· The full text is 4500 words long and about 9 minutes long
· Source of this article: Liu Shengjun's overall view (produced by Liu Shengjun Micro Finance)
Text: Liu Shengjun
The rule of officials is inseparable from "carrots and sticks". Carrots are more conducive to achieving "incentive compatibility". The one who wants the same wins.
On March 5, 2024, the Second Session of the 14th National People's Congress opened in Beijing, and Premier Li Qiang delivered a government work report to the Congress on behalf of the State Council.
1. A review of the situation in 2023
2023 is the first year of emerging from the pandemic, and China's economy has achieved 5.2% growth. This is not easy to come by, and it has also experienced ups and downs of wave-like development and tortuous progress. The report identifies several key reasons:
1. "The adverse impact of the external environment on the development of the mainland continues to increase".
2. "After three years of the impact of the new crown epidemic, there are many problems in the recovery and development of the economy, and the deep-seated contradictions accumulated for a long time have accelerated, and many new situations and new problems have followed. The decline in external demand and the lack of domestic demand have collided, cyclical and structural problems coexist, and the risks and hidden dangers of real estate, local debt, and small and medium-sized financial institutions in some places have become prominent, and some areas have suffered from serious natural disasters such as floods, typhoons, and earthquakes. Under such circumstances, the dilemma of policy choice and work progress has increased significantly."
Regarding the highlights of the economy in 2023, the report states:
• 5G user penetration rate exceeds 50%
• The urbanization rate of the permanent population has increased to 66.2%
• New energy vehicles account for more than 60% of the world's production and sales
• Exports of electric vehicles, lithium batteries and photovoltaic products increased by nearly 30%
• Historically, the installed capacity of renewable energy generation has surpassed that of thermal power, and more than half of the world's new installed capacity has been added throughout the year
2. Analysis of the situation in 2024
In 2024, the domestic and international situation will remain complex and challenging. The Report states:
1. "The momentum of world economic growth is insufficient, regional hotspot issues are frequent, and the complexity, severity and uncertainty of the external environment are rising".
2. "The foundation for the sustained recovery of the mainland economy is not solid, the effective demand is insufficient, the overcapacity of some industries, the social expectations are weak, there are still many risks and hidden dangers, there are blockages in the domestic cycle, and there are interferences in the international cycle."
3. "Some small and medium-sized enterprises have difficulties in operation. The pressure on total employment and structural contradictions coexist, and there are still many shortcomings in public services. In some localities, the financial resources at the grassroots level are rather tight. The ability to innovate in science and technology is not strong. There are still many hard bones to gnaw on in the reform of key areas. ”
4. "There are deficiencies in government work, formalism and bureaucracy are still prominent, and some reform and development measures are not in place. Some cadres lack the spirit of taking responsibility and doing practical work, passively evade responsibility, and make superficial statements. Corruption is still a problem in some areas."
3. 2024 target: 5%
The report sets a target of around 5% GDP growth by 2024 and stresses that "achieving the target for this year will not be easy."
The "Report" proposes:
1. "All regions and departments should adopt more policies that are conducive to stabilizing expectations, growth, and employment, and prudently introduce contractionary and inhibitive measures"
2. "Those who should be established should take the initiative to stand up, and those who should be broken should be resolutely broken on the basis of establishment" (Note: The central government proposes to establish first and then break. Establishment means creating new growth drivers through reform, and breaking down means eliminating low-quality growth drivers such as pollution and high leverage.
3. "In order to systematically solve the problem of funding for the construction of some major projects in the process of building a strong country and national rejuvenation, it is planned to issue ultra-long-term special treasury bonds for several consecutive years starting from this year, which will be specially used for the implementation of major national strategies and security capacity building in key areas, and 1 trillion yuan will be issued this year"
4. "The scale of social financing and the money supply should match the expected targets of economic growth and price levels" (Note: The main challenge is to prevent deflation. After June 2019, the PPI continued to grow negatively for 23 months (one of which was positive), and the PPI has remained negative since October 2019. The CPI will rise by only 0.2% in 2023, which is already hovering on the dangerous edge of deflation. Generally speaking, a moderate inflation of around 2% is more conducive to economic growth and stable expectations)
5. Governments at all levels should get used to living a tight life ()
6. Enhance the internal stability of the capital market (Note: The shock of the capital market in 2023 is worrying.) In the short term, stabilizing the capital market lies in stabilizing the economy, and in the long run, the key to stabilizing the capital market lies in system building.
