Jia Kang: Consolidate fiscal and monetary policies and real estate regulation in the context of economic improvement

This article is based on Mr. Jia Kang's speech at the 21st Blue Chip Annual Conference hosted by the Economic Observer (June 19, 2024).

Thank you, host, and hello everyone! Just now, Professor Chen Huai talked about a good understanding of the theme of real estate, from common sense to philosophy to basic ideas. In accordance with the topic given by the organizers, I would like to talk about the understanding of consolidating the two major policies of fiscal and monetary macroeconomic control and real estate regulation and control from the macro level.

First, let's sketch out the overall development situation. In 2023, which has passed, I value it as having the importance of pursuing an L-shaped transformation with the fact that China's macroeconomic operation has not completed a downward process since 2010, but is expected to use 2023 as a "year of opportunity" to pursue L-shaped transformation. In 2010, after the mainland successfully resisted the world financial crisis, the economic operation reported double-digit growth, and the central government at that time specially put forward the general tone of the economic work of stability and stability. In fact, we have not yet achieved the "L-shaped transformation" needed to "recognize, adapt and lead the new normal" in 2023. From 2020 to 2021, from 6.1% in 2019 to 5.2%, and from 2022 to 2023, it will fall from more than 5% in the previous to a compound average growth rate of only 4.1%. But in 2023, after all, we are standing at more than 5% year-on-year that year, and we have achieved 5.2% after hard work, and this year we will continue to raise about 5% as the guiding macroeconomic annual growth target, and a very important change is preceded in this regard: in November 2022, after the "epidemic prevention transition" mentioned by the central government, we have a great probability that the epidemic will no longer be a serious drag on the entire economic and social life, and macro policies are emphasizing the development of the last word, new quality productivity to support high-quality development, As well as unswervingly developing and growing not only the "56789" private economy, but also the upgrading of the "digital and real integration" that we strive to achieve with new quality productivity in this regard, as well as the increase in policies, and other factors, I think we can rely on the objective growth of China's economy and society, industrialization and urbanization still have considerable development depth This objective condition, coupled with very critical subjective efforts, to achieve 5% that has continued for a period of time from 2023 to this year The above is the new normal platform running state. In fact, in order to implement the "new two-step" modernization strategy, we must pursue such an L-shaped transformation in the macro aspect, from the new to the normal. The central government's current emphasis on the combination of counter-cyclical expansion of domestic demand and cross-cyclical supply-side reform is to achieve the strategic goal of modernization with medium-high-speed and high-quality development in 2035 and the next 2049-50 years.

After sketching this background, it is necessary to briefly discuss macroeconomic regulation and control. Under the orientation of governance optimization, the active fiscal policy continues to emphasize expansionary afterburner and efficiency; The most critical element of the so-called prudent monetary policy is actually to maintain reasonable and abundant liquidity. In coordination with these two major policies, in terms of finance, we particularly attach great importance to the issuance of ultra-long-term special treasury bonds starting this year with 1 trillion yuan, and then there will be multiple rounds of issuance; In terms of the central bank, in fact, it continues to operate in the channel of interest rate cuts and RRR cuts, and in May, the central bank set up 300 billion yuan of affordable housing reloans, in fact, this is an introduction to money, with the overall economic prosperity to improve the structure at the same time, in terms of monetary policy, with 300 billion yuan of affordable housing supply and real estate market linkage, first the social policy to better implement this matter. As long as the bottom is better supported on the guarantee track, the operation state on the commercial housing track has a supporting condition that makes it more healthy. Moreover, it is necessary to bring more funds together with refinancing, from the collection and storage of the part of the houses that have been built and thought to have inventory pressure in the past, and it is possible to consider the optimization of the overall use structure as a whole, so as to promote the real estate market that everyone is concerned about after the previous period of problems in the overall operation of the bottom to stabilize, and to move towards a better state. In terms of the monetary policy and the real estate market, the first mortgage interest rate for home purchases has also made very obvious downward adjustment and liberalization arrangements. These are the bright spots in the operation of major policies. When the fiscal policy is helping the expansion of aggregates, we should pay special attention to its function of highlighting key points and optimizing the structure. In the whole macroeconomic regulation and control, after all, the monetary policy is more responsible for the implementation of the so-called demand management of the aggregate control through monetary tightening, of course, it can also be under the principle that China pays special attention to "directional easing", the so-called "flexible and effective" at the same time, considering the structural aspect also has a role in promoting optimization. However, after all, the basic positioning of monetary policy itself is to first do aggregate control. Therefore, I would like to point out that there is a point of view that the level of prosperity in the real estate industry, which has been discussed for many years and is of concern to everyone, is determined by monetary policy, and I think this has fallen into a misunderstanding. Monetary policy itself can not alone determine the level of prosperity of the real estate market, let's imagine: from the basic logic, a few years ago, monetary policy has particularly emphasized the concept of stability to tighten, and at that time we feel more that the real estate market at every turn to rapidly increase the heat, and in recent years, monetary policy has emphasized that liquidity is reasonable and abundant, in the process of correcting the "synthetic fallacy" since 2022, monetary policy for real estate can be 180 degrees after the warm wind blows, Increasing the supply of funds for rigid and improving needs, easing the relevant lending rates and removing administrative restrictions on supporting conditions, but why is it that the overall recovery of the real estate market is still lower than the general expectations of the public? How much does this monetary policy play a role in the overall prosperity of the real estate market? From this observation in practice, it can be seen that in fact, there are a variety of factors that determine the changes in the real estate market, the most fundamental of which is the relationship between supply and demand in the market. In this regard, monetary policy, as a policy that mainly regulates aggregates, only plays the role of a background environment. After the real estate market has seen major changes in the relationship between supply and demand, it is expected that the monetary policy will continue to be loose, but do not think that with the condition that the monetary policy is loosening, the problem of our real estate market will be successfully solved.

