Inscription: On March 13, 2024, the 68th issue of the China Economic Observation Report "The Pressure and Motivation of China's Economy Interpreted by the Two Sessions" and the 30th Anniversary Celebration Kick-off Meeting of the Peking University Development Institute were held in Chengze Garden. Lin Yifu, Boya Chair Professor of Peking University, Honorary Dean of the National Development Institute, Dean of the Institute of New Structural Economics, and Dean of the South-South College, Xu Gao, Chief Economist and Managing Director of Bank of China Securities and Adjunct Professor of the Peking University Development Institute, Luo Zhiheng, Chief Economist and Dean of the Research Institute of Guangdong Kai Securities, and Lu Feng, Professor of Economics of the Peking University Development Institute and Chair Professor of the Development Fund of the Alumni College, respectively delivered keynote speeches and conducted dialogues under the chairmanship of Wang Xianqing of the Communication Center of the National Development Institute. This article is organized based on the dialogue session.
Audience question: Mr. Lin, in your new book, you talked about the new quality of productivity and the strategic support for it, and emphasized the use of comparative advantages to achieve high-quality development. I would like to ask how to find and explore comparative advantages in the current macroeconomic environment? At the same time, please further elaborate on the connotation of new quality productivity.
Lin Yifu: That's a very good question. When participating in the discussion of the Jiangsu delegation during the two sessions, the general secretary mentioned that the development of new quality productive forces consists of two parts: new technological innovation and the transformation of traditional industries. Both aspects need to be promoted in accordance with local conditions in combination with the comparative advantages of resource elements in various regions. This is highly consistent with the concept of new structural economics. New structural economics emphasizes the use of our comparative advantage, which comes from the resource endowments of each region and the status of the industries we now have.
In my opinion, China has a clear comparative advantage in emerging industries such as artificial intelligence and big data. We have a huge human capital, a broad market and a complete industrial support, which makes us have an advantage in the research and development of emerging industries in areas with short R&D cycles and relatively low capital requirements. This advantage is already evident, for example, four of the top five most downloaded apps in the United States were developed by Chinese companies, demonstrating our competitiveness in the new economy of software. At the same time, we are also leading the world in terms of hardware such as electric vehicles, lithium batteries, and solar panels. For example, Tesla has developed electric vehicles in the United States for more than ten years, but its production has never exceeded 30,000. However, since it chose to invest in China, it has achieved a staggering 480,000 vehicles in just one year, not only reversing the situation on the verge of bankruptcy, but also jumping to become the world's most valuable car company, and also propelling Musk to the position of the world's richest man, which fully demonstrates our comparative advantage in the new economy that requires hardware.
As for traditional industries, there is also huge room for improvement. We can introduce, digest, and absorb advanced technologies, and use our advanced digital infrastructure to digitize industries, thereby improving productivity levels, unleashing new quality productivity, and contributing to national development.
Audience Question: I would like to ask Mr. Lin, what do you think is the biggest pressure on China's economy at present, and what is our biggest motivation to overcome these external or endogenous pressures?
Lin Yifu: The biggest pressure on China's economy at present lies in a lack of understanding of the current situation. Only by prescribing the right medicine can the medicine be cured. Without a clear understanding of the stressors, policies are not only ineffective, but may even exacerbate the problem itself. For example, the efficiency of state-owned enterprises cannot be solved simply through privatization, as the historical experience of the former Soviet Union and Eastern Europe has demonstrated.
In the context of the current international economic downturn, China, as the world's largest exporter and trading country, is facing reduced external demand, which undoubtedly affects the investment willingness and job creation potential of the export sector, which is dominated by private enterprises, and brings pressure on the economic downturn. However, there is still plenty of room for countercyclical adjustments, especially in terms of new infrastructure investment. If the government can use its fiscal space to play an active role and take corresponding measures, China's economy is expected to achieve stable development.
