Guo Lei is the Chief Economist of GF** and a director of the China Chief Economist Forum
Summary of the report
First,**The GDP target set in the work report is "around 5%". It is worth noting that in 2024, in the face of a more normalized base, it will also be "about 5%", and the growth rate under the comparable caliber will be higher than that in 2023. 5% in 2023 corresponds to a two-year compound growth rate of 4%, and 5% in 2024 corresponds to a two-year compound growth rate of 51%。
Second,The 5% GDP target is in line with expectations. In our October 2023 "Macro Scissors Gap", we argued: "What needs to be further resolved in the economy is not the direction, but the center. From 2020 to 2022, China's economy grew at an average annual rate of 45%, which is significantly lower than the potential growth level. The size of the economic target for 2024 will be the key variable for the next macro phase. We tend to prefer that the policy has a high probability of keeping the GDP growth target at around 5%. From the perspective of policy necessity, the 5% target will also help stabilize domestic and foreign expectations about China's economy." In the report "Outlook 2024", we further estimate that the real growth rate of 5% requires three conditions: first, the export environment will improve in the context of overseas inventories bottoming out; second, the decline in real estate investment driven by the "three major projects" narrowed; The third is to actively financially ensure the relatively high growth rate of infrastructure and other fields. To put it simply, both the second and third conditions require an active fiscal policy.
Third,How to read the statement of fiscal space in the work report? The size of the deficit is 406 trillion yuan, an increase of 180 billion yuan over the budget at the beginning of the previous year, which is slightly higher than our expectation of "about 4 trillion yuan" (see our previous report "Looking at the Characteristics of the National Fiscal Budget from the Provincial Budget Report"), according to 4The deficit of 06 trillion and the deficit rate of 3% correspond to a nominal GDP of 135 in 202433 trillion yuan, implied nominal GDP growth rate of 74%。Of course, from experience, the two calibers do not exactly correspond, but from the side, this reflects the assumption that nominal growth will pick up in 2024. The second also confirms the characteristics of fiscal "moderate strengthening", that is, the scale of the deficit has been guaranteed as much as possible.
Fourth,In addition, the broad fiscal space also includes special bonds39 trillion yuan (slightly higher than the 38 trillion yuan); and 1 trillion yuan of ultra-long-term special government bonds. In this way, the room for broad fiscal purposes this year is calculatedIncluding "406 trillion deficit +39 trillion special bonds + 1 trillion ultra-long-term special treasury bonds", as well as the 1 trillion additional treasury bonds issued and used in the fourth quarter of last year; Theoretically, it is necessary to add similar financial instruments, such as the PSL, which has issued a total of 500 billion yuan to support the "three major projects". Fiscal expansion in a broad sense is more pronounced, and this is indeed what the economy needs most at this stage. It is worth noting that the plan for ultra-long-term special treasury bonds is to be issued for several consecutive years starting this year, and "to be earmarked for the implementation of major national strategies and security capacity building in key areas," and the expansion of broad fiscal bonds will be of a certain sustainability in the medium term.
Fifth,The target of new urban employment continues to remain at a high level of "about 12 million", with an annual average of 11 million; 12 million in 2023-2024), showing the importance attached to the issue of employment. **The work report also pointed out that "it is expected that more than 11.7 million college graduates will be graduates this year". In normalization years, such as 2019 before the epidemic, a GDP of 1 point corresponds to about 2.27 million jobs; In 2023, a GDP of 1 point corresponds to 2.39 million jobs. If we continue to estimate the employment GDP elasticity of 2.39 million, the endogenous GDP growth demand of 12 million jobs will be 50% or so. In addition to maintaining a certain target for the aggregate economy, the work report also mentions a series of structural policies to promote employment, including "strengthening support for enterprises in industries with large employment capacity".
