Event
On July 30, the Political Bureau of the Central Committee held a second quarter meeting to analyze the current economic situation and deploy economic work in the second half of the year.
unscramble
1. Overall Judgment: Fully estimate the severity of the economic and financial situation in the second half of the year, different relaxation
The Politburo meets quarterly (late April, late July, late October and late December) to analyse the current economic situation, set the direction of macroeconomic regulation and control, and lay out the tasks for further reform and development. At the end of July, the second quarter of the Politburo meeting set the policy trend for the second half of the year.
In the third quarter of 2018, the Politburo Conference emphasized for the first time that "downward pressure of the economy has increased", emphasized six "stabilities" and did not mention "deleveraging", indicating that macro-control policy has shifted from tightening to loosening, followed by a series of loose and active fiscal and monetary policies. It is the "bottom of the policy". (Refer to "No Polar Tailai - Macro Prospects for 2019")
In the first quarter of 419, the Politburo Conference held that the economy in the first quarter of 2019 was "generally stable, better than expected, with a good start". It did not mention "six stability" anymore, but re-mentioned "structural deleveraging", indicating that the short-term stable growth policy would gradually give way to the long-term reform and opening-up, and that monetary policy would move from a relaxed period to an observation period. It's the top of the policy. (Refer to "Policy Top: Interpretation of the Spirit of the 419 Politburo Conference")
The basic judgment of the Political Bureau meeting in the second quarter of 730 on the current situation is that "the current economic development of our country is facing new risks and challenges, and the downward pressure of the domestic economy is increasing, so we must enhance the sense of anxiety". This judgment is highly consistent with our previous judgment. Refer to "Fully Estimate the severity of the current economic and financial situation".—— Comprehensive interpretation of June economic and financial data. Six stability issues should be revisited every six months, deleveraging should not be mentioned, and fiscal policies should be strengthened to improve efficiency and continue to implement the policy of reducing taxes and fees in detail. Monetary policy should be relaxed and moderate, and liquidity should be maintained reasonably and adequately." It shows that monetary policy has returned to easing from the observation period, but this time it is different, mainly with mild structural easing: the flow of funds is to "guide financial institutions to increase medium-term and long-term financing for manufacturing and private enterprises", mainly high-end manufacturing and new infrastructure, and clearly "do not use real estate as a short-term stimulus to the economy". Means. It shows that the central government will rely more on the methods of cultivating new economic growth points, expanding consumption, building new infrastructure, urban agglomeration, a series of major opening-up, financial supply-side reform and other reforms to stabilize growth.
According to our judgment in "Fully Estimating the Seriousness of the Current Economic and Financial Situation - Comprehensive Interpretation of the June Economic and Financial Data", the current situation can be summarized as follows: the indicators of economic consistency and lag at the beginning of the year have temporarily stabilized, mainly affected by the monetary relaxation from the end of last year to the beginning of this year, the advance allocation of financial funds, and the renewed escalation of trade frictions in May. No support was shown. However, in recent years, leading indicators have declined, such as real estate sales, land acquisition and the decline in sources of funds, PMI orders and PMI export orders, a series of real estate financing tightening policies have been introduced intensively, and the impact of trade frictions will gradually appear in May. Moreover, the economic and financial structure is deteriorating. For example, the proportion of medium-term and long-term loans of enterprises in social finance is declining, and the proportion of short-term loans and short-term loans is rising. Historical experience shows that financial institutions are very cautious and even distrustful of enterprises. The reality is that the number of small and medium-sized enterprises applying for bankruptcy has increased substantially; PPI has declined, and the profit of enterprises has declined; PMI in June has gone from The industrial staff index reached a 10-year low of 46.9%. Production rebounded slightly, but the inventory of PMI raw materials and finished products increased, and a considerable part of production became inventory piles, reflecting the weak demand.
It is expected that the economy will go down again in the second half of 2019 to the first half of 2020. In the second half of 2019, supported partly by the recovery of inventory cycle and infrastructure construction, the economic downturn slope is slow and resilient, but in the first half of 2020, there will be a combination of inventory cycle, real estate cycle and world economic cycle, with a larger downward slope. (Reference to Born in Trouble - Medium-term Macro Prospects for 2019, June 2019)
Therefore, we suggest that we should strengthen the counter cyclical adjustment. On the one hand, we must prevent the currency drain to stimulate the real estate bubble. On the other hand, we must prevent the initiative from piercing and causing major financial risks, use time to change space, establish a long-term mechanism, find new economic growth points, and expand reform and opening up.
Over the past decade, local governments, enterprises and residents have steadily increased their leverage and limited space. Now is the time for the central government to increase and transfer leverage, so that micro-subjects can be put on the battlefield lightly. The main measures taken by the central government to increase leverage include: reducing taxes and fees on enterprises and residents on a large scale; realizing social security accounts to improve the level of social security for residents, so that residents can safely consume; liberalizing industrial controls on automobiles, finance, telecommunications and medical care; purchasing part of corporate debts with risk of equity pledge; and putting out part of good assets to enter the market. Mixed line changes, etc.