After we have a deep understanding of the main causes of the economic downturn, we will not easily blame the problem on the view that "the country advances and the people retreat". Instead, we will focus more on the opportunities emerging in the new economy and proactively look for them. In recent years, the development momentum of the new economy has been strong, especially in the fields of electric vehicles, lithium batteries, solar panels, etc., in which the private economy plays a leading role. This indicates that there is still huge space for the private economy to be tapped in terms of industrial innovation and upgrading.
At the same time, traditional industries also contain abundant opportunities. Through digital transformation, we can greatly improve the efficiency of traditional industries. In addition, a large number of products imported every year in the traditional economy are many high-tech and high-quality products, and we can actively introduce advanced technologies from these industries to improve our productivity level through digestion, absorption and innovation. In this way, it can not only meet the needs of the domestic market, but also expand to foreign markets. Therefore, opportunities are everywhere, just waiting for us to discover and grasp.
In general, the pressure on China's economy is mainly due to two aspects: first, the challenges of the external environment, and second, the accuracy of our understanding of the current situation. Once we have a deep and accurate understanding, we will be able to make better use of our favorable conditions to deal with the downward pressure brought about by the external environment. I firmly believe that we have the capacity and space to meet these challenges, while also having great potential for growth. In addition, as developing countries and countries in transition, we still have a lot of room for reform. By deepening reforms, we can further unleash the capabilities that have not been fully demonstrated due to the lack of reforms. In this way, we will be able to maintain a steady growth trend and achieve a reasonable growth rate.
Question: Recently, many large real estate companies have fallen into trouble, please ask Mr. Lin, does this mean that the government's rescue of real estate enterprises is limited, and may even acquiesce in the bankruptcy and liquidation of some enterprises?
Justin Lin: This issue can be viewed from two levels.
First of all, regarding the positioning of the real estate industry, the government has clearly put forward the policy orientation of "housing for living, not speculation", which is based on long-term stable development considerations. Because many mature countries have experienced the financial and economic crisis caused by the bursting of the real estate bubble, we need to avoid repeating the mistakes of the past. Positioning real estate as a residential-oriented rather than an investment tool is conducive to economic stability and the improvement of residents' welfare.
Secondly, although the emphasis is on "housing for living, not speculation", the real estate industry is still our pillar industry. In the process of urbanization, the demand for real estate will continue to grow. At the same time, as income levels rise, so does the demand for higher-quality housing. Therefore, the real estate industry still occupies an important position in the national economy, but it needs to remove the speculative component and pay more attention to the residential function.
Of course, in the process, some poorly managed real estate businesses may face a crisis. This is like in other industries, if a company is too highly leveraged, when the economy declines or the industry grows slowly, there may be a crisis, but this is a crisis for individual companies, and in general, it does not become a crisis for the entire industry.
Wang Xianqing: At this year's two sessions, the GDP growth target of 5% has attracted much attention, what are the favorable conditions for achieving this goal, and what are the unfavorable factors at the same time?
Xu Gao: It is indeed difficult to reach the 5% growth target, because the base has been raised. However, as an economy with oversupply, demand can be effectively stimulated by policy means, but supply is unlikely to increase out of thin air, so there is relatively more room for policy adjustment. In the past few years, the downward pressure on the economy has been greater, partly due to the excessive regulation of domestic demand, especially real estate. If policies are properly corrected, it will not be difficult to achieve the 5% growth target. However, the biggest challenge lies in the correction of perceptions. Many people have a prejudice against real estate, believing that it cannot continue to develop, and this perception is difficult to change. If this perception bias can be corrected, the problem will be easier to solve.
Luo Zhiheng: This year's 5% growth target is different from last year's 5% growth target because last year's target was based on a growth rate of 3% in 2022, while this year it is set on the basis of last year's growth rate of 5.2% and an average of 4.1% in the past two years, so it is more difficult.