After delineating the above two levels, I would like to talk about some views on real estate regulation.

First of all, we can note that in the process of changes and ups and downs in the real estate market, the central government has always adhered to a basic judgment, that is, the real estate industry is an important pillar industry of the national economy. If we make an objective analysis, China's overall industrial development is accompanied by industrialization and urbanization, which are the main trend of the development of global human civilization, and this industrialization and urbanization are two sides of the same coin. China's current industrialization of my basic understanding is from the middle to the late stage, to the later stage of the transformation process, "world factory" in the manufacturing industry in the world's largest scale is still "big but not strong", "made in China" must be upgraded to "created in China" and "intelligent manufacturing in China", China must change the central government is still the world's largest developing economy in the world, the basic reality of "international status has not changed". Upward upgrading and development, means that on the one hand, we must recognize our own shortcomings, on the other hand, we must understand the potential space behind ourselves, the depth of promotion is still considerable, is a very unique mega economy in the world to complete its own growth process to industrialization led by such an interaction of demand and supply, and in actual life, this must be manifested in China's urbanization must go through the real level of urbanization that high-speed development stage. International experience shows that this stage of rapid development is about 30 to 70 percent, with a room of 40 percentage points. At the beginning of China's reform and opening up, the level of urbanization was only a dozen percent, and now there are two concepts: although the urbanization rate of the permanent population has reached 65%, it is seriously mixed with water, and China's real urbanization level must first look at the urbanization rate of 47% of the registered population, and this urbanization index of the registered population tells us that more than half of the Chinese have not yet obtained the status of citizens, and there are still nearly 300 million so-called "migrant workers and their families" who have entered the city and are still working, living and living in urban areas relatively stably. They may have been living, working and living in the central area here for more than 10, 20, or even 30 years, but they are struggling to get a city hukou - Beijing, Shanghai, Guangzhou and Shenzhen are the most typical, why? That is, our real urbanization level cannot support such an effective supply, and we dare not give them the real equal treatment of public services. So what is needed? Make-up classes are required. I think it's okay to raise China's real urbanization level by 47%, because after all, the urbanization rate of the permanent population contains positive factors for urbanization. But to neutralize the two indicators, I myself have always been this view: although there is no very precise argument, and I don't think people can do this kind of argument, but we can roughly look at China's real urbanization level at around 55%. In other words, China has completed the stage of rapid urbanization development, at least 15 percentage points, and it will not go up to one point in a year (because this is the second half of the period, and the point that will go up in the future will be more and more decreasing in amplitude), even if it is assumed that it will go up to one point in a year, it will be after the "new two-step" 2035 basically completes socialist modernization. In this process, industrialization and urbanization are combined, and we already have the most representative and supporting force of about 700 central areas (large and medium-sized, representative areas of urbanization), the leading trend must be the urban-rural junction and extrapolation, in addition to building a lot of new districts, but also to better develop metropolitan areas and urban agglomerations, do a good job of interconnection, to have a round of infrastructure construction and upgrading, but also accompanied by a round of industrial interaction and upgrading, along with a round of human capital cultivation. What is the most supportive pillar industry in this? Obviously, the real estate industry plus the construction industry, we can broadly consider it as a real estate formation industry, its proportion in the entire Chinese GDP, dozens of industries in these two concepts - statistically called construction and real estate, to account for more than 17%, it is of course one of the important pillar industries of the national economy. So under the "problem-oriented" that the central government is now particularly emphasizing, the dual-track overall planning of housing has made efforts to make affordable housing such a social policy support thing to be practical, so that all members of society can live from the bottom, and at the same time, of course, it is necessary to consider how to form a new model of real estate development. The new model of this pillar industry is to pursue the "long-term mechanism for healthy development" mentioned by the central government a few years ago, and it is the contribution of such a pillar industry to the overall situation that is needed for long-term peace and stability.