The most urgent task is to mobilize the enthusiasm of local governments and entrepreneurs. Over the past few years, great progress has been made in preventing and resolving such long-standing problems as major financial risks, pollution prevention and control, and rectification of officials, reflecting the superiority of our system, while at the same time bringing about other new problems, such as local inertia, rising enterprise costs, and the difficulty of financing for small and medium-sized enterprises. It is not necessary to solve these problems. Instead, we should set up new mechanisms to meet the new requirements of the new era of high-quality development, such as encouraging local governments with high-quality development assessment, establishing multi-level capital markets and improving financing of small and medium-sized enterprises. China's success in the past 40 years has been mainly due to market-oriented reform, globalization and opening up, local GDP Championships and the bursting of vitality of private economy. Now it is necessary to give local officials a new incentive mechanism and give private entrepreneurs a reassuring pill, all of which involve major theoretical breakthroughs. Otherwise, they are too busy producing documents to achieve real results.
Everyone has his own robbery, can only rely on himself, practice, robbery, growth. My life depend on myself not the fate. There are seven stages in life: the babies who are waiting to be fed, the schoolchildren with red faces, the lovers who sing lamentations, the soldiers with long beards, the generals who have been through the hundred wars, the politicians who wear glasses, and the sages who return to life.
The same is true of our country: Lewis turning point, speed shift, L-shaped economy, structural transformation, transformation of old and new momentum, Sino-US trade friction, reform and opening up, new normal, new cycle and high-quality development - China's economy is also looting and breaking the seal. Where to seek great wisdom at this important turning point in history?
We are convinced that China's economic prospects will be brighter after the baptism of reform and transformation.
2. The meeting of the Political Bureau held that "at present, China's economic development is facing new risks and challenges, and the downward pressure of the domestic economy is increasing, so we must enhance the sense of hardship."
The Political Bureau meeting in the second quarter of 730 judged the current situation as "facing new risks and challenges, increasing downward pressure on the economy, we must enhance the sense of anxiety and be good at turning the crisis into an opportunity", which was more severe than the "overall stability, better than expected, and a good start" that the Political Bureau meeting in the first quarter of 419 considered.
After the first half and June data came out, there was a sound of "economic stabilization", "stabilization rebound" and "exceeding expectations" in the market. As a researcher who has been engaged in the analysis of macroeconomic situation for 20 years, I feel deeply worried. So we launched the blockbuster report "Fully estimating the current economic and financial situation", which has attracted wide attention from the market. The severity of the situation - a comprehensive interpretation of the June economic and financial data.
The short-term stabilization of the economy at the beginning of the year was mainly supported by fiscal and monetary easing at the end of last year and the beginning of this year, the "Xiaoyangchun" of the real estate market, the advance allocation of financial funds, and the impact of the escalation of trade frictions in May. However, GDP in the second quarter was 6.2% year-on-year, down 0.2 percentage points from the first quarter and 6.3% in the first half. The Troika has slowed down in recent years:
Exports have been hampered by the global economic downturn and the escalation of trade frictions. Export growth in the first half of the year was 0.1%, down 9.8 percentage points from the whole year of 2018; in June, export growth was -1.3%, down 2.4 percentage points from May.
Investment has declined, real estate investment has continued to slow down, and investment in infrastructure and manufacturing has recovered slightly, but it is still very depressed. Fixed assets investment in January-June was 5.8% year-on-year, down 0.2 percentage points from January-May. Among them, real estate investment in January-June fell by 0.3 percentage points from January to May, falling for two consecutive months; capital construction investment in January-June rose by 0.1 percentage points from January to May; manufacturing investment in January-June rose by 0.3 percentage points from January to May.
Consumption will be affected by employment pressure, lower income, weaker wealth effect of the stock market and higher leverage rate of residents. Consumption in June was 9.8% year-on-year, up 1.2 percentage points from last month, but the main reason is that the Fifth National Standard Automobile is hard to keep in stock.
In the first half of the year, 13.23 trillion yuan was added to social finance, an increase of 3.18 trillion yuan over the same period in 2018. The funds of state-owned enterprises and state-owned enterprises have significantly improved. However, the financing of private enterprises and small and medium-sized enterprises is difficult and prominent. The key to the problem lies in the structure, the proportion of medium-term and long-term loans of enterprises has decreased, the proportion of short-term loans and short-term loans has increased, and the proportion of medium-term and long-term loans of newly With a decrease of 24.8 billion yuan over the same period last year, historical experience shows that financial institutions are very cautious and even distrustful of enterprises.
From the microscopic data, the downward trend of cement production and the sharp decline of excavator sales prove that the downward pressure of economy is still large. Cement production in the first half of the year was 6.8% year-on-year, 2.6 percentage points lower than that in the first quarter. Excavator sales in the second quarter were 3.9% year-on-year, down 20.6 percentage points from the first quarter.
Considering the intensive introduction of the real estate financing tightening policy from June to July, the gradual emergence of the impact of trade frictions escalation in May, and the impact of local land fiscal contraction on infrastructure, we should fully estimate the severity of the future macroeconomic situation.
3. At the meeting of the Political Bureau, the "six stability" was mentioned again, not "deleveraging" and "reasonable and abundant liquidity" was increased. However, it was not flooding, but leading to manufacturing and new infrastructure.