The most favorable conditions are that infrastructure investment and equipment renewal may become the main support points of the economy. This year, the available funds for the fiscal sector have increased, including the issuance of deficits, special bonds, and ultra-long-term special treasury bonds. Among them, the scale of the deficit was 4.06 trillion yuan, an increase of 180 billion yuan over last year; the scale of special bonds was also expanded to 3.9 trillion yuan, an increase of 100 billion yuan over last year; 1 trillion yuan of ultra-long-term special treasury bonds will also be issued this year; and the additional 1 trillion yuan of treasury bonds issued last year will be mainly used this year. Taken together, we have about 10 trillion in capital bullets, which is significantly higher than last year's 7 trillion. This is the size of our spending this year, and the real scale of spending is on top of the figure of about 10 trillion plus the revenue of the year. More importantly, local governments felt pressured and uncertain in the process of debt resolution last year, and did not know where the debt would go, but now the path to debt through fiscal and financial synergy has been relatively clear, that is, in the short term, through interest rate cuts and extensions, so local government expectations are more stable. Of course, we are also concerned that infrastructure investment in some key provinces is restricted, and government investment projects are strictly controlled, and no new implicit debts are allowed, but what is strictly controlled is the possible new implicit debt and inefficient investment, and the areas that are supported by the state and high-quality development are still supported. Therefore, there is reason to believe that this year's infrastructure investment will become an important economic support point. In addition, there is also great potential for equipment replacement, the effectiveness of which will depend on the strength of our policy implementation, including fiscal support and monetary policy. Through these measures, we are expected to promote sustained and healthy economic development.
At present, we face two main headwinds: real estate and exports. These two areas have been a drag on economic growth in recent years. Therefore, whether the real estate market can be stabilized and ensure stable supply, demand growth, and stable housing prices is crucial for the healthy development of the economy this year. In the medium and long term, to promote the real estate boom to a scientific and technological innovation power, but in the short term, we also need real estate to stabilize the economy, economic transformation is a process, will not be achieved overnight, can not be said to develop new quality productivity, traditional industries do not want.
As for exports, it is more of an external variable, with relatively few factors under our control, and it is likely that its performance will be lower than expected. Judging from the data from January to February, the year-on-year and two-year average growth rate exceeded expectations, and the month-on-month was better than the seasonal, which seems to be a good performance, but considering the global economic downturn, the uncertainty of the global election year and the rising risk of geopolitical conflicts, exports for the whole year are still under great pressure.
In summary, infrastructure and equipment renewal are the economic support of this year, while real estate and exports are headwinds that cannot be ignored.
Lu Feng: Considering that the average growth rate in the previous two years was 4.1%, it is still challenging to achieve the 5% target this year. However, judging from China's potential growth estimates, this target may still be lower than the potential growth rate, and there is still potential for economic growth.
From the perspective of the international environment, the current economic situation is relatively stable, and the IMF's forecast for global economic growth at the beginning of the year has been slightly raised. However, economic growth is facing overcapacity in some industries, a complicated economic and trade environment, and especially the uncertainty brought about by the US election year, which may become a constraint on growth.
I mentioned earlier that the mainland's economic growth is characterized by "macroeconomic adjustment to ensure stability and reform to a higher level." This observation may not be invalid at present. When we talk about favorable conditions this year, I think that an effective repair of policy is key. Especially in the real estate sector, if the policy determination is greater, it can effectively make up for this shortcoming, which will not only support investment, but also greatly promote the consumption of related upstream and downstream. Of course, whether or not the policy can be quickly adjusted is indeed constrained by a variety of factors.
The favorable conditions for growth this year may be that the regulatory policy is relatively modest, and the recovery may gradually increase. This also reflects the relationship between economic performance and the effectiveness of policy interventions in recent years. At the same time, reform remains an important driving force for economic growth. Recently, there has been a heated discussion in the media and academic circles about reform, and if a systematic breakthrough in major reform policies can be achieved at the next Third Plenum, China's economy is expected to achieve more significant growth. Of course, it is also necessary to be aware of the constraints and avoid excessive optimism.
Wang Xianqing: Mr. Xu Gao also mentioned the plight of the real estate market before. In your opinion, what else do we need to strengthen or improve in terms of improving the real estate market?
