote the high-quality and efficient development of all kinds of business entities. The meeting put forward three aspects, to "deeply implement the reform of state-owned enterprises to deepen and upgrade the action", "promote the development and growth of private enterprises", and "promote the development of small and medium-sized enterprises". Compared with the "effectively optimizing the development environment for private enterprises" at the Politburo meeting in July, the meeting once again reaffirmed the goal of "developing and growing" private enterprises, and specifically proposed to implement a number of measures in "market access, factor acquisition, fair law enforcement, rights and interests protection, etc.", further releasing the attitude of support for private enterprises to stabilize the investment confidence of market players.

Second, we should speed up the construction of a unified national market, promote the rational flow of production factors, and smooth the domestic circulation. At the beginning of the meeting, it was pointed out that the current economy is still facing the difficulties and challenges of "there are blockages in the domestic circulation". In this regard, the meeting proposed to "speed up the construction of a unified national market, focus on breaking various forms of local protection and market segmentation, and effectively reduce the logistics cost of the whole society".

On the one hand, the construction of a unified national market is conducive to the rational flow and efficient agglomeration of various resource elements throughout the country, and to smooth the domestic circulation; on the other hand, the development of an efficient and smooth circulation system is also related to the supply of materials such as strategic reserves and circulation speed of the circulation sector, and is conducive to further ensuring the security of the industrial chain and supply chain nationwide.

The third is to plan a new round of fiscal and taxation system reform and implement the reform of the financial system. The report of the 20th National Congress of the Communist Party of China pointed out that it is necessary to "improve the modern budget system, optimize the tax structure, and improve the fiscal transfer payment system", which is expected to be the focus of the new round of fiscal system reform.

In response to the reform of the financial system, the Central Financial Work Conference in October 2023 pointed out that it is necessary to "comprehensively strengthen financial supervision, improve the financial system, optimize financial services, and prevent and resolve risks". Specifically, the Central Financial Work Conference emphasized that it is necessary to "strive to create a good monetary and financial environment, effectively strengthen high-quality financial services for major strategies, key areas and weak links", and "comprehensively strengthen institutional supervision, behavior supervision, functional supervision, penetrating supervision, and continuous supervision". The report of the 20th National Congress of the Communist Party of China pointed out that it is necessary to "deepen the reform of the financial system, build a modern central bank system, strengthen and improve modern financial supervision, and strengthen the financial stability guarantee system". It is expected that comprehensively promoting the construction of a modern central bank system and strengthening the ability to provide financial services to the real economy will be the key direction of the next stage of financial system reform.

4. Risk Warning

The escalation of the Russia-Ukraine situation, rising geopolitical risks, and volatile global commodity prices. U.S. inflation lasted longer than expected.

14. SDIC Securities

1. Macro: Seek a breakthrough through reform

(Yuan Fang)

Judging from the manuscript of the Central Economic Work Conference, although the market expects the introduction of more aggregate policies, such as policies that exceed expectations at the real estate and fiscal levels. However, under the current relatively severe internal and external situation, policymakers have made up their minds to get rid of the road of relying on strong stimulus in the past, and have chosen the path of breaking through reform and achieving high-quality development.

At the specific level of achieving high-quality development, policymakers attach great importance to scientific and technological innovation, which is involved in fiscal, monetary, demand, industrial and other policies.

China's past experience shows that China's major structural reforms have often been implemented in times of economic difficulties, and have also achieved outstanding results. It is worth paying close attention to the future implementation of these policies in different industries and entities, and the impact on the short- and medium-term macroeconomy.

Seek breakthroughs through reform and achieve high-quality development

The Central Economic Work Conference was held on December 11 and 12. The meeting analyzed the economic situation in 2023 and made detailed arrangements for economic work in 2024. Compared with the 2022 Central Economic Work Conference, this meeting pays more attention to and requires reform and high-quality development, seeking breakthroughs through reform and achieving high-quality development.

The meeting mentioned that "focusing on the central task of economic construction and the primary task of high-quality development, we will turn the grand blueprint of Chinese-style modernization into a beautiful reality step by step." "This is following the 2021 Central Economic Work Conference, which once again emphasizes the basic line requirements centered on economic construction, and at the same time puts high-quality development in the first place.

At the specific level of achieving high-quality development, policymakers attach great importance to scientific and technological innovation, which is involved in most policies.

For example, at the level of fiscal policy, it is pointed out that "active fiscal policy should be moderately strengthened, and quality and efficiency should be improved." Party and government organs should Xi living a tight life. At the same time, it emphasized that "the implementation of structural tax and fee reduction policies, focusing on supporting scientific and technological innovation and the development of the manufacturing industry." ”

At the monetary policy level, it is believed that "we should give full play to the dual functions of the total amount and structure of monetary policy tools, and guide financial institutions to increase support for scientific and technological innovation, green transformation, inclusive small and micro enterprises, and digital economy." "The ranking of scientific and technological innovation is higher than last year, and it complements the theme of the digital economy.

In terms of the deployment of work tasks, we will put "leading the construction of a modern industrial system with scientific and technological innovation" in the first place, and last year this position was to expand domestic demand. And unlike last year, it is further clarified that the construction of a modern industrial system needs to be guided by scientific and technological innovation. At the same time, this statement is more detailed and covers a wider range of industries. "We will build a number of strategic emerging industries such as biomanufacturing, commercial aerospace, and low-altitude economy, open up new tracks for future industries such as quantum and life sciences, widely apply digital intelligence technology and green technology, and accelerate the transformation and upgrading of traditional industries. ”

At the level of expanding domestic demand, special emphasis is placed on "giving full play to the amplification effect of government investment, focusing on supporting key core technology research, new infrastructure, energy conservation, emission reduction and carbon reduction, and cultivating new momentum for development." This was rarely mentioned in previous economic work conferences.

While more policies are tilted towards scientific and technological innovation to achieve high-quality development, policymakers are vigorously promoting reforms. The third point of the work task deployment is "deepening the reform of key areas". This not only includes the implementation of the "two unwavering" mentioned at last year's meeting, but also mentions that "it is necessary to plan major measures to further deepen reform in an all-round way to promote high-quality development." "Regarding private enterprises," promote the development and growth of private enterprises, and implement a number of measures in market access, factor acquisition, fair law enforcement, and protection of rights and interests. This statement is clearer and more operational. After the completion of the reform of financial institutions, "it is necessary to plan a new round of reform of the fiscal and taxation system and implement the reform of the financial system." "Reforms in these areas will help reduce the burden on the real economy and better serve the real economy.

At the open level, the details are also quite rich. For example, it emphasizes "relaxing market access for service industries such as telecommunications and medical care, benchmarking against international high-standard economic and trade rules, conscientiously solving issues such as cross-border data flow and equal participation in government procurement", and "effectively breaking through the blockages for foreigners to do business, study, Xi and tourism in China." We will do a good job in supporting the implementation of the eight actions of high-quality Belt and Road cooperation, and coordinate the promotion of major landmark projects and 'small but beautiful' livelihood projects. "These statements are more problem-focused and operational.

Finally, the meeting called for "seizing all favorable opportunities, taking advantage of all favorable conditions, grasping things as soon as they see them, doing more if they can, and striving to cope with the uncertainty of changes in the situation with the certainty of their own work." This statement demonstrates the determination and urgency of policymakers to reform.

Overall, although the market expects the introduction of more aggregate policies, such as policies that exceed expectations at the real estate and fiscal levels. However, under the current relatively severe internal and external situation, policymakers have made up their minds to get rid of the road of relying on strong stimulus in the past, and have chosen the path of breaking through reform and achieving high-quality development. China's past experience shows that China's major structural reforms have often been implemented in times of economic difficulties, and have also achieved outstanding results. It is worth paying close attention to the future implementation of these policies in different industries and entities, and the impact on the short- and medium-term macroeconomy.