Sixth,Promoting the construction of a modern industrial system is undoubtedly the top priority. **The first task of the work report in 2024 is to "vigorously promote the construction of a modern industrial system and accelerate the development of new quality productivity". There are three points that need to be reminded here: First, the framework of "modern industrial system" is still relatively broad-spectrum, and the report has mentioned "advanced manufacturing clusters", "high-end, intelligent and green transformation of traditional industries", and "modern producer service industry". Second, in the part of "emerging industries and future industries", the report successively involves "consolidating and expanding the leading advantages of industries such as intelligent networked new energy vehicles", "accelerating the development of cutting-edge emerging hydrogen energy, new materials, innovative drugs and other industries", "actively building new growth engines such as biomanufacturing, commercial aerospace, and low-altitude economy", "formulating future industrial development plans, and opening up new tracks such as quantum technology and life sciences". Third, on the cultivation of emerging industries and future industries, the report emphasizes "strengthening the overall layout and investment guidance of key industries to prevent overcapacity and low-level duplicate construction". The third point is very critical, if some new industries can optimize supply, their future supply and demand pattern will be more benign.
Seventh, with regard to consumption, the policy idea is to "stimulate consumption potential by increasing income, optimizing supply, and reducing restrictive measures", which includes new consumption, traditional consumer goods, and service consumption. Regarding traditional durable consumer goods, the report points out that "encourage and promote the trade-in of consumer goods, and boost bulk consumption such as intelligent networked new energy vehicles and electronic products", which has been elaborated on a series of policies in the early stage, and is one of the imagination spaces of macroeconomic policies in 2024, as well as promoting large-scale equipment renewal. Logically, they also need policy support such as fiscal policy, and the follow-up mainly depends on the specific implementation plan.
Eighth,In the field of opening up, the first work report pointed out that it will "completely cancel the restrictions on foreign investment access in the manufacturing sector, and relax the market access of telecommunications, medical and other service industries". In October 2023, at the Belt and Road Forum for International Cooperation, China announced that it would completely cancel the restrictions on foreign investment access in the manufacturing sector; At the end of last year, the Economic Work Conference pointed out that market access for service industries such as telecommunications and medical care would be relaxed, and the statement of the work report means that measures in two key areas will be further implemented.
Ninth,Real estate, local debt, and small and medium-sized financial institutions are related to the stock economy, and have always been the three risk points under the policy framework. Regarding real estate, the first work report emphasizes the optimization of real estate policies, and the reasonable financing needs of real estate enterprises with different ownership systems should be supported without discrimination; Second, it emphasizes adapting to the development trend of new urbanization and changes in the supply and demand relationship of the real estate market, accelerating the construction of a new model of real estate development, and increasing the construction and supply of affordable housing; The third emphasizes the improvement of basic systems related to commercial housing to meet residents' rigid housing needs and diversified improved housing needs. Here, "adapting to the development trend of new urbanization and the changes in the supply and demand relationship of the real estate market" is an important premise for understanding, the former means that whether it is commercial housing or affordable housing, incremental demand will still exist; The latter means that it is no longer overheated, and there are obvious changes on the supply and demand sides. Under these two premises, the policy is expected to take into account the medium and long term, further promoting market balance.
Tenth,Regarding local debt, the report pointed out that "the risk resolution and stable development of local debt should be coordinated". Specifically, "further implement the package of debt reduction plans, properly resolve the risks of existing debts, and strictly prevent the risks of new debts"; The second is to "establish a first-class debt management mechanism that is compatible with high-quality development, and improve the full-caliber local debt monitoring and supervision system". In fact, on February 23, the National Standing Committee introduced the current situation of localized debt, and the specific deployment is also a coordinated promotion, long-term and short-term combination, "through the concerted efforts of all parties, the local debt risk has been alleviated as a whole, laying a solid foundation for the next stage of work", and the follow-up should be "combined with far and near, blocking and sparse at the same time", "accelerate the establishment of a first-class debt management mechanism suitable for high-quality development".
Body
1] On the morning of March 5, 2024, the second session of the 14th National People's Congress opened, and Premier Li Qiang made a work report.