"Six Steady" has been mentioned for three consecutive quarters since it was proposed at the 731 Politburo Conference in 2018, but not in the first quarter of 419. In the second quarter of 730, the Politburo meeting again put forward the idea of "completing the work of"six stability"in an all-round way, reflecting that the central government fully estimated the severity of the economic and financial situation.
There is no mention of "deleveraging" and emphasis on "grasping the rhythm and strength of risk management". In December 2018, the Central Economic Work Conference put forward that "we should adhere to the basic idea of structural deleveraging and prevent abnormal fluctuations and resonances in financial markets". In the first quarter of 419, the Politburo Conference "adhere to structural deleveraging to prevent and defuse risks in promoting high-quality development". Incidents such as contractor banks have triggered new risks such as credit contraction. Follow-up policies are expected to advance more steadily and not prevent risks by one-size-fits-all and sport-like means.
The overall tone of fiscal policy should be consistent with the Central Economic Work Conference and the report on the work of the government. However, it focuses on implementation and reduction. This year, it has reduced taxes and charges by 1.17 trillion yuan. In the first half of the year, the national general public budget revenue grew by only 3.4% year-on-year, much lower than the nominal growth rate of GDP by 8.1%. The cumulative growth rate of tax revenue was 0.9%, which was 13.5 percentage points lower than the same period in 2018. In the first half of the year, the whole country has achieved a total of 1.17 trillion yuan in tax reduction and fee reduction, of which 1.04 trillion yuan is tax reduction. Specifically, the VAT reform reduced taxes by 436.9 billion yuan, the inclusive policy of small and micro enterprises by 116.4 billion yuan, and the personal income tax by 307.7 billion yuan. Taxpayers in private economy reduced taxes by 67.12 billion yuan, accounting for 65% of the total tax reduction. However, under the background of declining fiscal revenue in some areas, the implementation of tax reduction and fee reduction is not effective. On July 24, the executive meeting of the State Council emphasized the comprehensive investigation of illegal enterprise-related fees. For the revenue and expenditure gap of tax reduction and fee reduction, it is more made up by the form of profit surrender of state-owned enterprises.
In terms of monetary policy, the second quarter Politburo meeting proposed that "monetary policy should be tight and moderate, and maintain reasonable and sufficient liquidity". Compared with the 419 Politburo meeting, it increased "reasonable and sufficient liquidity", but not flooding, but oriented to manufacturing and new infrastructure. In the second quarter, the Politburo meeting proposed that "real estate should not be used as a short-term means to stimulate the economy", "stable manufacturing investment" and "guide financial institutions to increase medium and long-term financing for manufacturing and private enterprises". In the context of global economic growth slowdown, central banks have announced interest rate cuts, and the market generally expects the Federal Reserve to announce interest rate cuts of 25 basis points at its July 31 meeting. Faced with the global interest rate reduction tide, China's monetary policy space will be further expanded, and it is possible to lower the standard and lower the open market operating interest rate. In view of the deterioration of the financial structure caused by the decline in the proportion of medium-term and long-term loans, it is proposed to increase the proportion of this part.
Looking back on the current cycle of monetary policy, from the second half of 2016 to the first half of 2018, the main task is financial deleveraging and risk prevention, and the monetary and financial situation is relatively tight. In the second half of 2018, the downward pressure of the economy increased due to the double drop of domestic and foreign demand. Monetary policy was relaxed. In the second half of 2018, about 800 billion basic currencies were released each time through two structural reductions. In January 2019, the benchmark was lowered to release 1.5 trillion yuan of basic currency, while financial deleveraging was postponed, and the policy of lenient currency and lenient credit continued to be launched. With the temporary stabilization of the economy in the first quarter, monetary policy has entered the observation period from the easing period. In May 2019, the target was lowered to release 280 billion long-term funds, focusing on County small and medium-sized banks, supporting private enterprises and small and medium-sized enterprise loans. In addition, the People's Bank of China launched TMLF operations in January, April and July, with an operation volume of 257.5 billion yuan, 267.4 billion yuan and 297.7 billion yuan, respectively. Since June, with the increasing downward pressure on the economy, monetary policy will move from the observation period to the structural easing period.
4. Steady employment is the first of the "six stability", and there is a great pressure on real employment at present.
In July 2018, the meeting of the Political Bureau of the Central Committee put forward the requirement of "six stability" in economic work, in which "stable employment" was the first priority. In the Government Work Report of 2019, the employment priority policy was put on the macro policy level for the first time, and higher vocational colleges were required to enroll 1 million people. In May, the State Council's Leading Group on Employment Work was set up for the first time. In the second quarter of 730, the Politburo meeting emphasized that "we should implement the employment priority policy and do a good job in the employment of key groups such as college graduates, migrant workers and veterans."