Risk warning: (1) geopolitical risk (2) policy stimulus exceeds expectations

2. Strategy: Firm high-quality development and sing the bright theory of China's economy!

(Lin Rongxiong)

The Central Economic Work Conference, held in Beijing from December 11 to 12, 2023, has received wide attention from the market as the highest-level policy meeting in the economic field every year. While emphasizing that China's economy is currently facing the four major challenges of "insufficient effective demand, overcapacity in some industries, weak social expectations, and still many risks and hidden dangers", it is proposed to implement "active fiscal policy and prudent monetary policy" next year, and put the construction of a modern industrial system in the first place in the nine major economic tasks next year, and also involves the reform of key areas (state-owned enterprise reform, fiscal and taxation system reform, financial system reform, etc.), rural revitalization and urban-rural integration, ecological civilization construction, Fertility support policies and the silver economy. The overall attitude is to focus on stability, focusing on "changing the mode, adjusting the structure, improving the quality, and increasing the efficiency", and the long-term high-quality development is full of determination.

1.1. Economic situation: insufficient effective demand, overcapacity in some industries, weak social expectations, and still many risks and hidden dangers

The meeting pointed out that to further promote the economic rebound, we need to overcome some difficulties and challenges, mainly due to the lack of effective demand, overcapacity in some industries, weak social expectations, and many hidden risks.

Interpretation: Different from the "triple pressure" repeatedly mentioned in the previous two years (demand contraction, supply shock, and weakening expectations), under the impact of the epidemic of the century, the evolution of the century-old changes has accelerated, and the external environment has become more complex, severe and uncertain) The current difficulties in the economic situation, the meeting was summarized as the "four major challenges", with special emphasis on risks and overcapacity, the former is obviously concentrated in real estate, Local debt and small and medium-sized financial institutions, the latter may refer to traditional economic sectors related to infrastructure and real estate, or may include emerging sectors such as new energy. At the same time, while pointing out that the current internal circulation is not smooth, the relevant wording of the severe external environment is heavier than in previous years. It can be seen that the policy aspect has a full, comprehensive and objective understanding of the difficulties and challenges facing China's economy at present.

1.2. Overall tone: seek progress while maintaining stability, promote stability with progress, establish first and then break through, and firmly develop high-quality

The meeting pointed out that next year, it is necessary to adhere to the principle of seeking progress while maintaining stability, promoting stability with progress, establishing first and then breaking down, and creating more policies that are conducive to stabilizing expectations, growth, and employment, and actively forging ahead in changing the mode, adjusting the structure, improving quality, and increasing efficiency, so as to continuously consolidate the foundation for stability and improvement.

Interpretation: The general tone of the meeting for next year's policy is still to be stable, and the "progress" and "establishment" in it, combined with the announcement of the dilution of the growth rate and total amount, and focus on the "stability", "consolidation", "structure" and other words. We believe that "progress" and "establishment" may not correspond to economic growth, but are more likely to refer to more active and promising structural transformation and high-quality development. From this point of view, preventing risks, paying attention to quality, and improving the structure are the focus of next year's economic work, and the high-level management is full of determination for high-quality development.

1.3. Monetary and Fiscal Policy: Next year will be a combination of active fiscal policy and prudent monetary policy

The meeting pointed out that the active fiscal policy should be moderately strengthened to improve quality and efficiency. It is necessary to make good use of the fiscal policy space and improve the efficiency of funds and the effectiveness of policies. Optimize the structure of fiscal expenditures and strengthen the financial guarantee for major national strategic tasks. A prudent monetary policy should be flexible, moderate, precise and effective. Liquidity should be kept reasonably abundant, and the scale of social financing and money supply should be commensurate with the expected targets of economic growth and price levels. Give full play to the dual functions of monetary policy tools, such as the total amount and structure, revitalize the stock and improve the efficiency.

Unscramble:

1. In terms of fiscal policy, we believe that the expression of the draft is more positive, and there is a high probability that the fiscal policy will be further strengthened next year, and the "fiscal policy space" may refer to the further effectiveness of fiscal policy tools such as special bonds, tax and fee reductions, and transfer payments. Of course, the expression of "improving quality and efficiency" also means that there will be no large-scale fiscal spending to stimulate the economy next year, and the deficit ratio may also be set with restraint.

2. In terms of monetary policy, the meeting proposed for the first time that the scale of social financing and money supply should match the expected target of economic growth and price level, and the matching with the expected price level means that the central bank will attach importance to the inflation target and fully and effectively play the counter-cyclical and cross-cyclical adjustment function. We believe that the structural level will be the highlight of next year's monetary policy, and the draft specifically mentions the need to "revitalize stocks" and "improve efficiency", and adds a new "digital economy" to the areas of support. On the whole, next year's monetary policy should play a role in coordinating with fiscal policy, and pay more attention to the precision of the structure and the effectiveness of the force, rather than the amount of aggregate.

1.4. Macro policy: Enhance the consistency of macro policy orientation and sing the bright theory of China's economy

The meeting pointed out that it is necessary to enhance the consistency of macroeconomic policy orientation. Strengthen the coordination and cooperation of fiscal, monetary, employment, industrial, regional, science and technology, environmental protection and other policies, incorporate non-economic policies into the assessment of the consistency of macro policy orientation, strengthen policy coordination, and ensure that the same direction is exerted and a joint force is formed. Strengthen economic propaganda and public opinion guidance, and sing the bright theory of China's economy.

Interpretation: "Consistency of macro policy orientation" has been repeatedly mentioned when it was proposed to "play a good macro policy combination", and its connotation lies in the consistency assessment of the content and timing of policy documents and the macro policy orientation before the formulation and issuance of policy documents by various departments, so as to promote various departments to strengthen policy coordination and work coordination, prevent the problem of "synthetic fallacy", and maintain a stable and predictable macro policy environment.

The emphasis on this issue in the draft means that there will be more policy linkage between various fields and departments next year, and more attention will be paid to the coordination and cooperation between policies. Combined with the special attention to the guidance of public opinion, we believe that this reflects another level of consistency, that is, the consistency of public perception and macro policy direction, next year's economy will face more difficulties and challenges, and it is the top priority to form a joint force from top to bottom.

1.5. Scientific and technological innovation: The modern industrial system is placed at the top of the nine tasks, and its importance is highlighted

The meeting pointed out that it is necessary to promote industrial innovation with scientific and technological innovation, especially to promote new industries, new models and new kinetic energy with disruptive technologies and cutting-edge technologies, and to develop new quality productive forces. It is necessary to vigorously promote new industrialization, develop the digital economy, and accelerate the development of artificial intelligence. Encourage the development of venture capital and equity investment.

Unscramble:

1. Among the nine major economic tasks next year, the expansion of domestic demand will be put in the first place from 2021 to 2022, and this year, scientific and technological innovation and the modernization of the industrial system will be put in the first place, echoing the emphasis on high-quality development mentioned above.

2. The new expression "new quality productivity" in the circular was first put forward by General Secretary Xi Jinping during his inspection tour in Heilongjiang in September this year, and the new quality productivity is different from the traditional productive forces, involving new fields and high technological content, relying on innovation drive is the key, and the new quality productivity represents a leap in productivity, which is the productive force in which scientific and technological innovation plays a leading role. The proposal of new quality productivity not only means to promote industrial innovation with scientific and technological innovation, but also reflects the initiative to build new competitive advantages and win development with industrial upgrading. We believe that next year, in the context of high-quality development, strategic emerging industries and high-tech industries such as artificial intelligence, aerospace, life sciences, and quantum technology will be further valued and vigorously developed.

3. For the financial industry, the "encouragement of the development of venture capital and equity investment" clearly mentioned in the circular is worthy of attention, and China's venture capital industry is one of the few industries that can really help the development of industry and industry, which also reflects the hope of the senior management that the capital market will better play its pivotal role in encouraging scientific and technological innovation and increase support for real enterprises, especially in the field of science and technology.

1.6. Expansion of domestic demand: a virtuous circle in which potential consumption and productive investment reinforce each other

The meeting pointed out that it is necessary to stimulate potential consumption, expand profitable investment, and form a virtuous circle in which consumption and investment promote each other.

Unscramble:

1. The draft focuses on the "virtuous circle of mutual promotion of consumption and investment", and proposes to stimulate "potential consumption", which mainly refers to the consumption potential in three aspects, the first is the cultivation of new consumption, including "digital consumption, green consumption, and healthy consumption"; the second is the stability of traditional consumption, including "bulk consumption such as new energy vehicles and electronic products"; and the third is large-scale equipment renewal and trade-in of consumer goods. In particular, the new formulation of "new consumption" in the first point is worth paying attention to, and the new growth point of consumption often corresponds to the new direction of the capital market.