Then, from the perspective of review, looking at the real estate operation in the past ten years, the relevant regulation and control have been alternating with the overall situation, such as a few roller coasters. In the midst of several rounds of ups and downs, I would like to emphasize that after the "9.30" New Deal in 2016, the problem of "treating the symptoms but not the root cause" of administrative means has been very clear, and the article in the People's Daily has made a summary of this keyword. Of course, we cannot give a high-level evaluation in terms of regulation and control, and we must change to treating both the symptoms and the root causes and pursuing the root causes. In the actual operation, we saw that after the "9.30" new deal administrative means were mainly used to press down the heat, in the middle of the epidemic, in the second half of 2020, Shenzhen took the lead in another upward market, and it was fierce at that time. By the beginning of 2021, there were already three red lines, followed by all the management links in the hands of the public power, emphasizing strict and strict risk prevention, all of them showed themselves to implement the central policy guidelines, and they wanted to make meritorious contributions to the line of fire to reflect their political achievements, but in the fourth quarter of 2021, the Evergrande incident was marked by the bad situation with crisis characteristics in the entire real estate market. Han Wenxiu, deputy director of the Finance Office, commented on this and said that all the previous efforts seemed to be in the right direction, but the synthesis was a negative effect on the macro level. The lesson of this synthetic fallacy is worth summarizing. Then in real life, the deviation was corrected, and the policy immediately changed 180 degrees, and then the warm wind blew frequently until now. In general, we have dealt with the shock wave that preceded the "gray rhinoceros", not from the overheating side that people had feared, but from the crisis situation of the fourth quarter of 2021, when it almost felt like systemic risk was about to occur. Now, I think that after the policy shift under the guidance of the central government, the effect of the policy is indeed accumulating, and now there should be a basic judgment, that is, China can confidently say from the overall situation that the real estate market will not collapse as some people still say, and it is already entering a process of bottoming out and stabilizing. Under the pattern of ice and fire, the areas represented by first-tier cities that are most likely to improve their prosperity have already had a weather vane-style recovery; On the whole, if we further optimize the parallel state of the "bottoming" of the guarantee rail and the "bottoming" of the market rail, not only will it not collapse, but it is also expected to guide a relatively slow stabilization and recovery process in the fluctuation, and we can move towards a more satisfactory state of China's real estate operation step by step.

Now the recovery of first-tier and some second-tier cities has been clearly seen in the indicators. To give an example, it has been known for some time that in Hangzhou, Ningbo and Xiamen, there were new "land kings" in the three cities where developers took land on the same day - these developers were extremely cautious in the market correction process in the past few years, and they would not have made such a big determination to fight for this land king if they did not have full confidence in the market prospects after the development of the entire plot. Chunjiang plumbing duck prophet, such a local performance, implied in the real estate market supply and demand after a major change, there is still the potential for development, which is still worthy of our attention, to use our growth potential space, to strive for supply and demand interaction to make a difference, and to make a better situation step by step to create.

However, we should pay special attention to such an important statement of the central government, which is reflected in the title of our meeting, that the relationship between supply and demand in the field of real estate has undergone major changes. In other words, in general, the original seller's market for many years has evolved into a buyer's market. Objectively speaking, such a state is more conducive to the people as buyers, who now in order to meet their needs for a better life, they can choose and bargain more calmly for the houses they fancy and want to buy, which is of course a very affordable embodiment for the people. While the common people have the benefits of a buyer's market with a more favorable price formation mechanism in this regard, they may have to study and judge the overall situation from a micro perspective.