There are limitations or distortions in judging employment situation only by official unemployment rate and other data. 1) The registered unemployment rate in cities and towns relies on the unemployed to register with the people's and social sectors on their own initiative, and only for the non-agricultural population. The data fluctuate slightly, falling to 3.61% at the end of the second quarter of 2019, which is not related to the economic trend. 2) The unemployment rate of the urban survey has been officially announced since the beginning of 2018, which continued to be higher than 5% in 2019 and 5.1% in June. However, 85,000 urban households accounted for only 0.03% of China's urban employment, and the sampling rate was less than half of the 0.07% in the United States. Moreover, the representative of migrant workers was insufficient and the sampling frame was aging. 3) The rate of seeking employment depends on the voluntary registration of job seekers and employers to public employment service institutions in various places. The data shows a long-term upward trend, and the reference value is limited. In the second quarter of 2019, it was 1.22, down year-on-year and ring-on-ring. 4) Judging the employment situation requires not only quantitative indicators such as unemployment rate, but also employment quality indicators such as average working hours, wage growth rate and part-time employment ratio. However, the current indicators to measure the quality of employment are limited.
Other employment data reflect the current real employment pressure. 1) New employment in cities and towns decreased by 2% in the first half of the year compared with the same period last year. The growth rate of the number of people receiving unemployment benefits and re-employment is not optimistic. In the first half of 2019, only 7.47 million new jobs were created in cities and towns, a decrease of 2.0% over the same period last year, and the target completion rate dropped to 67.0%, a decrease of 1.4 percentage points over the first half of last year. In the first quarter of 2019, the number of people receiving unemployment insurance benefits increased year on year for five consecutive quarters. The number of urban unemployed persons reemployed decreased by 9.1% from January to May of 2019, and the number of people with employment difficulties decreased by 4.2%. 2) The index of PMI practitioners in both manufacturing and non-manufacturing industries declined. In June 2019, the manufacturing PMI employment index fell to 46.9%, the lowest level since March 2009, while the non-manufacturing PMI employment index fell to 48.2%, falling for two consecutive months. 3) Renmin University and Zhilian recruitment CIER index remained low in the second quarter. The CIER index is the ratio of recruitment demand and applicants on the recruitment website of Zhilian. It was 1.89 in the second quarter of 2019. Although it rose slightly from the same period last year, it is still at a low level. Regionally, in the second quarter of 2019, the CIER indices of eastern, central, western and northeastern cities were 1.18, 1.14, 0.92 and 0.66, respectively, with the largest decline in the eastern region, while those of the first, new, second and third-tier cities were 0.60, 0.94, 1.18, 1.25, and those of the second and third-tier cities were 0.64, 0.94, 1.18, 1.25, respectively. The greatest slippage. 4) In the first half of 2019, the search volume of job-hunting-related keywords in Baidu Index increased sharply. Baidu's search volume for "job hunting", "recruitment", "employment information" and "unemployment compensation" has increased by 482%, 492%, 80% and 122% respectively over the past 90 days.
The downturn in the economy will put further pressure on the job market. 1) The current economic and financial situation is grim, with GDP growth falling to a new low of 6.2% in the second quarter of 2019, down by 0.2 percentage points from the first quarter, and the impact of trade frictions escalating again in May and the intensive introduction of real estate financing tightening policies has not yet appeared. Recent economic leading indicators have declined, such as real estate sales, land acquisition and declining sources of funds, PMI orders and PMI export orders. Moreover, the economic and financial structure is deteriorating. For example, the proportion of medium and long-term loans of enterprises is declining, the proportion of short-term loans and short-term loans is rising, and the profit of enterprises is declining as PPI goes down. Although the supply of labor continues to decrease to ease employment pressure, the economic slowdown will lead to a further slowdown in labor demand and further pressure on the employment market, although large-scale unemployment is unlikely to occur. 2) From the perspective of industry, employment in manufacturing industry is mainly affected by the downturn in export and earnings of enterprises in the downturn of PPI. Construction industry is affected by the limited space for capital construction rebound and the downturn in real estate investment, and the follow-up is not optimistic. From the recruitment data of Zhilian, recruitment demand in financial industry is reduced by 39.7% and 37.0% respectively in the first and second quarter compared with the same period of last year. Internet/e-commerce decreased by 22.5% and 13.6% respectively. From the point of view of key groups, the scale of university graduates keeps innovating high, the scale of migrant workers slows down, but the aging, "4050" personnel scale rises, and employment pressure is greater.
Policy recommendations: Firstly, we should further optimize the business environment, promote the implementation of tax reduction and fee reduction, and smooth financing channels, so as to better play the role of enterprises as the main body of stable employment, especially private and small and medium-sized enterprises. Private and small and medium-sized enterprises (SMEs) are the main employment absorbers, but the business environment has deteriorated in the past few years, including being injured to a certain extent in the past de-leveraging, de-productivity and environmental protection storms. The persistent downturn in exports has increased their pressure on survival, coupled with inadequate financing channels and stratified liquidity. Although the government has issued a number of policies to relieve private and small and medium-sized enterprises, the effect of these policies remains to be seen. Second, we should strengthen the opening up of the service industry to the outside world, especially in the financial, educational, medical and telecommunication industries; accelerate the construction of metropolitan areas and urban agglomerations with big cities as the core, increase the density and frequency of the economically active population to promote agglomeration, and give full play to the role of service industry in absorbing employment. The three is to promote the steady and healthy development of the real estate market. We should prevent excessive financial bubbles and also prevent the initiative from piercing and causing major financial risks. Fourthly, we should firmly promote large-scale enrollment expansion in Higher Vocational colleges, implement large-scale vocational skills training, and promote the transformation of labor skills to meet the needs of industrial transformation and upgrading.