2. In terms of investment, the circular emphasizes the leading role of government investment, on the one hand, it is necessary to let government investment focus on supporting key core technology research, new infrastructure, energy conservation, emission reduction and carbon reduction, etc., and on the other hand, it is necessary to let the government and social capital cooperate and support social capital to participate in the construction of new infrastructure and other fields. By involving social capital, a virtuous circle of consumption and investment is formed.

1.7. Opening up: Accelerate the cultivation of new momentum for foreign trade and consolidate the basic market of foreign trade and foreign investment

The meeting pointed out that it is necessary to accelerate the cultivation of new momentum for foreign trade, consolidate the basic market of foreign trade and foreign investment, continue to build a market-oriented, law-based and international first-class business environment, and build the brand of "Invest in China". Effectively break through the blockages for foreign personnel to come to China for business, study, Xi, and tourism. We will do a good job in supporting the implementation of the eight high-quality Belt and Road Initiatives, and coordinate the promotion of major landmark projects and "small but beautiful" livelihood projects.

Interpretation: In the process of the transformation of the old and new kinetic energy mentioned above, there are still blockages in the internal circulation, so the support of external demand and foreign capital is indispensable next year, so it will still be the focus of foreign policy in the future to stabilize foreign investment and attract foreign investment by improving the business environment. The expression of "new momentum of foreign trade" refers to "intermediate goods trade, service trade, digital trade, and cross-border e-commerce exports", which reflects the main transformation trend of mainland foreign trade is to achieve the transformation from "low cost" to "high value-added", and we believe that exports are expected to remain resilient next year with the support of new momentum for foreign trade.

1.8. Risk prevention: the three aspects of risk are coordinated and resolved, and real estate risk is the top priority

The meeting pointed out that it is necessary to make overall plans to resolve risks such as real estate, local debts, and small and medium-sized financial institutions, severely crack down on illegal financial activities, and resolutely adhere to the bottom line of no systemic risks. Actively and prudently resolve real estate risks, meet the reasonable financing needs of real estate enterprises with different ownership systems without discrimination, and promote the steady and healthy development of the real estate market.

Unscramble:

1. The meeting clearly put forward the key risks that need to be prevented and resolved: real estate, local debt, and small and medium-sized financial institutions, which have not paid too much attention to local debt risks, on the one hand, because there are already more mature means of resolution, on the other hand, the overall planning of local debt risk resolution and stable development is the key, as mentioned earlier, next year's social investment also needs to be driven by government investment.

2. Real estate risk is still the top priority, and this meeting did not mention that "housing is not speculation" because the current supply and demand relationship in the real estate market has changed, and the current contradiction is not "speculation" but "falling housing prices". The resolution of this risk is a two-pronged approach: in the short term, it will fully meet the liquidity needs (financing needs) of real estate enterprises and keep the bottom line of no systemic risks, and in the medium and long term, accelerate the construction of a new model of real estate development through the promotion of the "three major projects".

3. It should be noted that although the meeting did not mention "housing not speculation", there was no expression related to the demand side, such as the previous "to implement policies according to the city, support the demand for rigid and improved housing, and solve the housing problems of new citizens and young people" did not appear this time.

Risk warning: the economy is less than expected, the policy strength is less than expected, etc.

15. Zhongtai Securities

Xi experience of the Central Economic Work Conference

(Zhang Deli, You Yong)

From December 11 to 12, 2023, the Central Economic Work Conference was held, continuing the formulation of "promoting stability through progress, establishing first and then breaking". After studying Xi the draft, there are two feelings: one is to "focus on the central work of economic construction", and the policy of stabilizing growth in 2024 will be greater than that in 2023, but China's economy will not follow the old path under the requirements of high-quality development;

Specifically, we believe the following points are worth paying attention to:

First, while affirming the achievements of economic work in 2023, it also clearly pointed out that some difficulties and challenges need to be overcome to promote the economic recovery. Compared with the "triple pressure", this meeting has a clearer definition of difficulties and challenges, that is, insufficient effective demand, overcapacity in some industries, and weak social expectations. In addition, the difficulties and challenges also include that there are still many risks and hidden dangers, and the pressure on smooth internal and external circulation. The meeting also pointed out that "on the whole, the favorable conditions for the development of the mainland are stronger than the unfavorable factors."

Second, it is necessary to effectively respond to and solve problems, and increase macroeconomic regulation and control, but under the requirements of high-quality development, we will not follow the old path and strong stimulus. The meeting clearly mentioned that in the process of Chinese-style modernization, economic construction is the central task, and high-quality development is the primary task. The principle of adhering to high-quality development was mentioned many times in the conference draft, including "we must take high-quality development as the last word in the new era" and "we must adhere to high-quality development and high-level security and benign interaction". In the stage of high-quality development, the probability of large-scale stimulation of real estate and infrastructure is low.

Third, leading the construction of a modern industrial system with scientific and technological innovation will be placed at the top of all key tasks in the economic field in 2024. With the previous expectation + capacity analysis framework, it is difficult to explain why manufacturing investment has continued to grow at a high rate since 2020, and this divergence may be related to the fact that manufacturing investment has also assumed a certain countercyclical adjustment role. The Central Economic Work Conference pointed out some key industries, including disruptive technologies and cutting-edge technologies, new industrialization, strategic emerging industries, and new tracks in the future. However, as mentioned above, this meeting pointed out that the current problem of overcapacity in some industries is currently facing, considering that in recent years, some industries have expanded their production capacity rapidly despite being in line with the direction of economic transformation, and may be more scientific in guiding the development of the industry in the future.

Fourth, compared with the Central Economic Work Conference in the past two years, there are several changes in the relevant content of monetary policy. First of all, the 2022 target to keep the broad money supply and social financing scale basically in line with the nominal economic growth rate, while the 2023 point to match the economic growth and price level expectation management goals, although the essence is the same thing, the 2023 outstanding price level target may be related to the recent CPI year-on-year and PPI year-on-year consecutive negative, and the attention to prices has increased. Second, emphasizing the dual functions of monetary policy tools in terms of total volume and structure may mean that structural monetary policy tools will play a greater role in the delivery of base money and support in key areas. Finally, from the perspective of the interest rate spread of commercial banks, it may be an important task of the broad monetary policy in 2024 to guide the decline of deposit interest rates through the reduction of MLF and 1-year LPR.

Fifth, from the perspective of the deployment of fiscal policy, it is worth looking forward to the fiscal policy in 2024. The market has paid great attention to how the Central Economic Work Conference deploys fiscal policy, and judging from the press release, fiscal policy is expected to continue to exert force in 2024. On the one hand, it is required to "make good use of fiscal policy space", and at present, the central government mainly has room for leverage, but "making good use" may indicate that the deficit ratio will not be significantly higher than 3%. On the other hand, rationally expanding the scope of local government special bonds to be used as capital funds, and alleviating the pressure on local finances through budgeted special bond funds under the sharp decline in land transfer revenue and the pressure of debt reduction, may be a concrete embodiment of the idea of "blocking the wrong door and opening the right door" in recent years.

Sixth, there are also some new proposals for expanding demand. On the one hand, it is necessary to "stimulate potential consumption and expand profitable investment", which means that from the perspective of input and output, consumption projects need to have room for growth, and investment projects can generate returns, which is the premise for consumption and investment to form a virtuous circle that promotes each other. On the other hand, it is necessary to "promote large-scale equipment renewal and trade-in of consumer goods by improving technology, energy consumption, emissions and other standards", and relevant policies may be introduced around technological transformation and trade-in of household appliances in 2024.

Seventh, stabilizing expectations will become a key task in the economic field in 2024. As pointed out at the Central Economic Work Conference, weak social expectations are one of the difficulties and challenges facing China at present. The negative impact of weak expectations on consumption, investment and financial markets is also being felt. The meeting noted the need for "practical... Improve social expectations", "more policies conducive to stabilizing expectations, stabilizing growth, and stabilizing employment", compared with the 2022 Central Economic Work Conference, even put stable expectations ahead of stable growth. "Strengthen economic propaganda and public opinion guidance, sing the theory of China's economic brightness", "pay attention to grasp... macro data and micro feelings", the core is to stabilize expectations.