**The GDP target set in the work report is "around 5%". It is worth noting that in 2024, in the face of a more normalized base, it will also be "about 5%", and the growth rate under the comparable caliber will be higher than that in 2023. 5% in 2023 corresponds to a two-year compound growth rate of 4%, and 5% in 2024 corresponds to a two-year compound growth rate of 51%。
* The work report points out that the main expected target for this year's development is GDP growth of about 5%; More than 12 million new jobs were created in urban areas, and the surveyed urban unemployment rate was 5about 5%; Household consumption** increased by about 3%; Household income growth and economic growth are synchronized; The balance of payments remained basically balanced; Grain production 1more than 3 trillion catties; Energy consumption per unit of GDP is reduced by 2About 5%, the quality of the ecological environment continues to improve.
The 5% GDP target is in line with expectations. In our October 2023 "Macro Scissors Gap", we argued: "What needs to be further resolved in the economy is not the direction, but the center. From 2020 to 2022, China's economy grew at an average annual rate of 45%, which is significantly lower than the potential growth level. The size of the economic target for 2024 will be the key variable for the next macro phase. We tend to prefer that the policy has a high probability of keeping the GDP growth target at around 5%. From the perspective of policy necessity, the 5% target will also help stabilize domestic and foreign expectations about China's economy." In the report "Outlook 2024", we further estimate that the real growth rate of 5% requires three conditions: first, the export environment will improve in the context of overseas inventories bottoming out; second, the decline in real estate investment driven by the "three major projects" narrowed; The third is to actively financially ensure the relatively high growth rate of infrastructure and other fields. To put it simply, both the second and third conditions require an active fiscal policy.
*The work report pointed out that the above-mentioned expected goals were put forward, taking into account the domestic and foreign situation and various factors, and taking into account the needs and possibilities. The expected target for economic growth is about 5%, which takes into account the needs of promoting employment and income, preventing and resolving risks, and is in line with the "14th Five-Year Plan" and the goal of basically realizing modernization, and also considers the economic growth potential and supporting conditions, reflecting the requirements of being proactive and promising. Achieving this year's expected goals will not be easy, and it will require policy focus, redoubled efforts, and concerted efforts from all sides.
How to read the statement of fiscal space in the work report? The size of the deficit is 406 trillion yuan, an increase of 180 billion yuan over the budget at the beginning of last year, which is slightly higher than our expectation of "about 4 trillion yuan" (see "Looking at the Characteristics of the National Fiscal Budget from the Provincial Budget Report"), according to 4The deficit of 06 trillion and the deficit rate of 3% correspond to a nominal GDP of 135 in 202433 trillion yuan, implied nominal GDP growth rate of 74%。Of course, from experience, the two calibers do not exactly correspond, but from the side, this reflects the assumption that nominal growth will pick up in 2024. The second also confirms the characteristics of fiscal "moderate strengthening", that is, the scale of the deficit has been guaranteed as much as possible.
* The work report points out that the active fiscal policy should be moderately strengthened, and the quality and efficiency should be improved. Comprehensively consider development needs and fiscal sustainability, make good use of fiscal policy space, and optimize the mix of policy tools. The deficit rate is planned to be arranged at 3%, and the deficit size is 406 trillion yuan, an increase of 180 billion yuan over the budget at the beginning of the previous year. It is expected that fiscal revenue will continue to resume growth this year, and with the transfer of funds, the scale of general public budget expenditure will be 285 trillion yuan, an increase of 1 over the previous year1 trillion yuan.
In addition, the broad fiscal space also includes special bonds39 trillion yuan (slightly higher than the 38 trillion yuan); and 1 trillion yuan of ultra-long-term special government bonds. In this way, the space for this year's broad fiscal policy includes "406 trillion deficit +39 trillion special bonds + 1 trillion ultra-long-term special treasury bonds", as well as the 1 trillion additional treasury bonds issued and used in the fourth quarter of last year; Theoretically, it is necessary to add similar financial instruments, such as the PSL, which has issued a total of 500 billion yuan to support the "three major projects". Fiscal expansion in a broad sense is more pronounced, and this is indeed what the economy needs most at this stage. It is worth noting that the plan for ultra-long-term special treasury bonds is to be issued for several consecutive years starting this year, and "to be earmarked for the implementation of major national strategies and security capacity building in key areas," and the expansion of broad fiscal bonds will be of a certain sustainability in the medium term.