7. "Enhance the consistency of macro policy orientation. Focusing on the overall development situation, 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 consistency assessment of macro policy orientation, strengthen policy coordination, and ensure that efforts are made in the same direction and form a joint force. All regions and departments should carefully listen to and absorb the opinions of all parties in formulating policies, and enterprise-related policies should focus on communicating with the market and responding to the concerns of enterprises. The implementation of policies should strengthen coordination and linkage, amplify the combination effect, and prevent one from neglecting the other and restricting each other."
8. "Promote the steady growth of consumption." We should take comprehensive measures to increase income, optimize supply, and reduce restrictive measures to stimulate consumption potential" (Note: The key structural problem of China's economy is that the savings rate is too high and the consumption rate is too low. The post-pandemic scarring effect has exacerbated this contradiction. In the four years from 2020 to 2023, Chinese households increased their net deposits by about 58.24 trillion yuan, equivalent to the total of 2009 to 2019, and more than 80% of them were time deposits. To stabilize consumption, 10 trillion consumption vouchers need to be issued to activate confidence)
Consumer Confidence Index
9. "Efforts should be made to stabilize and expand private investment, implement and improve support policies, implement new mechanisms for public-private partnerships, and encourage private capital to participate in the construction of major projects." We will further dismantle all kinds of barriers and allow private investment to enter, develop, and make achievements in more fields. Comprehensively implement the opinions and supporting measures to promote the development and growth of the private economy, and further solve outstanding problems in market access, access to factors, fair law enforcement, and protection of rights and interests. Increase the proportion of loans to private enterprises, expand the scale of bond financing, and strengthen support for individual industrial and commercial households. Implement actions to reduce logistics costs, improve the long-term mechanism for preventing and resolving arrears of enterprises, and resolutely investigate and deal with arbitrary charges, fines, and apportionments. Promote the spirit of excellence and entrepreneurship. (Note: Private enterprises are the five, six, seven, eight and nine of the economy, and only when private enterprises are stable can the economy be truly stabilized)
10. "Increase efforts to attract foreign investment. We will continue to reduce the negative list for foreign investment access, fully remove restrictions on foreign investment access in the manufacturing sector, and relax market access for service industries such as telecommunications and medical care." (Note: The United States promotes great decoupling, de-risking, China+1, and onshore outsourcing, and China must counter it with institutional opening-up. ）
Year-on-year growth rate of exports
Year-on-year growth rate of FDI
11. "The per capita financial subsidy standard for residents' medical insurance will be increased by 30 yuan. The minimum monthly standard of basic pension for urban and rural residents will be increased by 20 yuan" (Note: cracking the four mountains of education, pension, medical care and housing is the key to improving consumption power)
12. "Put the acceleration of the urbanization of the agricultural transfer population in a prominent position, deepen the reform of the household registration system, improve the policy of linking "people, land and money", let the willing migrant workers settle in cities and towns, and promote the equal enjoyment of basic urban public services by the permanent residents who have not settled down"
Fourth, the four key battles to stabilize the economy in 2024
1. Can real estate be stable?
Real estate is a pillar industry of the national economy. Affected by multiple factors such as the epidemic, the international situation, and social expectations, the current real estate landscape has undergone fundamental changes. The challenge is to not rely solely on real estate to drive growth, but to prevent systemic risk from falling too quickly. The Report states:
1) Optimize real estate policies, support the reasonable financing needs of real estate enterprises under different ownership systems, and promote the steady and healthy development of the real estate market.
2) Adapt to the development trend of new urbanization and the changes in the supply and demand relationship of the real estate market, and accelerate the construction of a new model of real estate development ().
3) Increase the construction and supply of affordable housing, improve the basic system related to commercial housing, and meet the needs of residents for rigid housing and diversified improved housing ().
At present, although the "white list" has been promoted, how to eliminate the "performance appraisal concerns" of banking personnel in the face of downward pressure on real estate is the key link. The Caixin article points out:
• The Real Estate Financing Coordination Mechanism is equivalent to a directive issued by a local government department and implemented by a local banking institution. At the bank level, there is no top-down list of financial regulators. There are a large number of "whitelist" projects pushed by the local housing and construction departments to the bank's branches, but there are not many high-quality projects. A person from a major state-owned bank said, "For the projects pushed by the local housing and construction department, we have not weakened the investigation and approval of the investigation, the approval of the approval, and the relevant loan and loan requirements." The person mentioned that the bank will still promote financial support for real estate under the principle of marketization and rule of law, "Taking our bank as an example, in the later stage, if the branch issues such a whitelist project loan is non-performing, the head office will still be held accountable." ”
It is difficult to execute, and it is difficult to go to the sky!