Eighth, compared with previous years of the Central Economic Work Conference, this meeting promotes the optimization and implementation of various policies from the perspective of the whole process. Only when various policies are implemented can they achieve the desired effect. In the stage of high-quality development, we need to increase the intensity of macroeconomic regulation and control, but we cannot make a big stimulus, and we need to promote the optimization and implementation of policies, one is to make a good advance in policy reserves and leave redundancy; the second is to be uncompromising, realistic and pragmatic implementation; third, we should pay attention to effectiveness and enhance the sense of gain in the evaluation of policy effects; fourth, we should strengthen policy coordination and cooperation, include non-economic policies in the consistency assessment of macro policy orientation, strengthen policy coordination, and ensure that we work in the same direction and form a joint force.

Ninth, risk mitigation in key areas continues to advance. The real estate-related part basically continues the existing policy expressions, such as "meeting the reasonable financing needs of real estate enterprises with different ownership systems without discrimination", and the key depends on how to implement it in the future. From the perspective of "major economic provinces should really take the lead and make greater contributions to stabilizing the national economy", the investment in major projects in provinces, municipalities and autonomous regions with greater pressure on hidden debt resolution may face certain pressure in 2024.

Risk warning: policy changes, economic recovery is less than expected.

16. Guojin Securities

Five key words, four main lines of economic work

(Zhao Wei's team)

affair

The Central Economic Work Conference was held in Beijing from December 11 to 12.

1. The five high-frequency words of the meeting correspond to the four main lines, namely, industrial upgrading, virtuous cycle of consumption and investment, risk prevention and deepening reform

Compared with the past few years, this Central Economic Conference is more concise and to the point, with "development", "high quality", "reform", "security" and "industry" as the five high-frequency words in the draft. Looking at the full text of this meeting, the draft is more concise and the length is lower than that of 2020-2022, but compared with high-frequency words, it can be found that the frequency of keywords such as "development", "high quality", "reform", "security" and "science and technology" is more than in 2022.

The five high-frequency words "development", "high quality", "reform", "security" and "science and technology" also correspond to the key economic work in 2024 mentioned at the meeting, that is, the four main lines of economic work are to promote industrial transformation and upgrading, the virtuous cycle of consumption and investment, continue to prevent risks in key areas, and deepen the reform of key areas.

The policy's attention to industrial transformation and upgrading, support or continuous improvement, are reflected in the central and local leadership surveys and the central financial work conference in October. Since the beginning of the year, the central and local leaders have conducted intensive research on strategic emerging and advanced manufacturing industries. The premier conducted the first research activity in Hunan and presided over a symposium on the development of advanced manufacturing industry, and the new leaders in many places also conducted in-depth research on the development of local industries, emphasizing scientific and technological innovation and industrial upgrading. In October, the Central Financial Work Conference also repeatedly mentioned that "strengthen financial support for new technologies, new tracks, and new markets", and "use more financial resources to promote scientific and technological innovation, advanced manufacturing, green development, and micro, small and medium-sized enterprises". The follow-up financial institutions forum held by the central bank and other departments also once again emphasized the implementation of the need to effectively strengthen high-quality financial services for major strategies, key areas and weak links, and use more financial resources to promote scientific and technological innovation, advanced manufacturing and other fields.

The virtuous cycle in which consumption and investment promote each other may be the key direction to tap the potential of consumption in 2024. On the one hand, on the demand side, we will give full play to the amplification effect of government investment, improve the investment and financing mechanism, support new infrastructure, new kinetic energy, etc., and drive consumption with investment; on the other hand, on the supply side, we will provide high-quality products and services through equipment renewal and related facility construction, and drive the release of potential consumption with high-quality supply.

In 2024, we will continue to prevent risks in key areas and accelerate the implementation of the "three major projects". The sluggish real estate sales and high inventories may suppress the investment willingness of real estate companies for a long time, and the growth rate of real estate investment may still be difficult to return to positive in 2024. In this case, risk prevention or efforts should be made in two aspects: on the one hand, we will increase policy support to "meet the reasonable financing needs of real estate enterprises with different ownership systems without discrimination" and continue to promote the resolution of hidden debts in key areas; on the other hand, we will prevent the "hard landing" of real estate investment, accelerate the implementation of the "three major projects" and hedge the drag of real estate. According to estimates, the average annual investment scale of the "three major projects" may be about 1.2 trillion yuan, and the formation of its physical workload in 2024 may be constrained by the policy rhythm and the availability of funds.

In 2024, the deepening of key areas will continue to advance, represented by financial supervision, reform of financial institutions, deepening reform of state-owned enterprises, and reform of related systems of private enterprises, all of which are behind the policy of increasing support for the development of the real economy and economic transformation and upgrading. Since the beginning of the year, the reform of various key areas has continued to advance, the financial regulatory system has shifted from "one bank, two sessions" to "one bank, one bureau and one session", and the construction of the financial system has also focused on empowering industrial transformation and upgrading, a new round of state-owned enterprise reform has begun, focusing on improving core competitiveness such as self-reliance and self-improvement in science and technology, and promoting the development and upgrading of the private economy to a top-level plan, and 31 measures have been introduced to promote the development of the private economy from six aspects, including business environment, policy support and legal guarantee. In 2024, the reform in the above key areas may be further deepened.

2. In 2024, steady fiscal growth may be strengthened by the central government, focusing on supporting large economic provinces with small debt burdens and large project reserves

The Central Economic Work Conference is the "detailed version" of the economic work part of the Political Bureau meeting of the Central Committee in December of that year, and the "forward-looking version" of the government work report of the following year. Compared with the recent meeting of the Political Bureau of the CPC Central Committee in December, the tone of the work of the Central Economic Work Conference remains unchanged, and an objective study and judgment of the current economic recovery and more detailed economic policy arrangements have been added. In view of the above difficulties and challenges, the economic work in 2024 will "promote stability with progress", "promote stability" in the three aspects of "stabilizing expectations, stabilizing growth, and stabilizing employment", and seek "progress" in "changing the mode, adjusting the structure, improving quality, and increasing efficiency"; In the process of clearing excess industries, we also pay attention to preventing risks and hidden dangers.

In terms of macroeconomic regulation and control, the meeting added "strengthening the innovation and coordination of policy tools" and "strengthening the coordination and cooperation of fiscal, monetary, employment, industrial, regional, science and technology, environmental protection and other policies". On the one hand, it refers to the follow-up fiscal and monetary policies or strengthening coordination and innovating policy tools to support stable growth. In 2022, the PSL support of the central bank and the establishment of policy-based development financial instruments by policy-based development banks are examples of fiscal and monetary coordination and innovative policy tools. On the other hand, it may point to the need for multi-sectoral policies to "form a joint force" and "strengthen overall planning", and macroeconomic control policies such as fiscal and monetary policies will pay more attention to the promotion of reform in key areas such as stabilizing employment, scientific and technological industry innovation, regional coordination, and green environmental protection.

Specifically, in terms of fiscal policy, new emphasis has been placed on making good use of fiscal policy space and optimizing the structure of fiscal expenditure. In October, the central government increased the deficit from 3% to 3.8%, and the central government may continue to increase local fiscal support in 2024. "Improving the efficiency of funds and policy effects" echoes with "major economic provinces should really take the lead and make greater contributions to stabilizing the national economy", or point to the follow-up fiscal funds are more inclined and the debt burden is smaller, the project reserves are larger, and the quality is higher.

"Optimize the structure of fiscal expenditures and strengthen the financial guarantee of major national strategic tasks. Reasonably expand the scope of local government special bonds used as capital", etc., may mean that in 2024, the central and local financial funds may further increase support for major strategic tasks such as the "three major projects" of real estate, and the expansion of the scope of special bonds used as capital can further improve the multiplier effect of fiscal funds. Compared with the shantytown reform projects, which have local financial funds, special bonds, and PSL and policy bank credit support, the current progress of the "three major projects" of real estate may be constrained by the lack of local financial funds. Under the guidance of "optimizing the expenditure structure" and "reasonably expanding the scope of local government special bonds used as capital", the follow-up central financial funds and local special bonds may increase financial support for the transformation of urban villages, the construction of "level-emergency dual-use" public infrastructure and affordable housing, and accelerate the implementation of projects.

