Zheng Lianghai is a member of the China Chief Economist Forum and the Chief Economist of Fuanda Fund
The Political Bureau of the Central Committee of the Communist Party of China held a meeting on April 30, and the main topics of the meeting were three major topics:
- Determine the time for the convening of the Third Plenary Session of the 20th CPC Central Committee. The meeting decided to convene the Third Plenary Session of the 20 th CPC Central Committee in Beijing in July this year, with the main agenda being that the Political Bureau of the CPC Central Committee should report its work to the CPC Central Committee, focusing on the study of the issue of further comprehensively deepening reform and promoting Chinese-style modernization.
- The meeting analyzed and studied the current economic situation and economic work. According to the usual practice, the central economic work conference held at the end of April was mainly to analyze the economic operation in the first quarter and make arrangements for the economic work.
- reviewed the "Opinions on Several Policies and Measures for Continuously and Deeply Promoting the Integrated and High-quality Development of the Yangtze River Delta".
First, the beginning of the economy: to achieve a good start, there are still many challenges
Good start: The economy has made a good start with an increase in positive factors, a continuous increase in momentum, an improvement in social expectations, and a solid advance in high-quality development, showing the characteristics of rapid growth, structural optimization, and improving quality and efficiency.
There are still many challenges: the economy still faces many challenges in the continuous recovery and improvement, mainly due to the lack of effective demand, the greater pressure on business operations, the lack of risks and hidden dangers in key areas, the lack of smooth domestic circulation, and the obvious increase in the complexity, severity and uncertainty of the external environment.
Enhance confidence: At the same time, it must be noted that the mainland's economic foundation is stable, has many advantages, is resilient, has great potential, and that a good start and a good rebound are the basic characteristics and trends of the current economic operation, and it is necessary to enhance confidence in doing a good job in economic work.
In the first quarter of this year, the economic data of the first quarter of this year, the GDP growth rate and the main indicators exceeded market expectations, but a number of indicators in March fell back from January to February, high-frequency and PMI data, the momentum in April was weaker than expected, the annual economic target can not be relaxed, and the policy still needs to be forced.
2. Macro policy: rely on the front to make efforts to avoid tightening before and loosening later
The meeting pointed out that it is necessary to make efforts to effectively implement the macroeconomic policies that have been determined, and to implement a positive fiscal policy and a prudent monetary policy.
Fiscal policy: It is necessary to issue and make good use of ultra-long-term special treasury bonds as soon as possible, speed up the issuance and use of special bonds, maintain the necessary intensity of fiscal expenditure, and ensure that the "three guarantees" at the grassroots level are spent on time and in full.
Monetary policy: It is necessary to flexibly use policy tools such as interest rates and reserve requirement ratios to increase support for the real economy and reduce the comprehensive financing cost of society.
In the first quarter of this year, the monetary policy remained loose, with a RRR cut in January and an interest rate cut in February, with abundant liquidity and a low funding rate. In terms of fiscal policy, most of the trillions of treasury bonds issued in the fourth quarter of last year were used in the first quarter of this year, while the issuance progress of new local special bonds was lower than that of the same period in history. At the same time, the cumulative fiscal expenditure in the first quarter was 2.9% year-on-year, and the expenditure progress was flat compared with the average of the past three years, but the growth rate of expenditure in March was lower than that in January and February. Judging from the macroeconomic policies decided this year, the central government's fiscal investment and the broad fiscal deficit ratio have both maintained an expansion pace, and maintaining the intensity of fiscal expenditure and giving full play to the role of fiscal funds in leveraging are of great importance to expanding demand and stabilizing confidence. In our view, monetary policy is expected to remain accommodative in order to match the issuance of ultra-long bonds, and the probability of a RRR cut in the second quarter remains high.
3. Develop new quality productive forces in accordance with local conditions
The meeting stressed the need to develop new productive forces in the light of local conditions. It is necessary to strengthen the layout of national strategic scientific and technological forces, cultivate and expand emerging industries, advance the layout and construction of future industries, and use advanced technology to empower the transformation and upgrading of traditional industries. It is necessary to actively develop venture capital and expand patient capital.
The concept of new quality productivity was first mentioned by General Secretary Xi Jinping at the Northeast Revitalization Symposium in September 2023, and it is also the primary task established in this year's government report. General Secretary Xi Jinping pointed out that the development of new quality productive forces is not to ignore and abandon traditional industries, but to prevent a rush and bubble, and not to engage in a model. All localities should persist in proceeding from reality, first establish and then break down, adapt measures to local conditions, and provide guidance by category. According to the local resource endowment, industrial base, scientific research conditions, etc., selectively promote the development of new industries, new models and new kinetic energy, use new technologies to transform and upgrade traditional industries, and actively promote high-end, intelligent and green industries.
Source: All important meetings and information, compiled by Fuanda Fund
The Central Economic Work Conference put "leading the construction of a modern industrial system with scientific and technological innovation" at the top of the key work arrangements for the coming year, and focused on four main lines: 1) new industrialization, digital economy, and artificial intelligence, 2) strategic emerging industries: biomanufacturing, commercial aerospace, and low-altitude economy, 3) future industries: quantum, life sciences, and 4) industrial transformation and upgrading: digital intelligence technology, and green technology. The first of the ten primary tasks identified in the 2024 government work report is to "vigorously promote the construction of a modern industrial system and accelerate the development of new quality productivity".
Source: 2024 Government Work Report, compiled by Fuanda Fund
Fourth, real estate and prevention and mitigation of risks
The meeting pointed out that it is necessary to continue to prevent and resolve risks in key areas.