5. Fostering a new growth point of China's economy. The Political Bureau meeting put forward "multi-use reform measures to expand consumption" and "stabilizing manufacturing investment", emphasizing the transformation of old residential areas and the construction of new infrastructure.
Cultivate new economic growth points. On July 29, General Secretary Xi Jinping hosted a seminar for non-Party personages, emphasizing that "cultivating new economic growth points and promoting solid economic development of high quality". In "Fully Estimate the Seriousness of the Current Economic and Financial Situation - A Comprehensive Interpretation of the June Economic and Financial Data", we put forward: "Looking for new economic growth points. China's investment saturation is a false proposition. China's per capita GDP is only 9,700 US dollars, which is only one sixth of that of the United States, and the difference between the East and the West is huge. Therefore, the investment space is huge, but it is not the traditional iron cock, but in the new investment field: the people's livelihood is still very short of education and health care, and the scientific and technological innovation field is of great foundation. R&D is still a short board, while the four links of urban ground transportation are developed, the construction of urban underground pipeline network is still very backward - all of which need the attention of public policy, coupled with new mechanisms and new openness.
The Political Bureau meeting in the second quarter of 730 emphasized that "tapping the potential of domestic demand, expanding the final demand, effectively starting the rural market, and expanding consumption by means of reform", which meant that expanding consumption would no longer adopt simple and crude stimulus policies and fully tap the rural market. At present, the important reason for the insufficient consumption in China is that the supply can not meet the demand, especially the high-end supply and the insufficient supply of medical and pension services, which should be solved by opening up market access and increasing competition. In the first quarter of 419, the meeting of the Political Bureau put forward the idea of "focusing on the supply-side structural reform to stabilize demand". In 2018, the Central Economic Working Conference put forward the idea of "improving the consumption environment, implementing the special additional deduction policy of personal income tax, and enhancing consumption capacity". The overall thinking is consistent.
The quarterly meeting of Politburo clearly put forward "stabilizing manufacturing investment", reflecting that the central government pays full attention to the current downturn in manufacturing investment, and proposes "guiding financial institutions to increase medium and long-term financing for manufacturing and private enterprises". The current downturn in manufacturing industry is mainly related to the downturn in exports and corporate profits. Without the support of tax reduction and fee reduction, the growth rate of corporate profits will decline faster. In addition, we should also reduce the price of various factors through reform and improve the profitability of enterprises.
In the second quarter, the Politburo meeting emphasized "the implementation of the project of making up the shortcomings of old urban residential areas, urban parking lots, urban and rural cold chain logistics facilities" and combined stable investment with benefiting people's livelihood. On June 19, Premier Li Keqiang proposed at the executive meeting of the State Council that "we should deploy and promote the renovation of old urban residential areas to meet the expectations of the masses and improve living conditions, and determine measures for completing the task of upgrading rural power grid ahead of time, so as to promote rural revitalization". Rebuilding old residential areas can not only expand effective investment, but also promote consumption and improve people's livelihood. At present, there are hundreds of millions of inhabitants in old urban districts that need to be renovated throughout the country. Construction projects include hydropower, electric circuit, optical fiber, elevator, parking facilities, etc.
In the second quarter, the meeting of Politburo put forward the idea of "speeding up the construction of new infrastructures such as information network" to speed up the development of economy to high quality. In 2018, the Central Economic Work Conference put forward the idea of "quickening the pace of 5G commerce and strengthening the construction of new infrastructure such as artificial intelligence, industrial Internet and Internet of Things". The government's work report in 2019 also proposes to strengthen the construction of a new generation of information infrastructure. Infrastructure construction of information network represented by 5G will add vitality to the economy, provide low-level support for new products and consumption patterns, promote the optimization and upgrading of industrial structure, and advance to high-quality development.
6. The Politburo Conference emphasized the upgraded version of the supply-side reform and the structural reform of the financial supply-side to support high-end manufacturing and private enterprise financing.
The second quarter Politburo meeting emphasized that "we should closely focus on the eight-character policy of"consolidation, enhancement, promotion and unimpeded", deepen the structural reform of the supply side, and enhance the basic capacity of the industry and the level of the industrial chain." The spirit of the 419 Politburo Conference and the Central Economic Work Conference will continue as a whole. At the 419 Politburo meeting, it was proposed that "the implementation measures of the eight-character policy of"consolidation, enhancement, promotion and unimpeded"should be refined, and that the demand should be stabilized by means of structural reform on the supply side". Both the Central Economic Work Conference at the end of 2018 and the two sessions in 2019 show that the supply-side reform pays more attention to marketization and legalization, corrects some wrong understandings and practices in the past, and upgrades its connotation to "consolidation, enhancement, promotion and unimpeded". That is to consolidate the achievements of the previous supply-side reform of "three removals, one reduction and one supplement" and enhance the micro-level. The main body's vitality should be enhanced, the level of industrial chain should be raised, and the national economic cycle should be smoothed, especially the virtuous cycle of Finance and real economy.