* The work report pointed out that it is planned to arrange local ** special bonds 39 trillion yuan, an increase of 100 billion yuan over the previous year. In order to systematically solve the problem of funds for the construction of some major projects in the process of building a strong country and national rejuvenation, it is planned to issue ultra-long-term special treasury bonds for several consecutive years starting this year, which will be specially used for the implementation of major national strategies and security capacity building in key areas, and 1 trillion yuan will be issued this year. At present, it is necessary to increase financial input in many aspects, vigorously optimize the expenditure structure, strengthen the major national strategic tasks and basic financial guarantees for people's livelihood, and strictly control general expenditures. ** Finance to increase the local balanced transfer payment, appropriate tilt to difficult areas, provincial ** to promote the sinking of financial resources, the bottom line of the "three guarantees" at the grassroots level. Implement structural tax and fee reduction policies, and focus on supporting scientific and technological innovation and the development of manufacturing industry.
The target of new urban employment continues to remain at a high level of "about 12 million", with an annual average of 11 million; 12 million in 2023-2024), showing the importance attached to the issue of employment. **The work report also pointed out that "it is expected that more than 11.7 million college graduates will be graduates this year". In normalization years, such as 2019 before the epidemic, a GDP of 1 point corresponds to about 2.27 million jobs; In 2023, a GDP of 1 point corresponds to 2.39 million jobs. If we continue to estimate the employment GDP elasticity of 2.39 million, the endogenous GDP growth demand of 12 million jobs will be 50% or so. In addition to maintaining a certain target for the aggregate economy, the work report also mentions a series of structural policies to promote employment, including "strengthening support for enterprises in industries with large employment capacity".
In the March 12, 2020 report "What is the relationship between employment goals and GDP targets", we have sorted out: when formulating GDP targets, employment targets are an important consideration in policy, such as 2017 "GDP growth of one percentage point can drive employment of 1.9 million to 2 million people". Judging from the historical law, the employment population driven by unit GDP is gradually rising, which should be related to the gradual increase in the proportion of employment in the tertiary industry.
*The work report points out that multiple measures should be taken to stabilize employment and promote income growth. Employment is the most basic livelihood of the people. It is necessary to give prominence to the priority orientation of employment, strengthen the support of fiscal, tax, financial and other policies to stabilize employment, and increase the intensity of special policies to promote employment. Implement and improve policies such as the return of stable jobs, special loans, employment and social security subsidies, and strengthen support for enterprises in industries with large employment capacity. It is estimated that there will be more than 11.7 million college graduates this year, and it is necessary to strengthen policies and measures to promote youth employment and optimize employment and entrepreneurship guidance services. Do a solid job in the employment of retired soldiers, migrant workers and other groups, and strengthen assistance for the disabled and other persons with employment difficulties. Improve the safeguard measures for flexible employment services by category, and expand the pilot project of occupational injury protection for employees in new forms of employment. Resolutely correct all kinds of employment discrimination, ensure the payment of wages to migrant workers, improve the mechanism for consultation and coordination of labor relations, and safeguard the legitimate rights and interests of workers. Adapt to the needs of talents in advanced manufacturing, modern services, elderly care and other fields, and strengthen vocational skills training. Increase the income of urban and rural residents through multiple channels, expand the size of middle-income groups, and strive to increase the income of low-income groups.