Xu Gao: According to the latest data, the decline in weekly sales area in 30 cities is still significant, and the current real estate sales area is far lower than the same period in the past three years. In my view, current policies do not capture the heart of the matter. As we pointed out two years ago, the main contradiction in the real estate industry is the high credit risk of developers due to the financing crunch. Rising credit risk leads to a lack of confidence among homebuyers, and off-plan sales fall sharply, creating a vicious circle. In the past, demand-side stimulus has had limited effect, as consumers are more concerned about the soundness of developers than about interest rate fine-tuning.
In my opinion, what is most needed at the moment is inclusive bailout for real estate developers. It's not enough to bail out projects, because if developers can't stabilize, there will only be more and more problematic projects. While there are reservations about bailing out developers, it is important to recognise that the surge in property prices reflects a shortage of real estate, and developers are a key link in this supply chain. Under the tightening financing policy, the area of new real estate construction has shrunk significantly, which poses a huge challenge to future housing price control. Therefore, I believe that the real estate industry is the main contradiction of the current economy, and the credit risk of developers is its core issue. Current policies have yet to touch this core. The data shows that the downward trend of the real estate industry is still obvious, and the pressure on the economy is still huge.
Considering the high economic base in the first quarter of last year, the year-on-year growth rate in the first quarter of this year may decline. Without decisive measures in the real estate sector, such as adjusting financing policies and bailing out developers with public funds, there will be considerable pressure to achieve this year's 5% growth target.
Wang Xianqing: Mr. Luo mentioned that this year's available financial funds have increased by more than 3 trillion compared with last year, so in your opinion, how should these funds be more ideally allocated and used?
Luo Zhiheng: First of all, on the issue of real estate, I would like to add that I believe that ensuring supply and promoting demand go hand in hand. Real estate sales grew by 8% last year, but existing home sales actually grew by double digits. This shows that as long as we can ensure that the supply of housing is not unfinished, consumers are willing to buy. In terms of promoting demand, in addition to traditional interest rate measures, we can also start from other aspects. For example, the launch of high-quality commercial housing in the core areas of first-tier cities is in high demand. At the same time, we should consider appropriately adjusting some restrictive policies that still exist in first-tier cities and some second-tier cities, because the current supply and demand situation and expectations have changed, there is no need to worry about the problem of skyrocketing housing prices; In addition, it is necessary to make reasonable adjustments to the tax costs associated with real estate. Judging from the rhythm of policy introduction, it is necessary to optimize the real estate policy as soon as possible, and the policy should be released as soon as possible, and the expectations should be gradually reversed. The sooner it is introduced, the easier it is to dispel the wait-and-see sentiment of home buyers, otherwise the longer the wait-and-see process for home buyers, the more sellers will be, and the supply and demand will be more unbalanced, resulting in a delay in clearing the market. Of course, I believe that with the optimization and implementation of a series of policies, we can gradually stabilize the real estate market.
Returning to the allocation of fiscal funds, the estimated fiscal expenditure this year is 28 trillion yuan. In the economic downturn, I believe that it is necessary to discuss the effectiveness of policies and make the limited bullets more effective. First, fiscal policy should be based on expenditure policy, supplemented by revenue policy. Spending policies should dominate, while revenue policies such as tax and fee reductions should be complementary. This is because simple tax cuts and fee reductions may not effectively stimulate corporate investment and household consumption, but may lead to increased debt and rising risks, while fiscal spending will be able to expand aggregate demand, increase corporate income or household income, and then drive the economic cycle. Second, in terms of the direction of expenditure, we can gradually shift from focusing on investment to paying equal attention to investment and consumption. For example, increasing residents' disposable income through transfer payments is a direction worth exploring. At the same time, we should also use funds to support areas of new productivity, such as additional deductions for R&D expenses, interest discounts and other support measures for the expenditure side, so as to promote innovation and technological progress.