As for the structural reform of the financial supply side, the meeting of the Political Bureau emphasized that "guiding financial institutions to increase medium and long-term financing for manufacturing and private enterprises, grasping the rhythm and intensity of risk management, and consolidating the responsibilities of financial institutions, local governments and financial regulatory departments", while further specifying the objectives of the reform of the financial supply side. That is, to increase support for manufacturing and private enterprise financing. In February 2019, the Political Bureau of the Central Committee put forward the structural reform of the financial supply side, emphasizing the need to adjust the market structure, vigorously develop multi-level capital markets, and increase the proportion of direct financing; deepen the reform of financial institutions such as banks, and promote the reform of mixed ownership of banking industry; improve the financial product system and develop differentiated funds. Fusion of products will better serve the real economy.
Seventh, the Politburo meeting stressed that "insist on the orientation of housing for living, not for speculation, implement the long-term management mechanism of real estate, and do not use real estate as a short-term means of stimulating the economy."
In the first quarter of 419, the Politburo meeting proposed that "we should stick to the position that houses are used for living, not for speculation, and implement a long-term control mechanism of"one city, one city, one city, and the main responsibility of the city government". In December 2018, the Central Economic Work Conference proposed that "we should build a long-term mechanism for the healthy development of the real estate market, insist that housing is used for living, not for speculation, implement urban policy, classified guidance, implement the main responsibility of the city government, and improve the housing market system and housing security system".
The Political Bureau meeting in the second quarter of 730 sent three clear signals: 1. The central government should cope with short-term economic pressure, not relax the regulation of real estate as a means of stimulating the economy; 2. The housing system will adhere to a positioning of housing, explore and improve the market and security two systems, and return to solve the housing problem of residents. 3. The long-term mechanism of Real Estate focuses on "management". Local governments will have greater decision-making power and more abundant toolboxes to assume local main responsibilities. The central government will implement the policy objectives of "stabilizing house prices, stabilizing land prices and stabilizing expectations" by improving the monitoring, early warning and evaluation mechanism of the market.
For a long time, real estate has been the pillar industry, contributing 6.5% directly to GDP, 9.0% indirectly through upstream and downstream; real estate development investment accounts for 17.4% of fixed assets investment; real estate is the main source of local fiscal revenue, land transfer funds and real estate related taxes account for 35.4% of local comprehensive financial resources in 2018; The system is highly interwoven. In 2018, real estate loans accounted for 28.4% of the loan balance.
The housing system has always been a part of macro-control. Prior to 1978, housing construction was squeezed from the priority strategy of heavy industry; since 1978, emphasis on housing commercialization stemmed from the transformation of economic system from planning to market; in 1998, housing reform was greatly promoted to cope with the impact of the Asian financial crisis; in 2003, the shift to a housing supply system dominated by commercial housing was a "play" to the central government. Response to the role of the market in allocating resources; vigorous development of affordable housing in 2008 is to hedge the impact of the international financial crisis. The housing system not only aims at solving the housing problems of residents, but also undertakes some functions of macro-control, which is the key feature of China's housing system.
In the new era, we should abandon short-term stimulation, seek institutional breakthroughs, put people first and make living the highest goal and inspire people.
In the first quarter of 2019, when Xiaoyangchun appeared in the housing market, the Politburo meeting in the first quarter of 419 re-mentioned "housing is not speculative", and real estate sales have cooled significantly since mid-April. From January to June, the sales area of commercial housing was 76 million yuan, down 1.8% year-on-year, and the decline was 1.5 percentage points larger than that of January to April. Sales of commercial housing was 7.1 trillion yuan, up 5.6% year-on-year, and the growth rate was 2.5 percentage points lower than that of January to April.
In May, "No. 23" of the Banking and Insurance Regulatory Commission has launched a new round of real estate financing tightening, and a series of new regulatory policies, such as trust, overseas debt, bank loans, have been introduced intensively. This clear release of the signal that regulation is not relaxed means that the financing situation of Housing enterprises in the second half of the year is grim. It is expected that insurance, capital management, financial management and other financing channels will also receive regulatory attention. In the future, the downturn of real estate sales, the cooling of land transactions, the increasing downward pressure of real estate investment and the acceleration of industry concentration will increase the risk of capital chain rupture faced by small and medium-sized housing enterprises. In the first half of 2019, the top 10 companies issued corporate bonds and overseas bonds accounted for 18.2% and 35% respectively, which increased by 9.1% and 4.2% compared with 2018. Financing has been tightened rapidly and the market has cooled down. Some small and medium-sized housing enterprises, which are short of funds, have dramatically reduced their prices, delayed their delivery and even went bankrupt. As of July 24, 274 Housing enterprises in China went bankrupt in 2019, an increase of 41.2% over the previous year.
In the face of the complex and grim situation both inside and outside, a series of tightening policies have been issued recently for real estate financing, including comprehensive tightening of overseas debt, trust and credit. Objectively speaking, on the one hand, it is necessary to prevent currency drain from stimulating the real estate bubble. On the other hand, we must prevent the initiative from piercing and causing major financial risks. If we take the initiative to break through, Sino-US trade frictions need not continue. Ten crises and nine real estate crises, China's housing market value will be about 260 trillion yuan in 2017, the stock market will be about 43 trillion yuan in 2018, and the bond market will be about 58 trillion yuan. Laochengmouguo is a time-for-space, stable land prices, stable housing prices, stable expectations, the use of time window to promote housing system reform and long-term mechanism. At the same time, normal business should be allowed to carry out, non-standard business should be gradual, open the front door and close the back door, not sport-style one-size-fits-all. At present, especially to support M&A financing, enterprises through M&A adverse assets or problem projects become the main force to resolve bad and financial risks.