Promoting the construction of a modern industrial system is undoubtedly the top priority. **The first task of the work report in 2024 is to "vigorously promote the construction of a modern industrial system and accelerate the development of new quality productivity". There are three points that need to be reminded here: First, the framework of "modern industrial system" is still relatively broad-spectrum, and the report has mentioned "advanced manufacturing clusters", "high-end, intelligent and green transformation of traditional industries", and "modern producer service industry". Second, in the part of "emerging industries and future industries", the report successively involves "consolidating and expanding the leading advantages of industries such as intelligent networked new energy vehicles", "accelerating the development of cutting-edge emerging hydrogen energy, new materials, innovative drugs and other industries", "actively building new growth engines such as biomanufacturing, commercial aerospace, and low-altitude economy", "formulating future industrial development plans, and opening up new tracks such as quantum technology and life sciences". Third, on the cultivation of emerging industries and future industries, the report emphasizes "strengthening the overall layout and investment guidance of key industries to prevent overcapacity and low-level duplicate construction". The third point is very critical, if some new industries can optimize supply, their future supply and demand pattern will be more benign.
* The work report points out: promote the optimization and upgrading of the industrial chain. Keep the industrial economy running smoothly. Implement the high-quality development action of the key industrial chain of the manufacturing industry, focus on making up for the shortcomings, elongating the long board, and forging new boards, so as to enhance the resilience and competitiveness of the industrial chain. Implement the technological transformation and upgrading project of the manufacturing industry, cultivate and expand advanced manufacturing clusters, create a national new industrialization demonstration zone, and promote the high-end, intelligent and green transformation of traditional industries. Speed up the development of modern producer services. Promote the development of small and medium-sized enterprises. Strengthen standard guidance and quality support, and create more "Made in China" brands with international influence.
*The work report points out: actively cultivate emerging industries and future industries. Implement industrial innovation projects, improve industrial ecology, expand application scenarios, and promote the integration of strategic emerging industries. Consolidate and expand the leading advantages of intelligent networked new energy vehicles and other industries, accelerate the development of cutting-edge emerging hydrogen energy, new materials, innovative drugs and other industries, and actively build new growth engines such as biomanufacturing, commercial aerospace, and low-altitude economy. Formulate future industrial development plans, open up new tracks such as quantum technology and life sciences, and create a number of future industry pilot areas. Encourage the development of venture capital and equity investment, and optimize the function of industrial investment. Strengthen the overall layout and investment guidance of key industries to prevent overcapacity and low-level redundant construction.
With regard to consumption, the policy idea is to "stimulate consumption potential by increasing income, optimizing supply, and reducing restrictive measures", and the areas mentioned include new consumption, traditional consumer goods, and service consumption. Regarding traditional durable consumer goods, the report points out that "encourage and promote the trade-in of consumer goods, and boost bulk consumption such as intelligent networked new energy vehicles and electronic products", which has been elaborated on a series of policies in the early stage, and is one of the imagination spaces of macroeconomic policies in 2024, as well as promoting large-scale equipment renewal. Logically, they also need policy support such as fiscal policy, and the follow-up mainly depends on the specific implementation plan.
* The work report points out: promote the steady growth of consumption. We will take comprehensive measures to increase income, optimize supply, and reduce restrictive measures to stimulate consumption potential. Cultivate and expand new consumption, implement policies to promote digital consumption, green consumption, and healthy consumption, and actively cultivate new consumption growth points such as smart homes, cultural and entertainment tourism, sports events, and domestic "trendy products". Stabilize and expand traditional consumption, encourage and promote the trade-in of consumer goods, and boost bulk consumption such as intelligent networked new energy vehicles and electronic products. Promote the expansion and quality of services such as elderly care, childcare, and housekeeping, and support social forces in providing community services. Optimize the consumption environment, carry out the "Consumption Promotion Year" activities, implement the "Assured Consumption Action", strengthen the protection of consumer rights and interests, and implement the paid leave system. Implement actions to improve standards, accelerate the construction of a standard system that meets the requirements of high-quality development, promote the continuous improvement of the quality of goods and services, and better meet the needs of the people to improve their lives.