Xu Gao: Let me add one more point. At present, the real estate market is facing great pressure from short-term house price declines, and the area of commercial housing for sale is close to 700 million square meters, and the market is oversupplied, but this is not the norm. There are two main reasons for this situation: first, the credit risk of developers has led to a sharp decline in real estate sales, but the demand has not disappeared, but has only been temporarily suppressed, and second, the area of real estate completions has remained high, and developers have accelerated the completion of real estate in order to recoup funds, further exacerbating the short-term imbalance between supply and demand.
However, we should also note that the area of new real estate construction has shrunk significantly to one-third of the previous one. The pent-up demand will be released sooner or later, so the contradiction between supply and demand in the real estate market may be reversed in the future. When there is a shift from oversupply to undersupply, the upward pressure on housing prices will increase significantly. Because it takes time to build a house, it is not possible to meet the market demand quickly.
Therefore, the current real estate policy has not been able to effectively solve the market problem in the short term, and the pressure on the rise of house prices in the medium and long term is also accumulating. The real estate industry urgently needs effective policies to mitigate risks.
Wang Xianqing: Next, I would like to ask Mr. Lu, you mentioned the problem of overcapacity earlier, which is indeed worthy of our vigilance. However, in terms of industry or management, sometimes overcapacity will also prompt some particularly excellent enterprises to stand out. Because in the environment of overcapacity and vicious competition, these companies can better control costs and improve innovation capabilities. So, what kind of overcapacity do you think can be considered benign?
Lu Feng: Today, instead of comprehensively discussing the theoretical and practical issues involved in overcapacity, we focused on the current performance and characteristics, especially the impact on the external economic and trade environment. In the early years of the new century, I discussed the overcapacity situation and how to deal with it at the CEO and on other occasions. Overcapacity does have a multifaceted function. For example, it helps the industry to consolidate and survive the fittest, thereby promoting the growth of the industry, and at the same time, the price reduction accompanied by excess is also a benefit to consumers. However, if there is overcapacity in multiple sectors, this may mean that the allocation of resources is somehow out of efficiency, and therefore remains an issue that requires attention and appropriate scope.
In addition, given that China's manufacturing sector accounts for about 30% of the global economy, if there is significant overcapacity, there will inevitably be some spillovers. These effects may in turn adversely affect us through the complexity of economic and trade relations. Therefore, when dealing with the problem of overcapacity, we need to consider both its positive functions and negative effects, and take corresponding measures to balance and deal with it.
Question from the audience: Regarding the problem of overcapacity, I would like to ask Mr. Lu Feng for further advice. At present, regional competition from local governments seems to have exacerbated the phenomenon of overcapacity. For example, last year, we counted seven or eight cities that claimed to build lithium battery cities. In addition, various places built intelligent computing centers before the emergence of ChatGPT, but then due to improper selection of tracks, a lot of investment was wasted. This phenomenon seems to stem from the blind competition and duplication of layout by local governments before planning. So, in the future, how can we avoid similar problems? How can we better carry out regional planning, or optimize the allocation of resources through regional cooperation? Is a unified national market a viable solution? Or should we rely more on market competition and let the government have only limited planning and participation?
Lu Feng: This question is also of great practical significance. What role local governments play in the new round of overcapacity or capacity expansion, and how it may change in the future, are all topics that need to be focused on and analyzed when studying the problem of overcapacity.
Over the past period, China's industrial policy has undergone continuous innovation and adjustment. One of the distinctive features is to promote certain short-board industries that we believe need to be developed through industrial funds. In this process, both the central government and local governments have played a role, but the local governments have invested more significantly in the aggregate. Taking new energy vehicles, power batteries, chips and other industries as examples, we have indeed seen some successful experiences of local interventions, but there are also poor and unsuccessful investment results. From the perspective of background analysis, overcapacity often stems from too high or too fast upfront investment, so how to understand the role of local governments is the proper meaning of the question.