We should stabilize land prices, house prices and expectations, and use the time window to push forward housing system reform and long-term mechanism. The long-term mechanism is an important reform of our country's real estate regulation and control thinking, and is a result-oriented policy design. Compared with the real estate regulation in the past, the construction of long-term mechanism has four main aspects: first, consolidating the responsibility of the main body of the city, changing the main body of regulation from the central to the local, and local governments have greater autonomy in regulation and control. They can independently choose the appropriate combination of regulation and control policies in the toolbox of regulation and control policies from the actual situation of various places, because of the fact that the main body of regulation has changed from the central to the local government. Local conditions and precise measures should be taken. The second is to give the local financial, fiscal and taxation, land and other policy toolbox, the central assessment and supervision. At the beginning of each year, the local government reports to the central government the control objectives, and carries out monthly monitoring, quarterly assessment and annual assessment. Commodity house price, second-hand house price, rent and land price index are synchronized with CPI as far as possible. Third, the construction of housing market system and security system. To solve the housing problem of residents, we should adhere to the principle that "low income depends on security, middle income depends on support, and high income depends on market". Fourth, speeding up the legislation of real estate tax. Real estate tax is a strategy to deal with land finance and land price to promote house price. The regulation and control of real estate will change from administrative measures to comprehensive policies, including a package of policy tools such as finance, land, finance and taxation, housing security and market management.
8. The meeting of the Political Bureau put forward the idea of "speeding up the implementation of major strategies and enhancing the functions of urban agglomerations". It is expected that the construction of urban agglomerations will be accelerated.
The Yangtze River Delta, Guangdong, Hong Kong, Macao, Beijing, Tianjin and Hebei metropolitan agglomerations have all risen to the national strategy, and Chengdu-Chongqing urban agglomerations are expected to be positioned as the fourth growth pole. The construction of urban agglomeration is conducive to improving the density and frequency of the economically active population, enhancing the total factor productivity and promoting the high-quality development of China's economy. Since 2013, the central government has requested urban agglomeration as the main form of promoting the new urbanization of the country, and planned to build 19 urban agglomerations, but most of them are not mature. At present, 19 urban agglomerations gather 75% of the population with 25% of the land, creating 88% of GDP, of which 78% is urban population. Among them, the Yangtze River Delta, Guangdong, Hong Kong, Macao, Beijing, Tianjin and Hebei have all become national strategies. The National Development and Reform Commission's "Key Tasks for the Construction of New Urbanization in 2019" requires that "the implementation of Chengdu-Chongqing Urban Agglomeration Development Planning should be tracked and evaluated, and the policy measures to support the high-quality development of Chengdu-Chongqing Urban Agglomeration should be studied and put forward, so as to foster and form a new important growth pole." This is the first time in the central document that Chengdu-Chongqing urban agglomeration will be emphasized separately, suggesting that it will follow up or rise to a national strategy to build China's fourth growth pole.
Cultivating modern metropolitan area is the breakthrough and grasp of urban agglomeration construction. In February 2019, the National Development and Reform Commission issued the Guiding Opinions on the Cultivation and Development of Modern Metropolitan Circle, which calls for the construction of an hour commuting circle in the direction of the same city. This is the first central document in China with the theme of "Metropolitan Circle". At present, there are more than 10 metropolitan areas of 20 million people in Shanghai, Beijing, Guangfozhao, Hangzhou and Shenguanhuai, and 14 metropolitan areas of 10 million to 20 million people in Chongqing, Qingdao and Xiamen, Zhangquan. Twenty-four mega-metropolitan areas, with 6.7% of the country's land, gather about 33% of the permanent population and create about 54% of GDP. Most of the population in the metropolitan area is in continuous inflow. As the core part of urban agglomeration, the construction of metropolitan area in China has been developing rapidly in recent years, but the problems such as weak traffic connection, Limited Division of labor and cooperation, and serious low-level homogenization competition are prominent.
9. The meeting of the Political Bureau emphasized that "scientific innovation board should stick to its orientation, implement the registration system with information disclosure as the core, and improve the quality of listed companies".
The central government attaches great importance to the establishment of multi-level capital market and promotes the steady and healthy development of science and technology innovation board. It is to promote the economic development of high quality, from direct financing to indirect financing, and to meet the needs of industrial restructuring. In the second quarter of 730, the Politburo meeting put forward that "scientific innovation board should stick to its position, implement the registration system with information disclosure as the core, and improve the quality of listed companies". Prior to the 419 Politburo meeting, it was emphasized that "the healthy development of capital market should be promoted by the innovation of key systems, and the registration system of securities issuance with information disclosure as the core should be truly implemented in the scientific creation board". In December 2018, the Central Economic Working Conference proposed that "Capital market plays a vital role in financial operation. We should deepen reform to create a standardized, transparent, open, dynamic and resilient capital market... Promote the establishment of science and technology innovation board in Shanghai Stock Exchange and the pilot registration system to land as soon as possible.