In addition to the "moderate strengthening" of the total amount and the optimization of structural expenditure, the "quality and efficiency improvement" of the fiscal in 2024 also needs to be supported by the matching of stable growth project reserves. According to the 2022 financial audit reports of various regions, insufficient project preparation is one of the important reasons affecting the implementation of special bond funds, which means that the effective performance of fiscal funds also requires high-quality projects and adequate preparation. In the first nine months of 2023, the monthly approval scale of local infrastructure projects was nearly 250 billion yuan, which was lower than the average monthly approval scale of nearly 620 billion yuan in 2022, or pointed to the lack of project reserves, which also constrained the development of fiscal funds. In the case of sufficient follow-up financial funds, it is necessary to reserve the declared projects in advance, increase the support of the early elements of the project, and focus on supporting the water conservancy and transportation quality projects in the "14th Five-Year Plan" or accelerate the implementation of the physical workload.

Risk Warning:

1. The economic recovery is less than expected. Changes in the overseas situation have increased the drag on exports, and real estate has weakened more than expected.

2. The effect of policy implementation is not as expected. Debt suppression, project quality and other drags down the implementation of policies, and funds are stranded in the financial system.

17. Yuekai Securities

Taking Economic Construction as the Centricity -- Learning and Xi of the Central Economic Work Conference

(Law Zhiheng)

affair

From December 11th to 12th, the Central Economic Work Conference was held. The meeting comprehensively summarized the economic work in 2023, deeply analyzed the current economic situation, and systematically deployed the economic work in 2024.

On the whole, the tone of the meeting was positive, and positive signals were released from the aspects of research and judgment of the current situation, next year's work goals, policy tone, and work methodology, which are conducive to strengthening and consolidating the driving force for the sustained economic rebound next year. The policy tone emphasizes the effect of policy efficiency, strengthens the evaluation of the consistency of policy orientation, and emphasizes the effect of fiscal policy and monetary policy, so as to avoid the impact of non-economic policies on economic policy, avoid the fallacy of synthesis, and give better play to the mainland's policy space. We will continue to emphasize the important role of reform in promoting economic momentum, emphasize the planning of a new round of reform of the fiscal system, and the reform of the tax-sharing system is about to usher in the 30th anniversary, and in the future, there will be new progress in the relationship between the government and the market and between the central and local governments, so as to fundamentally solve the problems of the current tight balance in the fiscal situation and the continuous increase in debt. On the one hand, the Central Economic Work Conference continued the major judgments and policy orientations of the Politburo meeting on December 8, such as "the mainland's economy is picking up", "next year, we must persist in seeking progress while maintaining stability, promoting stability through progress, establishing first and then breaking down, strengthen counter-cyclical and cross-cyclical adjustment of macroeconomic policies, and continue to implement a proactive fiscal policy and a prudent monetary policy." The proactive fiscal policy should be moderately strengthened, improve quality and efficiency, and the prudent monetary policy should be flexible, moderate, precise and effective. It is necessary to enhance the consistency of macroeconomic policy orientation, strengthen economic propaganda and public opinion guidance", etc. On the other hand, the Central Economic Work Conference has added many new contents in terms of situation judgment and work deployment, such as "to further promote the economic recovery for the better, we need to overcome some difficulties and challenges, mainly due to insufficient effective demand, overcapacity in some industries, weak social expectations, and many hidden risks, there are blockages in the domestic cycle, and the complexity, severity and uncertainty of the external environment are rising" We must take the promotion of Chinese-style modernization as the biggest politics, focus on the central task of economic construction and the primary task of high-quality development", "include non-economic policies in the consistency assessment of macro policy orientation", "encourage the development of venture capital and equity investment", "pay attention to grasping and handling the relationship between speed and quality, macro data and micro feelings, economic development and improvement of people's livelihood, and development and security". Risk warning: external shocks exceed expectations, and the real estate market downturn exceeds expectations

unscramble

1. Judgment of the overall situation: the recovery is improving, but it is facing a series of internal and external difficulties and challenges

The meeting fully affirmed that the situation of "the mainland's economy rebounding for the better" is extremely difficult, and it was only achieved by "withstanding external pressure and overcoming internal difficulties." From the perspective of economic operation, the mainland's economic operation in 2023 will be a recovery of twists and turns, and it will generally be in a post-epidemic recovery trend, driven by the continuous recovery of the service industry, it has achieved a good start in the first quarter, increased downward pressure in the second quarter, and continued to rebound in the third quarter, and the completion of the annual goal is a high probability event. Judging the economic situation in the next stage, the meeting believed that it was necessary to overcome a series of internal and external difficulties and challenges: the internal face of "insufficient effective demand, overcapacity in some industries, weak social expectations, still many risks and hidden dangers, and there are blockages in the domestic circulation", and the external face "the complexity, severity and uncertainty of the external environment are rising". Insufficient macro aggregate demand and low confidence of micro entities are the key factors slowing down the pace of economic recovery; overcapacity in some industries will further exacerbate the price downturn, affecting enterprise revenues and profits, residents' employment and wages, and leading to the divergence between macro data and micro feelings; real estate, local debt, small and medium-sized financial institutions, and other risks are prominent, causing a negative impact on economic recovery. At the same time, the trend of overseas geopolitical conflicts, the risk of recession and monetary policy changes in advanced economies, the impact of the US election on Sino-US relations, and the restructuring of the global trade system and industrial chain system will disrupt the steady and healthy development of the mainland economy through trade, capital flows, sentiment, financial markets and other channels. The meeting particularly stressed that "the favorable conditions facing the mainland's development are stronger than the unfavorable factors, and the basic trend of economic rebound and long-term improvement has not changed, so it is necessary to enhance confidence and confidence." "Confidence is more important than gold, 2024 is the second year after the epidemic, the scarring effect gradually fades, expand aggregate demand, relax supply constraints, boost the confidence of market players, stimulate the vitality of local governments, stabilize the bull's nose of real estate, China is likely to achieve an economic growth rate of about 5%.

Second, the overall policy orientation: to promote stability, first establish and then break, strengthen macro policy counter-cyclical and cross-cyclical adjustment

The meeting demanded, "next year, we must adhere to the principle of seeking progress while maintaining stability, promoting stability with progress, establishing first and then breaking down, and creating more policies that are conducive to stabilizing expectations, stabilizing growth, and stabilizing employment, and actively forging ahead in changing the mode, adjusting the structure, improving quality, and increasing efficiency, and constantly consolidating the foundation for stability and improvement." It is necessary to strengthen the counter-cyclical and cross-cyclical adjustment of macroeconomic policies, continue to implement a proactive fiscal policy and a prudent monetary policy, and strengthen the innovation and coordination of policy tools. The meeting was positive about the overall tone of next year's economy and policy, and further explained the relationship between stability and progress, that is, "seeking progress while maintaining stability, promoting stability with progress" and "intensifying macroeconomic regulation and control", which is conducive to promoting next year's economy and laying a solid foundation for recovery. A stable economic and social environment is a prerequisite for progress, and the achievement of a stable economic environment also requires the support of proactive policies, such as active fiscal policies, prudent monetary policies, and real estate policies that continue to exert force and optimize. It is expected to achieve economic growth of about 5% next year, and the main drivers will be the service industry, high-end manufacturing and infrastructure investment. Progressive policies promote a stable situation and stable expectations. At the same time, it is necessary to adhere to the principle of seeking progress while maintaining stability, adjust policies and promote reforms, grasp the timeliness and efficiency, adhere to the principle of establishing first and then breaking down, and make steady progress, so as to do a good job in connecting the old and new kinetic energy to prevent the risk of disposal risks. "Establish first and then break" is particularly important for China's economy in the transition period of old and new kinetic energy. In the course of the mainland's long-term reforms, such practices as "crossing the river by feeling the stones" and "gradual experiments" are the methods of first establishing and then breaking down. The 2021 Central Economic Work Conference also mentioned this expression: "We must persist in seeking progress while maintaining stability, adjust policies and promote reforms, grasp the timeliness and efficiency, and insist on establishing first and then breaking down, and making steady progress." It is necessary to strengthen overall planning and coordination and adhere to the concept of systems. On March 5, 2022, General Secretary Xi Jinping stressed when participating in the deliberations of the Inner Mongolia delegation at the Fifth Session of the 13th National People's Congress: "Green transformation is a process, not an overnight thing. "To achieve the 'double carbon' goal, we must be based on national conditions, adhere to the principle of seeking progress while maintaining stability, and gradually achieve it, and we cannot detach ourselves from reality and rush to achieve success, engage in sports 'carbon reduction' and step on the 'emergency brake'". The positive tone of the policy is also highlighted in the emphasis on economic development, with the meeting emphasizing the need to "promote Chinese-style modernization as the biggest politics, focusing on the central task of economic construction and the primary task of high-quality development". Chinese modernization is the modernization of a huge population, the modernization of common prosperity for all the people, the modernization of the harmony between material civilization and spiritual civilization, the modernization of harmonious coexistence between man and nature, and the modernization of taking the path of peaceful development. Without sufficient material foundation, it is difficult to achieve all-round human development, which requires strengthening the counter-cyclical and cross-cyclical adjustment of macroeconomic policies, strengthening the innovation and coordination of policy tools, accelerating the pace of economic recovery, and ensuring the steady and long-term development of the economy.