I think there are two regulatory mechanisms here. First, even if there is no overcapacity, there will be a natural process of elimination for the success or failure of the investment. In some areas, investments can pay for themselves and have a positive impact on the local economy, while others may be at risk of losing all their money. To some extent, this self-elimination mechanism is a constraint on local government intervention. However, the problem is even worse when there is overcapacity. Even if micro-investments are successful, changes in the industry landscape can still cause problems. Therefore, we need to maintain a cautious attitude towards the investment of local government industrial funds.
Second, there are still some common institutional constraints on government investment, such as the possible incentive mechanism when using public sector funds for investment. While it is not excluded that through learning and practice, local government officials can make progress and correct traditional biases, thereby increasing the chances of success stories. However, on the whole, I think that more systematic empirical research is still needed, and we still need to be cautious.
Therefore, we need to sum up our experience and promote market-oriented reforms. As Professor Law has just mentioned, the Government should clearly define its functions. At certain stages, government intervention may be necessary, but in the long run, more decisions and actions should be left to the market and good business. In this way, we can more effectively avoid the problem of overcapacity and promote the healthy development of the economy.
Question from the audience: I would like to ask about the issue of market access for private enterprises in the field of emerging industries. At present, there are still certain thresholds for private enterprises in commercial aerospace and other fields, although the government work report has clearly stated that the development of these industries will be supported. Mr. Lu thinks that how to further open up to private enterprises in emerging industries?
Lu Feng: Regarding market access, I think it should be as open as possible. Back in the early years of the new century, one of the purposes of policy attention to overcapacity was to restrict investment, especially by private enterprises. I disagree with this and have some discussion on it. More than a decade later, we have made significant progress in easing access. However, there is still a further easing of investment restrictions. After all, the mainland's manufacturing industry has basically opened up to foreign investment, and it is reasonable to be more open to private enterprises in the country, so as to avoid bias in reverse national treatment? I feel that the official view on this issue has also made significant progress compared with 20 years ago. Even in special fields such as the aerospace sector, we can learn from the experience of companies such as Tesla and try to fully mobilize the enthusiasm of private enterprises. In today's situation, it is clear that we should have more confidence in private enterprises. This will help boost confidence and further enhance the vitality of supply, while also promoting demand to cope with the current lack of demand.
Audience Question: Please ask Mr. Lu. First, on the causes of global overcapacity, you mentioned changes in industrial policy in the U.S. and Western countries, including nearshoring and friendshoring. I would like to know to what extent do you think these policies have exacerbated the current phenomenon of overcapacity, or are they just beginning to show their effects, and there may be even bigger impacts ahead? Second, the current situation with US and EU trade protectionists against China seems to be more complicated than the US-China trade war a few years ago. At that time, tariffs were the main instrument, but now more non-tariff measures may be involved. What do you think will happen if the United States really sets its sights on China's "new three" exports and adopts a series of trade protection measures?
Lu Feng: Regarding the impact of overcapacity and its quantification, it is indeed necessary to have in-depth discussions in different sectors. The adjustment of industrial policies in the United States and the West, including the increase in onshore, nearshore and friendly investment in the United States and its allies due to geopolitical considerations, has had a significant impact on the increase in production capacity in some sectors in recent years, which is more obvious in the expansion of chip production capacity, and also in the field of new energy.
Changes in the trade balance situation linked to supply expansion may cause new tensions in foreign economic and trade relations, and the EU is one of the trends in China's new energy vehicles with the help of the countervailing mechanism. For example, some U.S. politicians recently pointed out that Mexico's exports to the U.S. actually contributed to China's industrial relocation. Although the USMCA contains specific provisions for Chinese exports, it does not appear to have completely blocked the flow of more cost-effective Chinese goods. Whether the United States will take additional measures in the future is a question that needs to be watched.