The central government said that the new model of real estate development and the long-term mechanism of healthy development, I emphasized the "symptom and root cause", and emphasized that the symptom and root cause are followed by "cure the root cause", which is a very key proposition for us to reform the deep-water area. There will be a plenary session of the Central Committee in July, and everyone has been looking forward to the Third Plenary Session for a long time, and it is estimated that an authoritative guiding document for comprehensive reform similar to the Third Plenary Session of the 18th Central Committee will be issued. In this regard, we can wait and see: what kind of guidance will the Third Plenary Session make in terms of land system reform, investment and financing system reform, real estate tax system reform and other supporting reforms related to the long-term and healthy development of the real estate market, and even the overall supporting reforms. For example, real estate tax, at the moment I don't think there is a positive time to focus on it, we must also have strategic patience, in the relatively slow ice and fire pattern is still continuing such a fluctuation process, to complete the overall recovery of China's real estate market, then now so sensitive, the people are particularly concerned and the vast majority of people out of the inevitable "tax aversion" are not willing to see the real estate tax reform more actively promoted, obviously in the grasp of the timing, we must be particularly cautious. But at the same time, I believe that this issue cannot be avoided in the general direction. If as a researcher, my estimation is that the Third Plenary Session of the CPC Central Committee will be considered as a comprehensive reform, and the direction of real estate tax reform will still be affirmed, which is consistent with the gradual increase in the proportion of direct taxes explained by the central government in the past, the promotion of common prosperity mechanism construction, and we must build a high-level market economy system with the supporting reform in the real estate field to connect the tax sharing system under the concept of China's "local" local tax system, the transformation of local government functions must match the system. The construction of conditions on such a chassis is closely related. Therefore, the latter choice is actually a question of how to gradually form the timing of promoting real estate tax reform.

As a researcher's suggestion, I would like to put forward the following points: The first suggestion is that the government should actively consider judging the situation and continuing to subtract from the remaining administrative control measures. At present, it is mainly Beijing, Shanghai, Guangzhou and Shenzhen, and I heard that there are still places like Tianjin and Sanya, Hainan, which still have administrative measures such as limited purchase and loan restrictions, and if possible, we should more actively consider subtracting it. It is understandable to do subtraction gradually in first-tier cities, and there is a need to properly grasp the "small steps" in this regard, but if we can step by step and completely remove the restrictions of these administrative measures, I think it will make China's market economy healthier, so why not? In this regard, we should give better positive consideration to the implementation of policies according to the city, and combine the overall reorganization of the real estate stock with the optimization and supply of housing increments, which is an essential point in the work.

In general, a lot of so-called inventory, with the support of funds and overall planning, can better improve the overall performance. Some cities have said that the foundation of the affordable housing trust for many years has changed from the original "brick repair" to the "brick repair" that does not need to be newly built, and this is the right time. In many places, there is a considerable correspondence in the housing supply, and the government's action in this regard is indispensable and its due diligence.

The second suggestion is that as a developer, I believe that we should actively optimize customized solutions that are suitable for giving full play to our core competitiveness, and use our own wisdom in this regard. The premise is whether it is possible for you to match the core competitiveness of your own developer with the specific "line" that you objectify to, the "city" on the line, the specific "location" in the city, and the specific "type" development project on the lot, so that your core competitiveness is truly reflected in this customized solution. It's impossible for anyone else to do it for you. Developers can also strive to obtain external intellectual support in the form of purchasing services, first of all, to do a good job of this kind of supply-side solutions that must be customized, and then to strive to make a move when it is time to open up a new situation for their own development.

Third, as the main body of consumers, I believe that the low and middle-income classes should actively respond to the further implementation of the effective supply policy of affordable housing. There has been a lot of experience in public rental housing and co-ownership housing in various places, and now there may be an effective supply of long-term rental housing on the guarantee track under the concept. Young white-collar workers who have just graduated from college, and the so-called "income sandwich layer", should give more priority to this kind of policy-based long-term rental housing and co-ownership housing. The lowest income group, even if they are on subsistence allowance, must have a place to live, and now the government is actively supporting this foundation. In this regard, it should also be mentioned that the middle-income and above groups who have the ability to pay to do transactions in the commercial housing market, in order to meet the needs of a better life, continue to use the so-called concept of rigid demand for the first house, and the concept of improvement demand after the second set, and pay attention to grasp the critical point of the public's "buying up or not buying" in a specific scenario that I think is worth considering now. In some high-end, now we have seen the emergence of this critical point is very rapid, in Shenzhen, in Shanghai have appeared "day disc", high-end real estate, hundreds of sets a day to grab the light, in order to get the purchase qualification, there will be a series of conditions in front, the last resort, the lottery, and each buyer according to the number to you, only give 50 seconds, to make full preparations, within 50 seconds to pick out the rest of the house you want which set, it is hot to this extent. If the critical point of buying up but not buying is missed when the specific needs of consumers to buy their own houses are realized, there will be more losses and restrictions on the benefits in the future. This is also a matter of experience.