Third, pay more attention to the relationship between macro data and micro feelings, development and security, pay attention to effectiveness in the evaluation of policy effects, enhance the sense of gain, include non-economic policies in the assessment of macro policy orientation consistency, and strengthen economic publicity and public opinion guidance

Since the beginning of this year, there has been a significant divergence between the macro data and the micro feelings, and the micro feelings are not as good as the macro data, reflecting the unstable expectations and low confidence of the micro subjects, which will drag down the steady and sustained recovery of the economy. First, the lack of confidence of micro entities will lead to the weakening of the effect of macro policies, resulting in "tax and fee reduction traps" and "liquidity traps". In recent years, the mainland has continued to implement a proactive fiscal policy and a prudent monetary policy, but the policy effect has been decreasing at the margin, and to a certain extent, there has been an idling and inefficiency of the policy. Second, the lack of confidence and expectations will increase economic contraction and downward pressure, leading to the self-fulfillment of expectations. Lack of confidence and expectations will lead to a cycle of "expected economic downturn - behavioral contraction - economic performance downward". Third, the lack of confidence and expectations will affect the credibility of the government to a certain extent, and must be taken seriously.

Therefore, in the context of policy formulation and evaluation of effectiveness, the following points were particularly emphasized:

First, "pay attention to grasping and handling the relationship between speed and quality, macro data and micro feelings, economic development and improvement of people's livelihood, and development and security." "We can't ignore speed and development because of quality and safety, and we can't just focus on macro data and economic development while ignoring micro feelings and improving people's livelihood.

Second, "strengthen the synergy and linkage in the implementation of policies, amplify the combination effect, make a good advance and leave redundancy in the policy reserve, and pay attention to the effectiveness and enhance the sense of gain in the evaluation of policy effects." In recent years, some policies have shown the characteristics of "public opinion and passive response of the government" to a certain extent, and there is a lack of systematic and overall planning between some policies, and there is a tendency to fragmentation, which restricts the coordinated play of policy effects. We should not let the market wait for the policy, but let the policy go ahead of market expectations and exceed market expectations, so as to break the sluggish market sentiment and mobilize the enthusiasm of micro subjects.

Third, "it is necessary to enhance the consistency of macroeconomic policy orientation." Strengthen the coordination and cooperation of fiscal, monetary, employment, industrial, regional, science and technology, environmental protection and other policies, incorporate non-economic policies into the assessment of the consistency of macro policy orientation, strengthen policy coordination, and ensure that the same direction is exerted and a joint force is formed. "The austerity effect of some non-economic policies, such as the one-size-fits-all environmental protection policies that existed in some areas in the past, power rationing, and the adjustment of some industries, have objectively led to a lack of confidence among enterprises and residents. After the tax and fee reduction, enterprises still do not dare to significantly increase investment, and residents do not dare to increase consumption, the result is that tax and fee reduction can not effectively stimulate economic growth, the effect of tax and fee reduction is attenuated, and it falls into the "tax and fee reduction trap". Therefore, it is necessary to comprehensively consider the impact of non-economic policies on the economy to avoid triggering supply shocks and discouraging the enthusiasm of market players.

Fourth, "strengthen economic propaganda and public opinion guidance, and sing the bright theory of China's economy." "At present, the economy is a structural recovery rather than a comprehensive recovery, and some of the damaged groups have been impacted and have a certain amount of negative emotions, and it is necessary to give positive guidance, otherwise negative emotions will contag each other, and the situation of insufficient confidence of micro subjects will continue, dragging down the economic recovery process. Development and problem-solving are ultimately paramount. It is necessary to do a good job of fully and effectively communicating with the market in advance, responding to public opinion concerns in a timely, forceful and effective manner, and improving publicity methods. There are bright spots and hidden worries in the economy, and only by responding and responding positively can we truly dispel public doubts.

Fourth, expand domestic demand: stimulate potential consumption, expand effective investment, and form a positive feedback effect on consumption and investment

The meeting proposed that "it is necessary to stimulate potential consumption, expand profitable investment, and form a virtuous circle in which consumption and investment promote each other." "China's economy is shifting from being driven by external demand to being driven by domestic demand, and from being investment-driven to being consumption-driven. The driving force of the economy is closely related to the stage of economic development, the characteristics of resource endowment and major national strategies. In 2024, efforts should still be made to expand domestic demand, mainly from two aspects: on the one hand, stimulating consumption needs to solve the two key problems of insufficient consumption capacity and weak consumption willingness of residents, especially in the case of insufficient confidence of residents, the issuance of cash subsidies to low- and middle-income groups is conducive to improving consumption capacity; In the medium and long term, in order to fundamentally solve the problem of sluggish consumption, it is necessary to deepen the reform of the income distribution system, accelerate the construction of a public service system, guide the upgrading of medium and long-term consumption, and improve the social security system. On the other hand, while expanding investment, it is necessary to comprehensively consider the benefits of investment, and use more funds to support major national strategies, promote the upgrading of the industrial structure, and benefit the people's livelihood and make up for shortcomings, instead of blindly carrying out projects and one-sidedly pursuing the growth of GDP "quantity"; ineffective investment will inevitably lead to high debts and waste policy space.

Specifically, the first is to deploy and promote the implementation of major projects identified in the "14th Five-Year Plan". Accelerate the promotion of quantum information, scientific and technological research and other major research projects that lead the future development, the Sichuan-Tibet Railway, the development of hydropower in the lower reaches of the Brahmaputra River and other world-class landmark projects in the field of infrastructure. The second is to promote the construction of new infrastructure such as rail transit, 5G infrastructure, UHV, and new energy charging piles in the metropolitan area. The third is to invest in important areas of people's livelihood such as pension, child care, and urban drainage and sewage systems to improve residents' consumption capacity. Consumption and investment are related, and effective investment and consumption supported by income are both the starting points for expanding domestic demand. Investment activities will form economic demand in the short term, but in the medium and long term, they will form economic supply, optimize the supply structure, and ultimately serve consumption; moreover, the income of employees in investment activities will drive the growth of consumption, thus driving investment again. The rise in terminal consumer demand is conducive to increasing investment in manufacturing, while high-quality investment forms high-quality supply, which is conducive to promoting the release of consumption. Fifth, the positive fiscal policy: moderately strengthened, improve quality and efficiency, implement the structural tax and fee reduction policy, optimize the structure of fiscal expenditure, and ensure fiscal sustainability; the tone of the fiscal policy of the new round of fiscal and taxation system reform meeting is roughly the same as the tone of the meeting at the end of last year, and the overall tone of "moderate afterburner, quality and efficiency" is positive, that is, the afterburner is to expand aggregate demand, prevent and resolve economic and social risks, but at the same time put forward "moderation", "improve quality and efficiency", "strengthen counter-cyclical and cross-cyclical adjustment", and "make good use of fiscal space" In other words, it should be implemented according to economic and social needs, without flooding, and active finance is still active under the framework of high-quality development, so as to avoid greatly increasing fiscal risks and make finances more sustainable. More importantly, the meeting proposed to plan a new round of reform of the fiscal and taxation system, which is a more long-term measure in addition to short-term debt reduction and expansion of aggregate demand.