At the end of last year, I mentioned in my article China's strategy of circumventing trade frictions or trade barriers through direct investment. After investment in a third country, exports are no longer regarded as direct Chinese exports to the United States, but as exports from third countries to the United States. However, if a new round of overcapacity develops further and the mainland's export competitiveness further improves, it is also questionable whether the United States and the West will seek to adopt more unreasonable restrictive measures on such direct investment in the mainland. At the end of last year, the U.S. Congressional task force put forward the extreme proposition of canceling China's most-favored-nation status in the report on the reset of China policy, and Trump proposed extremely exaggerated tariff protection measures in the election year, which is related to the new dynamics of overcapacity and trade balance, indicating the increased uncertainty of the external environment pointed out by the Central Economic Work Conference and the government work report. This requires proper attention and analysis, and precautions should be taken in advance.
Wang Xianqing: For individual investors or entrepreneurs, what investment areas does Mr. Luo think should be the most important to focus on in 2024?
Luo Zhiheng: I would like to add some observations on the problem of overcapacity, you may have noticed a concept called "equity finance" in recent years, that is, the government sets up a guidance fund and then incubates some high-tech enterprises, which not only develops the industry, but also can make a profit through exit. This idea is good, but I don't think it can be promoted across the country, otherwise there will be chicken feathers and overcapacity. Therefore, this model does not solve a basic problem, that is, the contradiction between the low-risk preference of financial funds and the high-risk characteristics of the high-tech industry, and at the same time, this model also relies on the highly keen market awareness of government departments and the corresponding due diligence exemption system, etc.; not every place has the corresponding industrial resources; not every place has relevant human resources, and the market will definitely identify investment opportunities better than the government. At the same time, the concept of "equity finance" is specious, and in addition to relying on the taxes obtained by political power, the socialist public ownership state can naturally obtain income by virtue of property rights; if the above model is regarded as equity finance, will the income from land transfer be regarded as equity finance? Of course, it is the realization of government property rights, but is the income from the state-owned capital operating budget counted as equity finance? Of course, it is the profits of government property rights and dividends. So be cautious about looking at this concept and this model.
Now I would like to answer Mr. Wang's question, which is more complicated, because whether it is the real estate market or the capital market, there are many departments and factors involved. With regard to the real estate market, there has been a discussion before, and I will now focus on the situation in the capital market.
In my opinion, this round of capital market rallies is mainly due to policy expectations triggered by personnel changes. Normally, after the Spring Festival and before the release of economic data in January and February, there will be a so-called "spring restlessness" in the market. Why is there a general rise during this period? Since the economic data for January and February have not yet been released at this stage, the financial data is okay because commercial banks and other banks have put credit forward, which makes everyone feel that the economy seems to be improving. At the same time, there is still some time before the release of the data in March, and it is at the stall of the two sessions, which gives the market room to tell stories. This is the "spring agitation" effect that is often referred to in sell-side research.
As for the rise and fall of the capital market, I will not express my opinion for the time being. But I think that in order for the capital market to be stable and long-term and enhance its internal stability, we need to carry out some institutional reforms.
First of all, high-quality listed companies are the foundation of the capital market. To achieve this, we need to smooth the channels for companies to enter the market and improve the delisting system to ensure that bad companies are eliminated and good companies are left.
Secondly, we need to strengthen our dividend to attract more investors. China's capital market is still far behind Japan and the United States in terms of dividends, and increasing dividends can enhance its attractiveness.
In addition, we need to bring in more medium- and long-term funds, which requires reforming the annual assessment mechanism for medium- and long-term funds and further improving financial instruments.
Finally, we must increase the cost of violations of laws and regulations in the capital market to ensure the integrity of the enterprises and information disclosure that remain in the capital market, and make the costs and benefits more compatible through strict punishment and strict laws, so that enterprises and intermediaries do not dare to falsify, and the market is clean and the pricing is reasonable. Through these reforms, the capital market will be more likely to achieve the goal set out in the Government Work Report, that is, to enhance its endogenous stability, so that the capital market can achieve "long cattle and slow cattle and slow cattle".
![The Dow is at a new high! Gold continues to be bullish, with 48% of global fund managers expecting China's economy to strengthen...[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)