2. Can local debts be managed?
Since local governments are not independent entities in the legal sense, and the tenure of officials is short, it has led to the institutional impulse of "blindly borrowing money to achieve political performance". The local debt accumulated by this problem is already quite serious. Compared with the United States, Japan and other countries, China's government debt is concentrated in local governments, which is a prominent phenomenon.
Local government debt pressure must be taken seriously: 1) local government debt pressure will lead to a chain reaction such as arrears of funds to private enterprises, and 2) the decline in local government revenue will affect the stability of civil servants and public institutions. The 2014-2015 real estate downturn caused local civil servants to pay off wages, a phenomenon that needs to be paid attention to.
The Report states:
• Coordinate the resolution and stable development of local debt risks, further implement the package of debt reduction plans, properly resolve the risks of existing debts, and strictly prevent the risks of new debts
• Establish a government debt management mechanism that is compatible with high-quality development, improve the full-caliber local debt monitoring and supervision system, and promote the transformation of local financing platforms by category.
Knock on the blackboard: The bigger challenge is that it is difficult for a clever woman to cook without rice. Since local governments play a pivotal role in China's economic growth model, there is also a dilemma between guarding against local government debt risks and promoting economic growth.
3. Can college students be successfully employed?
Employment, especially for young people and university students, is a prerequisite for social stability. In this sense, "the economy is the biggest politics". In particular, the Report states:
• Strengthen support for enterprises in industries with large employment capacity. It is estimated that there will be more than 11.7 million college graduates this year, and it is necessary to strengthen policy measures to promote youth employment.
The author believes that the key to stabilizing employment depends on private enterprises. The "eight" in the "five, six, seven, eight, nine" of the private economy refers to the employment of more than 80 percent of the urban labor force. Here's the problem: private investment will fall by 0.4% year-on-year in 2023. Without investment, it is difficult to create jobs. To increase private investment, we should:
1) Expand market access for private enterprises, give private enterprises more investment space, and give private enterprises the opportunity to invest;
2) It is necessary to truly break the financing difficulties of private enterprises and let them have the ability to invest;
3) It is necessary to substantially promote reform, improve the expectations of private enterprises, and give private enterprises the confidence to invest.
4. Can officials be active?
As the reform enters the deep waters, the phenomenon of official inaction, low-level red, and high-level black has become an important factor affecting economic development. The Report states:
• Improving administrative efficiency across the board...... Continuously improve execution and credibility...... Have the courage to think outside the box and be path dependent...... In terms of implementation, we should be uncompromising, vigorous and resolute, truth-seeking and pragmatic, and dare to do good deeds, so as to ensure that the final effect is in line with the decision-making intentions of the Party Central Committee and conforms to the expectations of the people...... Resolutely rectify formalism and bureaucracy, further streamline documents and meetings, improve supervision, inspection and assessment, and continue to reduce the burden on grassroots units and enterprises. Implement the "three distinctions" and improve the responsibility of cadres as an incentive and protection mechanism.
Officials at all levels are the transmission center of economic and social operations. How to arouse the enthusiasm of officials is an urgent task. The Hunan Provincial Party Committee and Provincial Government's "Notice on Carrying out the Great Discussion Activities of Emancipating the Mind in the Province" lists a series of phenomena that deserve great attention ():
• The speed complex of the hero based on GDP growth, the anxiety of shifting gears that do not take the initiative to change the mode of development and are unwilling to bear the pains of transformation, the fraudulent impulse to "find a way" and "create performance" in the data, the path dependence of borrowing indiscriminately regardless of risks, blindly following the trend of projects, and paving the way for great achievements, not looking at reality, not acting according to the law, and "not afraid that the masses will not be satisfied, but afraid that the leaders will not pay attention", and the extensive model of simply relying on resources and capital investment to stimulate economic development is obsessed with "building momentum for a while" Instead of the utilitarian tendency of "benefiting one party", the tossing practice of "scribbling the cake" and implementing the "turning over the cake" in decision-making, the "ostrich mentality" of deliberately evading and covering up contradictions and problems, and the "lying flat" idea of "preferring not to do anything in order not to have an accident...... The habitual thinking of steadily engaging in construction and seeking development step by step......
The rule of officials is inseparable from "carrots and sticks". Carrots are more conducive to achieving "incentive compatibility". The one who wants the same wins.
Liu Shengjun @ Shenxian Ju
Economists who insist on telling the truth
Political Economy + Big Historical View
In 2014, he participated in the Prime Minister's Economic Symposium
Liu Shengjun is the founder of Micro Finance
Member of the Shanghai Economic Committee of the Zhi Gong Party
Chief expert of Shandong Provincial Human Resources Development Promotion Association
Author of "The Next Decade"
Shandong Heze Dingtao people