In the field of opening up, the first work report pointed out that it will "completely cancel the restrictions on foreign investment access in the manufacturing sector, and relax the market access of telecommunications, medical and other service industries". In October 2023, at the Belt and Road Forum for International Cooperation, China announced that it would completely cancel the restrictions on foreign investment access in the manufacturing sector; At the end of last year, the Economic Work Conference pointed out that market access for service industries such as telecommunications and medical care would be relaxed, and the statement of the work report means that measures in two key areas will be further implemented.
* The work report points out: increase the efforts to attract foreign investment. We will continue to reduce the negative list for foreign investment access, fully remove the restrictions on foreign investment access in the manufacturing sector, and relax market access for service industries such as telecommunications and medical care. Expand the catalogue of industries that encourage foreign investment, and encourage foreign-funded enterprises to reinvest in China. Implement the national treatment of foreign-funded enterprises, ensure equal participation in procurement, bidding and bidding, and the formulation of standards in accordance with the law, and promote the resolution of issues such as cross-border data flow. Strengthen the service guarantee for foreign investment and build the brand of "Invest in China". Enhance the convenience of foreign personnel to work, study and travel in China. We will further implement the promotion strategy of the pilot free trade zone, give more autonomy to the pilot free trade zone and the Hainan Free Port, promote the reform and innovation of the development zone, and create a new highland for opening up.
Real estate, local debt, and small and medium-sized financial institutions are related to the stock economy, and have always been the three risk points under the policy framework. Regarding real estate, the first work report emphasizes the optimization of real estate policies, and the reasonable financing needs of real estate enterprises with different ownership systems should be supported without discrimination; Second, it emphasizes adapting to the development trend of new urbanization and changes in the supply and demand relationship of the real estate market, accelerating the construction of a new model of real estate development, and increasing the construction and supply of affordable housing; The third emphasizes the improvement of basic systems related to commercial housing to meet residents' rigid housing needs and diversified improved housing needs. Here, "adapting to the development trend of new urbanization and the changes in the supply and demand relationship of the real estate market" is an important premise for understanding, the former means that whether it is commercial housing or affordable housing, incremental demand will still exist; The latter means that it is no longer overheated, and there are obvious changes on the supply and demand sides. Under these two premises, the policy is expected to take into account the medium and long term, further promoting market balance.
*The work report points out that the real estate policy should be optimized, and the reasonable financing needs of real estate enterprises under different ownership systems should be supported without discrimination, so as to promote the stable and healthy development of the real estate market. Adapt to the development trend of new urbanization and the changes in the supply and demand relationship of the real estate market, and accelerate the construction of a new model of real estate development. Increase the construction and supply of affordable housing, improve the basic system related to commercial housing, and meet the needs of residents for rigid housing and diversified and improved housing.
Regarding local debt, the report pointed out that "the risk resolution and stable development of local debt should be coordinated". Specifically, "further implement the package of debt reduction plans, properly resolve the risks of existing debts, and strictly prevent the risks of new debts"; The second is to "establish a first-class debt management mechanism that is compatible with high-quality development, and improve the full-caliber local debt monitoring and supervision system". In fact, on February 23, the National Standing Committee introduced the current situation of localized debt, and the specific deployment is also a coordinated promotion, long-term and short-term combination, "through the concerted efforts of all parties, the local debt risk has been alleviated as a whole, laying a solid foundation for the next stage of work", and the follow-up should be "combined with far and near, blocking and sparse at the same time", "accelerate the establishment of a first-class debt management mechanism suitable for high-quality development".
*The work report points out that it is necessary to coordinate the resolution and stable development of local debt risks, further implement the package of debt reduction plans, properly resolve the risks of existing debts, and strictly prevent the risks of new debts. Establish a first-class debt management mechanism that is compatible with high-quality development, improve the full-caliber local debt monitoring and supervision system, and promote the transformation of local financing platforms by category.
Hypothetical Risk:In 2024, the macroeconomic and financial environment will change more than expected, the risk of overseas economic recession will exceed expectations, the slope of overseas inventory replenishment will exceed expectations, the downside risk of domestic real estate sales and investment will exceed expectations, and the construction of the three major domestic projects will exceed expectations, and the policy understanding will not be in place.