First, the main tone of the proactive fiscal policy remains unchanged, which is determined by the current situation in which the foundation for economic recovery is not solid and the confidence of micro entities has not been fundamentally boosted. In 2024, it may be necessary for the deficit rate to exceed 3%, and the scale of the deficit will be dominated by the central government. The issuance of an additional 1 trillion yuan of treasury bonds in the fourth quarter of 2023 and the issuance of part of the new local bond quota in 2024 in advance will help form a physical workload as soon as possible and form a good start in 2024. It is necessary to seek truth from facts and face the real deficit rate, and avoid the situation that the long-term use of "deficit control + expansion of special bonds" leads to a situation in which the deficit scale is too small and the efficiency of special bonds is low. The deficit ratio exceeding 3% can send a more positive fiscal policy signal to the international and domestic markets, which will help boost the confidence of micro entities. At the same time, considering the current contradiction between local government fiscal revenue and expenditure and the prevention and resolution of debt risks, the central government will leverage to assume more expenditure responsibilities or transfer funds to local governments.

Second, "improving quality and efficiency" is an important goal of fiscal policy in recent years, which is determined by the tight balance of the current fiscal situation. The more the contradiction between revenue and expenditure intensifies, the more necessary it is to improve the performance of fiscal expenditure, which requires that the tax reduction and fee reduction on the revenue side should be shifted from the pursuit of quantity and scale to the efficiency and effect type; the expenditure side should optimize the structure of fiscal expenditure, reserve and excavate good projects in advance, and improve the economic and social benefits of the projects.

Third, the reintroduction of "structural tax and fee reduction" is conducive to further stabilizing the macro tax burden. The mainland has implemented a proactive fiscal policy for more than 10 consecutive years, and the long-term implementation of large-scale tax cuts and fee reductions has led to a gradual decline in the macroeconomic tax burden, and the fiscal space still exists, but on the whole it continues to narrow. Therefore, in the future, tax and fee reductions should focus on efficiency and effectiveness, pay attention to structural tax and fee reductions, and focus on supporting scientific and technological innovation and manufacturing industries, which is conducive to stabilizing the macro tax burden and avoiding the scale of debt rising too quickly due to tax and fee reductions.

Fourth, the meeting proposed to "reasonably expand the scope of special bonds used as capital", which is conducive to solving the problem of the continuous decline in the income of special bond projects. At present, all parties have formed a strong consensus on the issue of the generalization of special bonds, and the continuous decline in the income of special bond projects has led to debt risks and reduced fiscal co-ordination capabilities, while some special bond funds have been idle, resulting in the failure to give full play to the role of fiscal funds in stabilizing growth. Expanding the scope of capital is conducive to reserving more projects with higher returns, promoting the implementation of projects as soon as possible, reducing risks and promoting stable growth.

Fifth, in order to make better use of fiscal space, it is necessary to focus on the expenditure policy in the future, supplemented by revenue policies such as tax cuts and fee reductions, and promote the gradual shift of fiscal policy from emphasizing investment to paying equal attention to investment and consumption, so as to improve the efficiency of the use of fiscal funds. During economic downturns, spending policies tend to be more effective than income policies. Because the income policy of tax reduction has to work through market entities, the transmission chain is long, and it is easy to be interfered by other factors. Once the confidence of market players is insufficient, revenue-side policies such as tax and fee reductions can not only stimulate economic growth, but also push up deficits and debts, falling into the "tax and fee reduction trap". In the past, the mainland continued to introduce tax cuts, fee reductions, tax refunds and tax deferrals, which effectively alleviated the problem of tight cash flow of market entities and improved the anti-risk ability of enterprises, but also led to a continuous decline in the macro tax burden.

Sixth, planning a new round of reform of the fiscal and taxation system is an important task in the next stage, so that the current problems of tight balance in fiscal operation and sustained growth of local debts can be fundamentally solved; the implementation of the reform of the tax-sharing system is about to usher in 30 years, and it is necessary to further carry out the reform to the end. Since the implementation of the reform of the tax-sharing system in 1994, it has effectively promoted the sustained and high-speed growth of China's economy, and is a vital basic system in the socialist market economic system.

First, the central government's financial resources have been concentrated and the central government's macroeconomic regulation and control capabilities have been effectively enhanced; second, a system of tax returns and transfer payments has been established, which has effectively reduced the gap in regional financial resources and helped promote balanced regional development and the equalization of regional basic public services; third, the reform of the supporting taxation system has straightened out the relationship between the government and the market, safeguarded a unified market, and avoided regional division; fourth, the relationship between the central and local governments has been initially straightened out, the expectations of the central and local governments have been stabilized, and the relationship between the central and local governments has entered the stage of stable relations between the central and local governments from the various types of lump sum system。 However, at present, there are still problems such as the unclear relationship and boundary between the government and the market, the unclear division of powers and expenditure responsibilities between the central and local governments, the excessive powers and expenditure responsibilities of local governments, the lack of coordination of financial resources, the irregularity of transfer payments, and the need to further deepen the financial system below the provincial level, which need to be further resolved in future reforms. It can be expected that in the future, it is necessary to further sort out the relationship between the government and the market, define the scale of the government, and avoid the continuous expansion of the government's expenditure responsibility; the central government will collect some of the powers and expenditure responsibilities from the upper authorities to reduce the expenditure responsibilities and expenditure burdens of local governments; further stabilize the macro tax burden; and continue to standardize transfer payments, especially the transfer of common powers.

6. Monetary policy: stabilize the aggregate, adjust the structure, revitalize the stock, and improve efficiency

The meeting proposed that "a prudent monetary policy should be flexible, moderate, precise and effective", compared with the expression of "a prudent monetary policy should be precise and powerful" in 2022, one is to increase flexibility and moderation, and the other is to change "powerful" to "effective". Flexibility means that monetary policy will be selected according to the economic and financial performance, and liquidity will be reasonable and abundant. Effective means that the aggregate is relatively restrained, with more emphasis on quality and actual effect, and structural monetary policy tools, revitalizing existing loans, and improving the efficiency of the use of existing loans are the focus of future work.

Specifically, first, the scale of social financing and the money supply match the expected targets of economic growth and price levels, and there is still room for interest rates to be lowered. For the first time, it was mentioned that the money supply should be matched not only with economic growth, but also with the expected target of the price level. The current price level is low, and although nominal interest rates are at a low level, real interest rates are high, and real financing costs will still need to be reduced in the future. Considering the weakening of exchange rate constraints, it is expected that interest rates may be cut in the first quarter of next year, and deposit interest rates will be lowered accordingly to ensure a reasonable level of interest margins for banks.

Second, monetary policy should follow the overall requirements of high-quality development and will not be "flooded". Pan Gongsheng, governor of the central bank, mentioned in an exclusive interview with Xinhua News Agency: "Manage the general gate of the currency and protect the people's money bags." On the basis of stimulating the economy, monetary policy may bring about fluctuations in the price level, but it will not deliberately pursue inflation, and on the basis of meeting the needs of economic development, it is the top priority not to let the people's votes become "gross". This means that monetary policy will be relatively restrained in terms of aggregates, and the intensity of easing will be limited.

