Li Xiaojian (Macro Researcher, Jiufang Institute of Finance, Master of Economics, Peking University).
From December 11 to 12, 2023, the ** Economic Work Conference was held in Beijing. As the most authoritative weather vane for judging the current economic situation and setting the tone of macroeconomic policies for the next year, this meeting has undoubtedly attracted the attention of all sectors of society. The macro team of Jiufang Financial Research Institute believes that this first-class economic work conference pointed out that China's "basic trend of economic rebound and long-term improvement has not changed", while also facing a series of difficulties and challenges faced by China's current economic operation, and made a series of positive and effective arrangements for next year's economic work. Specifically, the following aspects are worth paying attention to.
First, the meeting fully affirmed the achievements made by China's economy this year. This year, as a year of economic recovery after the three-year transition of the new crown epidemic prevention and control, China's economy has resumed "wave-like development and zigzag progress", and after experiencing an unexpected recovery in the first quarter, the slope of the economic recovery in the second quarter has slowed down. However, after entering the third quarter, the domestic economic fundamentals improved again, and the year-on-year growth rate of real GDP reached 49%, which is significantly better than market expectations, and this also lays the foundation for the completion of the 5% economic growth target for the whole year. The meeting pointed out that "China's economy is rebounding and high-quality development is being solidly promoted", which also expressed the affirmation of the economic work since the beginning of this year.
Second, this meeting pointed out the difficulties and challenges facing China's economy at present. From a dialectical point of view, everything has two sides, this meeting in the affirmation of the achievements at the same time, also directly pointed out the current difficulties and challenges faced by China's economy, that is, "insufficient effective demand, overcapacity in some industries, weak social expectations, risks and hidden dangers are still more" four aspects. At the Politburo meeting held in late July, only "insufficient domestic demand" was noted. This means that compared with the middle of the year, the policy level has a clearer judgment on the "blocking points" of domestic economic operation, and the follow-up policies will be more targeted.
Third, compared with the mid-year meeting, the policy tone of this meeting is more positive. This meeting continued the policy tone of last Friday's Politburo meeting, which was "seeking progress while maintaining stability, promoting stability with progress, and establishing first and then breaking down", which was more positive than the statement of "seeking progress while maintaining stability" at the July meeting. In addition, in addition to the previous statements such as "strengthening the counter-cyclical and cross-cyclical adjustment of macro policies", it is also straightforward to point out that it is necessary to "have more policies that are conducive to stabilizing expectations, stabilizing growth and stabilizing employment", which means that on the basis of the current policy, the follow-up policies are expected to continue to increase.
Fourth, there is still room for fiscal policy to be strengthened. The meeting pointed out that "the active fiscal policy should be moderately strengthened, and the quality and efficiency should be improved", that is, on the basis of the current policy, the fiscal policy should still be "strengthened", which is also consistent with the expression of the Politburo meeting last Friday. Considering that there have been obvious signs of fiscal easing in the near future, the broad fiscal deficit ratio is expected to continue to increase in 2024 after an additional 1 trillion yuan of government bonds have been added to water conservancy construction in late October. In addition, this meeting also put forward requirements for the "quality" and "effectiveness" of fiscal policy, and the process of this round of fiscal expansion may be more concentrated than in the past, and it can play a greater stabilizing role.
Fifth, the loose monetary policy may continue, and there is still room for RRR and interest rate cuts. In terms of monetary policy, the meeting pointed out that "the prudent monetary policy should be flexible, moderate, precise and effective", although from a literal point of view, the overall tone of monetary policy is not overly positive, but there are two aspects of the follow-up that deserve the attention of the market: First, "the scale of social financing, the amount of money and the level of economic growth and the expected target" is the first time to appear, in the central bank's third quarter monetary policy implementation report is still "to maintain the amount of money and society." The growth rate of financing scale basically matches the growth rate of the nominal economy." In our view, this change in rhetoric indicates that monetary policy and credit supply may shift from passively following the inflation level to actively guiding the inflation trend, that is, monetary policy will be more proactive. Second, this meeting pointed out that "to promote the steady decline of social comprehensive financing costs", although this statement has appeared in previous relevant documents or meetings, but it is the first time in the ** economic work conference in recent years, which also indicates that there is still a possibility of a reduction in the policy rate in 2024. In addition, the expression of "comprehensive social financing costs" also means that the financing costs of residents, enterprises and other sectors are expected to continue to decrease.