Finally, I think we should pay special attention to the guidance of the central government, and in the long run, we should actively create conditions and seek the right time to steadily promote the real estate tax reform and related supporting reforms in the process of deepening reform.

Thank you for your criticism and correction.

Expert Profile

Jia Kang, a well-known economist, is a member of the 11th and 12th National Committee of the Chinese People's Political Consultative Conference, a distinguished expert of the 13th National Committee of the Chinese People's Political Consultative Conference (CPPCC), the founding president of the Huaxia Institute of New Supply Economics, and a researcher and doctoral supervisor of the Chinese Academy of Fiscal Sciences.

Since 1985, he has worked in the Research Institute of the Ministry of Finance, successively serving as Deputy Director and Director of the Research Office, Deputy Director of the Research Institute, and Director from 2001 to 2014. He has decades of rich experience in the theoretical and policy research fields of national economy, finance and taxation, finance, and public affairs.

In 1988, he was selected for the Heinz Foundation and went to the University of Pittsburgh as a visiting scholar for one year.

In 1995, he received a special government allowance.

In 1997, he was rated as a high-level academic leader of the National Millions of Talents Project.

He has participated in the research work of formulating national economic policies for many times, presided over or participated in a number of projects at home and abroad, and has written and published dozens of monographs and hundreds of papers, thousands of financial manuscripts and interviews.

On June 24, 2002, he was invited by Premier Zhu Rongji to discuss economic work.

Since 2003, he has been invited by Premier Wen Jiabao to discuss economic work many times.

In 2006-07, he was twice invited by General Secretary Hu Jintao to discuss economic work (known as "Zhongnanhai Questioning" by the media).

Since 2013, he has been invited by Premier Li Keqiang to discuss and advise Premier Li Keqiang on economic work according to the arrangement of the National Committee of the Chinese People's Political Consultative Conference.

He is the winner of the Sun Yefang Prize in Economics, the Huang Da-Mundell Prize in Economics, and the China Soft Science Award

On January 8, 2010, he was one of the commentators of the 18th collective study of the Political Bureau of the CPC Central Committee on the topic of "Reform of the Fiscal and Taxation System". /

Participated in the symposium of philosophy and social science workers presided over by General Secretary Xi Jinping on May 17, 2016.

State (Member of the Expert Committee of the 11th Five-Year Plan, the 12th Five-Year Plan and the 13th Five-Year Plan. Member of the Expert Committee of the PPP Expert Database of the National Development and Reform Commission. Former Vice President and Secretary-General of the Chinese Fiscal Society. Member of the Expert Committee of the PPP Expert Database of the National Development and Reform Commission. Distinguished experts, consultants or advisory members of the people's governments of Beijing, Shanghai, Fujian, Anhui, Tibet, Guangxi and other places, and distinguished professors of Peking University, Chinese Renmin University and other universities.

In 1995, he was granted a special government allowance. In 1997, he was rated as a high-level academic leader of the National Millions of Talents Project. He is the winner of the Sun Yefang Prize in Economics, the Huang Da-Mundell Prize in Economics, and the China Soft Science Award.

In 2013, he edited "New Supply: China's Innovation in Economic Theory", initiated the establishment of the "Huaxia Institute of New Supply Economics" and the "New Supply Economics 50 Forum" (served as the first president and the first secretary-general), and co-authored and published the monograph "New Supply Economics", "Supply-side Reform: A Concise Reader of New Supply" with Su Jingchun from 2015 to 2016, and "China's Hurdles: How to Overcome the "Middle-Income Trap" (awarded the "2016 China Good Book" by the China Book Critics Society and CCTV). In 2016, the Ten Lectures on Supply-side Reform was rated as a national excellent textbook by the Organization Department of the CPC Central Committee, the State Administration of Press, Publication, Radio, Film and Television and the National Library. In 2021, he co-authored and published "The New Development Pattern of Dual Circulation" with Liu Wei, which was rated as the "China Good Book" of the year and the national excellent textbook for party building. According to the big data statistical analysis of more than 700,000 documents in 6,268 academic journals of philosophy and social sciences in mainland China in 2006~2015 published by the Chinese Social Science Assessment, Mr. Jia Kang ranked first in the number of articles published (398 articles), the total citation frequency (4,231 times) and the total download frequency (204115 times), and the comprehensive index was 3,429, ranking first, and he was a representative scholar among the core authors of economics.