Third, precise delivery is the key, and structural monetary policy tools and revitalizing stocks are important starting points. "The debt-driven growth model, which relied on infrastructure and real estate investment in the past, may achieve higher growth in the short term, but it will also solidify structural contradictions and undermine the sustainability of growth," Pan Gongsheng said. With the structural transformation of the economy, the focus of monetary policy will naturally also change, and structural monetary policy tools will be the key to supporting the total amount of credit. In addition, this meeting for the first time proposed to "revitalize the stock and improve efficiency", combined with the recent statement of the central bank, in the future, it will focus on the optimization of the stock loan structure, and free up credit resources in the field of inefficient occupation of financial resources, and invest in key areas such as scientific and technological innovation, green transformation, inclusive small and micro enterprises, and digital economy. Fourth, implement the reform of the financial system. On the one hand, the central bank will speed up the construction of a modern central bank system, improve macro-prudential policies, and deepen the market-oriented reform of interest rates and exchange rates. On the other hand, the PBOC will also vigorously promote all kinds of commercial banks to focus on their main responsibilities and main businesses, especially small and medium-sized banks, improve corporate governance and improve the equity structure. In addition, the construction of the bond market and the interconnection of domestic and foreign financial markets will be accelerated.

7. Industrial policy: give full play to the leading role of scientific and technological innovation in the industry, develop new quality productivity, develop artificial intelligence, low-altitude economy, etc

The meeting emphasized the leading role of scientific and technological innovation in the industry, proposed the development of new quality productivity, improved the emerging national system, and put forward new arrangements around the four directions of stabilizing stocks, increasing increments, seeking variables, and strengthening guarantees. There are many new ideas in this meeting, including "leading the construction of a modern industrial system with scientific and technological innovation", "promoting industrial innovation with scientific and technological innovation, especially using disruptive technologies and cutting-edge technologies to give birth to new industries, new models and new kinetic energy, and developing new quality productive forces", "strengthening applied basic research and cutting-edge research", "encouraging the development of venture capital and equity investment", etc. If the industrial policy in 2023 emphasizes making up for shortcomings, strengthening domestic substitution, and improving the safety level, then the focus in 2024 will be science and technology leadership and forward-looking layout.

The first is to stabilize the stock, the key industrial chain of the manufacturing industry should strengthen quality support and standard guidance, and the transformation of traditional industries should be accelerated. The meeting proposed: "Improve the new national system, implement high-quality development actions for key industrial chains in the manufacturing industry, strengthen quality support and standard guidance, and improve the resilience and safety of the industrial chain and supply chain." At the same time, it requires the extensive application of digital intelligence technology and green technology to accelerate the transformation and upgrading of traditional industries. It means that at the juncture of the transformation of old and new kinetic energy, the policy will further support key industries to enhance their global influence and promote the transformation of traditional industries, which will also bring investment in technological transformation and help stabilize the economic fundamentals.

The second is to increase the increment, and the role of strategic emerging industries should be further developed. The meeting mentioned: "It is necessary to vigorously promote new industrialization, develop the digital economy, and accelerate the development of artificial intelligence" and "create a number of strategic emerging industries such as biomanufacturing, commercial aerospace, and low-altitude economy", and planned a development path for strategic emerging industries. In addition, the meeting emphasized the support for the field of digital economy, and specifically pointed out in the statement of monetary policy that financial resources should be guided to invest in the field of digital economy, and the digital economy industry may usher in great development opportunities.

The third is to seek variables, with special emphasis on future industries, and the introduction of future industrial development plans and policies at the national, provincial and municipal levels will be accelerated. The meeting pointed out that "open up new tracks for future industries such as quantum and life sciences". In 2024, the map of future industries will gradually become clear, and the support for future industries such as brain-like intelligence, quantum information, and gene technology will be greatly improved. Development and reform, industry and information technology and other relevant ministries and commissions will also accelerate the introduction of plans or action plans, and the future industry may officially enter the policy introduction period.

Fourth, it is a strong guarantee, which mentions for the first time "encouraging the development of venture capital and equity investment". It is difficult for traditional financial funds to adapt to the development demands of enterprises in emerging industries, and the mechanism of risk sharing and benefit sharing of venture capital and equity investment can provide stable long-term funds for related enterprises and smooth the virtuous cycle of "science and technology-industry-finance". The Regulations on the Supervision and Administration of Private Investment Funds (Draft) promulgated this year has a special chapter to support the development of venture capital funds, which clearly states: "give policy support to venture capital funds, encourage and guide them to invest in growth and innovative start-up enterprises, and encourage long-term funds to invest in venture capital funds". It is expected that support for venture capital will be further strengthened next year.

On the one hand, more grace will be given in terms of investment scope, investment strategy, application of leverage, duration and so on, and on the other hand, more convenience will be provided in terms of investment exit, such as supporting the circulation of private equity in the secondary market, carrying out share transfers, and strengthening tax protection in the process of transfer.

8. Prevent and resolve risks: local government debt, real estate and small and medium-sized financial institutions

The meeting proposed to "prevent and resolve risks" and "continue to effectively prevent and resolve risks in key areas." It is necessary to coordinate and resolve risks such as real estate, local debts, and small and medium-sized financial institutions, severely crack down on illegal financial activities, and resolutely adhere to the bottom line of preventing systemic risks. "At present, major risks are mainly concentrated in the fields of local government debt, real estate and small and medium-sized banks, and next year's risk prevention and mitigation will focus on the following three aspects:

First, we will continue to promote the prevention and resolution of local government debt risks, harden local debt constraints, and prevent hidden debts from becoming endless. On July 24, after the Politburo meeting put forward the "package of debt reduction plan", all localities actively promoted the resolution of hidden debts in the region through fiscal debts and financialized debts. As of December 8, a total of 27 provinces across the country have issued a total of 1,377.017 billion yuan of special refinancing bonds. From the perspective of regional distribution, Guizhou, Tianjin, Yunnan, Hunan, Inner Mongolia and other provinces with heavy debt burdens have become the main force in the issuance of this round of special refinancing bonds, with an issuance scale of more than 100 billion yuan, 214.88 billion yuan, 128.63 billion yuan, 125.6 billion yuan, 112.2 billion yuan and 106.7 billion yuan respectively. However, from a longer-term perspective, the special refinancing securitization debt mainly alleviates the current risk, and it is still necessary to curb the soil for implicit debt through the linkage reform of the institutional mechanism. While stabilizing the macro tax burden, it is fundamental to clarify the relationship between the government and the market, define the responsibilities and scale of the government, and solve the problems of excessive government functions and excessive expenditure responsibilities with unlimited responsibility.

The second is to resolve real estate risks and build a new model of real estate development. With the major changes in the relationship between supply and demand in the mainland real estate market, the real estate sector has gradually exposed some risks in recent years, such as the debt risk of real estate enterprises, the risk of unfinished real estate, and the continued downturn in real estate sales and investment, which have had a significant impact on finance, finance, economy and other aspects. To resolve the current real estate risks, there are several important starting points: first, do a good job of "ensuring the delivery of buildings" The second is to prevent the liquidity shortage of healthy real estate enterprises, and to meet the reasonable financing needs of real estate enterprises of different ownership systems without discrimination. The transformation of urban villages and the construction of the "three major projects" of "level-emergency dual-use" public infrastructure can not only hedge against the decline in real estate investment, but also improve the living conditions of residents.

The third is to deal with the risks of small and medium-sized financial institutions in a timely manner to prevent the spread of risks. In recent years, small and medium-sized banks have accumulated more risks in the process of development and operation. Since 2019, risk events have broken out in some urban commercial banks and village and township banks in some areas. To resolve and deal with the risks of small and medium-sized financial institutions, we must first clarify the principles. The measures to deal with bank risks are divided into three types of administrative measures: lender of last resort measures (liquidity support), deposit guarantee measures and administrative takeover measures, as well as two types of market-oriented measures: self-rescue measures and interbank mutual rescue measures. The second is to consolidate territorial responsibility. In 2022, the People's Bank of China (PBOC) issued the Regulations on Local Financial Supervision and Administration (Draft for Solicitation of Comments), which clearly stated the principle of "unified rules by the central government and supervision by local governments", clarified the relationship between central and local financial supervision, and included various local financial formats in a unified regulatory framework. Finally, we will vigorously promote mergers and reorganizations. In the process of merger and reorganization, the purpose of the reorganization should be clarified: if the main purpose is to resolve risks, the treatment of non-performing assets in the process of merger and reorganization should be considered. If the main purpose is to seek development, the development status of the bank should be fully analyzed, and a set of characteristic development strategies should be formulated for the new bank.