Real estate: Continue to adhere to city-specific policies, consolidate the responsibilities of local governments, real estate enterprises and financial institutions, and earnestly do a good job in ensuring the delivery of housing to protect the legitimate rights and interests of home buyers. It is necessary to combine the new changes in the supply and demand relationship of the real estate market and the new expectations of the people for high-quality housing, coordinate the study of policies and measures to digest the stock of real estate and optimize the incremental housing, and pay close attention to building a new model of real estate development to promote the high-quality development of real estate.
Local government debt: It is necessary to implement a local government debt risk mitigation plan in depth to ensure that provinces, cities and counties with high debt risks can truly reduce their debts and develop steadily.
Small and medium-sized financial institutions: It is necessary to continue to promote the reform of small and medium-sized financial institutions to reduce risks, and take multiple measures to promote the healthy development of the capital market.
In the first quarter of this year, real estate data remained under pressure, with real estate development investment falling by 9.5% year-on-year in the first quarter, the sales area of newly built commercial housing falling by 19.4%, of which the sales area of residential buildings fell by 23.4%, and the funds in place for real estate development enterprises fell by 26.0%. In March, the real estate development prosperity index was 92.07. Property sales in March were -18.3% year-on-year, up from -20.5% in January-February. The National Bureau of Statistics pointed out that the current mainland real estate market is still in the process of adjustment, in the first quarter of this year, the decline in some sales indicators of mainland real estate expanded, due to the high base of comparison in the same period last year, and March last year was a "small spring" in real estate sales.
For the resolution of local government debt risks, after the issuance of special refinancing bonds last year, some regions continued to issue refinancing bonds in the first quarter of this year to resolve local government debt. After several rounds of debt conversion since 2015, certain results have been achieved. On April 10, the relevant responsible comrades of the Ministry of Finance responded to reporters' questions on the outlook for Fitch's downgrade of China's sovereign credit rating, and emphasized that the Ministry of Finance will arrange a certain scale of refinancing government bonds within the space of the local government debt limit to support local governments, especially high-risk areas, to resolve the hidden debts of financing platforms and clear up the government's arrears to enterprises, so as to alleviate the pressure of centralized repayment of mature debts and reduce the burden of interest expenses. In accordance with the principle of "the province bears the overall responsibility, and the cities and counties do their best to reduce debts", all localities base themselves on their own efforts, coordinate all kinds of resources, formulate plans for debt reduction, and clarify specific measures one by one. Through the concerted efforts of all parties, the local debt risk has been alleviated as a whole. The payment of principal and interest on local government statutory debts has been effectively guaranteed, and the scale of implicit debts has gradually decreased. On February 23 this year, Premier Li Qiang presided over an executive meeting of the State Council to make arrangements to further prevent and resolve local debt risks. The meeting pointed out that it is necessary to adhere to reform and innovation, strengthen supporting policy support, persistently advance the tackling of tough problems, and further promote the implementation of the package of debt solutions. It is necessary to strengthen governance at the source, combine near and far, block and sparse at the same time, and treat both the symptoms and the root causes, accelerate the establishment of a government debt management mechanism that is compatible with high-quality development, and gradually resolve local debt risks in high-quality development.
Fifth, the integrated development of the Yangtze River Delta
The meeting pointed out that it is necessary to deeply understand the strategic intent of the Party Central Committee, promote greater breakthroughs in the integrated development of the Yangtze River Delta, and better play the role of pioneering, leading and demonstrating, and radiating and driving. The meeting deliberated on the "Opinions on Several Policies and Measures on Continuously and Deeply Promoting the Integrated and High-quality Development of the Yangtze River Delta", and made it clear that it is necessary to always focus on the two keys of integration and high quality, and strive to complete the four major tasks deployed by the central government:
- It is necessary to accelerate breakthroughs in key core technologies, coordinate and promote the upgrading of traditional industries, the growth of emerging industries, and the cultivation of future industries, and jointly build innovation chains, industrial chains, and supply chains on a larger scale.
- It is necessary to speed up the improvement of systems and mechanisms, break down administrative barriers, improve policy coordination, and promote the expansion of integration to deeper and broader fields.
- It is necessary to take the lead in aligning with international high-standard economic and trade rules, actively promote high-level coordinated opening-up, and create new advantages for a higher-level open economy.
- It is necessary to adhere to the bottom-line thinking, coordinate development and security, and strengthen the joint governance of the ecological environment and regional green development cooperation.
On the whole, the key tasks of the integration of the Yangtze River Delta are all centered on the core content of high-quality development, mainly involving the construction of core technologies and industrial clusters, the unification of large markets and integrated construction, in-depth and high-level opening-up, safe development and ecological protection. The deliberation of the Political Bureau of the CPC Central Committee on several policies and measures to deepen the integrated and high-quality development of the Yangtze River Delta is enough to highlight the ardent expectations of the CPC Central Committee for the construction of the Yangtze River Delta, and also fully reflect the role of the Yangtze River Delta as the locomotive in realizing China's modernization. The meeting required that the Central Leading Group for Regional Coordinated Development should strengthen overall coordination, relevant departments should increase support, Shanghai should better play a leading role, and Jiangsu, Zhejiang and Anhui provinces should develop their strengths, gather strong work forces, and continue to write a new chapter in the integrated development of the Yangtze River Delta.
Attached: Comparison of the main measures of the recent Politburo meeting
Source: Politburo meeting of the CPC Central Committee, compiled by Fuanda Fund