Sixth, the importance of policy coordination has been further enhanced. There is an obvious synergy between macroeconomic policies, and the coordination between fiscal, monetary and other policies can be improved, which can make the policy combination play a "1+1>2" effect. In particular, this meeting proposed to "enhance the consistency of macroeconomic policy orientation", and fiscal, monetary, employment, industry, regional, science and technology, environmental protection and other aspects were all included, which was rare in previous meetings. In our view, this statement suggests that the current macroeconomic policy formulation process may be more systematic than in the past, and the effect of the policy combination is expected to exceed market expectations.
Seventh, the direction of the construction of a modern industrial system is clearer. Among the key tasks proposed by this meeting, "leading the construction of a modern industrial system with scientific and technological innovation" was put in the first place, which on the one hand shows that the importance of the construction of a modern industrial system has been significantly improved, and on the other hand, it also points out the importance of scientific and technological innovation in the construction of a modern industrial system. What is more noteworthy is that this conference pointed out the key areas of industrial innovation, that is, "disruptive technologies and cutting-edge technologies to give birth to new industries, new models, and new kinetic energy", especially the digital economy, artificial intelligence, biomanufacturing, commercial aerospace, low-altitude economy, quantum, life sciences and other new industries and new tracks are mentioned, and these industries may also lead the development of the domestic capital market in the next few years.
Eighth, "new consumption" may become a new starting point for expanding domestic demand. At present, the biggest difficulty and challenge facing China's economy lies in the "lack of effective demand." Therefore, there are more detailed and concrete arrangements for expanding domestic demand at this meeting. Among them, the most noteworthy is new consumption such as digital consumption, green consumption, and health consumption, as well as new consumption growth points such as smart home, entertainment and tourism, sports events, and domestic "trendy products". In addition, the expression of "promoting large-scale equipment renewal" may mean that a new round of China's manufacturing capacity expansion cycle is about to begin, and the meeting mentioned "new infrastructure" twice, which also points out the direction for follow-up infrastructure investment. In general, new consumption, manufacturing transformation and upgrading, and new infrastructure may be the three main lines to expand effective demand in 2024.
Ninth, a new model of real estate development may be under construction. Compared with the July meeting, the meeting did not have a long description of real estate, only pointing out that "actively and prudently resolve real estate risks, meet the reasonable financing needs of real estate enterprises under different ownership systems without discrimination, and promote the steady and healthy development of the real estate market". However, we believe that this may mean that the real estate industry is in the process of risk mitigation, and the new development model represented by the "three major projects" is also being built. In particular, the transformation of urban villages and the construction of affordable housing may become a "new driving force" for the development of the real estate market in the future.
Tenth, regional economic development will present a new pattern. At present, there are certain differences in the economic development of different regions in China, and some regions with relatively backward economic development levels also have certain debt risks. The meeting pointed out that "to coordinate the resolution of local debt risks and stable development, the major economic provinces should really provoke the beam", which may indicate that in the construction of the new development pattern, the positioning of different regions is different, among which the "economic provinces" with relatively low risk levels will pay more attention to "development", while other regions will strengthen "development" and "security", and regional economic development will also enter a new stage.
Disclaimer: This report is written by Li Xiaojian (registration number: A0740123050026), and the company does not make any representations and warranties as to the accuracy, completeness, timeliness, validity and applicability of the content of the report (including public information). The Company has endeavoured to be objective and fair in the content of the report, but the opinions, conclusions and recommendations in the report reflect only the assumptions, opinions and analytical methods of the authors as of the date of issuance of the report and should be used for reference only. At the same time, the Company may issue other reports that are inconsistent with the information contained in this report and have different conclusions. The information or opinions in this report do not constitute an order to buy or sell a trading product or a bid to buy or sell, and investors should make their own investment decisions, and any investment decisions made thereon have nothing to do with the company or the author, and they bear their own risk, and the company and the author do not bear any legal responsibility for this.
About Q9 Financial Research Institute:
Jiufang Financial Research Institute is a Hong Kong-listed company Jiufang Fortune (09636.).HK) subsidiary, Q9 Intelligent Investment's financial research institute, with the guiding principle of "focusing on finance, focusing on innovation, leading the industry, and building a brand", is committed to building a first-line information investment and research force in China, and providing investors with long-term, stable, systematic and reliable professional research services. The institute has a research service team of more than 100 people, covering macroeconomics, industry companies, investment strategies, index and investment tool design and other fields.