On July 22, the first 25 companies of Kechuangban were officially listed, shifting from pre-supervision to in-process and post-supervision, and upgrading the supervision system. First, the transparency of auditing has been significantly improved. For the first time, 32 key points of IPO auditing have been made public in official calibre and written form. Regulatory inquiries and corporate responses have been made public. Second, the auditing efforts have increased. As of June 2019, about 92 companies have disclosed 223 auditing inquiries and responses, and nearly 6000 questions. Thirdly, the efficiency of audit has been greatly improved. It takes an average of 75 days for 25 companies to register from acceptance to the approval of the SFC. In less than three months, they can complete the three-year listing process of the approval system. Fourth, the marketization of issuance and underwriting. The average price-earnings ratio of the first 25 listed companies is 53 times, which is 2.4 times that of the newly listed companies under the same approval system. The average winning rate is 0.06%, slightly higher than the approval system under the 0.05% online new winning rate. Fifth, the content of science and technology is relatively high. The new generation of information technology accounted for 52%, high-end equipment manufacturing and new materials industry accounted for 20%, biological industry accounted for 8%, and the average R&D expenditure accounted for 11.3% of business income, which was higher than that of 66 A-share listed companies. Sixth, the quality of issuers is better. The average asset-liability ratio of the first batch of listed companies is 33.4%, which is lower than 39% of the benchmarking enterprises, and the average net profit ratio is 22%, which is much higher than 6.5% of the benchmarking enterprises, and the compound growth rate of business income is 24%, which has great potential for the development of enterprises.
In order to maintain the vitality of the registration system, we must examine the registration system and its supporting system from the top level of design. Firstly, we should focus on information disclosure and maintain the vitality of science innovation board. Second, actively exert self-discipline and social forces to participate in supervision. Thirdly, we should promote the revision of the Securities Law and make the violators pay a heavy price. Fourth, we should improve the compensation mechanism for investors'damages. Fifth, to establish a seamless multi-level capital market. Sixth, develop institutional investors to attract long-term stable funds into the market.
At the end of 2018, after the Central Economic Work Conference put forward the idea of "improving the quality of listed companies", the 730 Politburo Conference put forward it again, which is conducive to stimulating market vitality and boosting confidence. At present, there are 421 zombie companies with broad caliber in A-share market, accounting for 11.5% of the total number of Listed Companies in A-share market, and they rely on government subsidies for a long time. To improve the quality of listed companies, we need to encourage the survival of the fittest through market-oriented mergers and acquisitions; improve the information disclosure mechanism; increase the cost of violations of laws and regulations of listed companies and their shareholders; encourage the development of new technologies and new formats, and give preferential treatment in tax policies; guide the associations of listed companies to improve industry self-discipline opportunities. System.
10. The meeting of the Political Bureau emphasized that "we should effectively deal with economic and trade frictions, open wider to the outside world, accelerate the implementation of a series of major opening-up measures" and build a high-level open system.
In the second quarter, the Politburo meeting put forward the idea of "effectively coping with the economic and trade frictions" and "doing our own thing well", while in the first quarter of 419, the Politburo meeting did not mention the Sino-US economic and trade frictions. The main reason is that the Sino-US economic and trade frictions are facing uncertainties again. Trade frictions have arisen in China's exports, employment, industrial chain transfer, capital market and expectations Negative effects. We estimate that Sino-US economic and trade frictions have a greater impact on employment in electromechanical, mechanical and labor-intensive industries. We should attach great importance to the recessive unemployment of migrant workers in these industries and the decline in employment quality. It is necessary to liberalize some service industries, strengthen re-employment training and financial funds to ensure their basic livelihood. Meanwhile, the transfer of industrial chain is continuing. The growth rate of China's exports to the United States dropped sharply to - 12.3% from January to May, but the growth rates of Taiwan's and Vietnam's exports to the United States rose to 17.2% and 36.4% respectively. At present, Vietnam's labor price, land price, rent, house price, enterprise tax burden, water price, gasoline, diesel oil and electricity price are equivalent to 31.8%, 68.6%, 15.2%, 10.4%, 80%, 51.5%, 84.5%, 78.3% and 87.5% of China's respectively.
Sino-US trade frictions have been escalating continuously since 2018. The scale of goods imposed by the US tariffs on China has been expanding, and from trade frictions to technological and financial wars, to investment restrictions, technological blockades, interruption of talent exchanges and isolation of China.
In the early stage of Sino-US trade frictions, "Sino-US relations are neither better nor worse," and "Sino-US trade frictions have little impact on China" were once popular. However, we have judged from the beginning that "Sino-US trade frictions are long-term and increasingly severe", "this is a containment under the banner of trade protectionism", "Sino-US trade frictions, our best response is to promote a new round of reform and opening up with greater determination and courage."
On May 6, 2019, Trump suddenly said that he would impose tariffs on 200 billion US dollars of imports, which had previously imposed 10% tariffs on China, to 25% from May 10, and 25% on another 325 billion US dollars in the short term. On May 13, China announced that on June 1, it would raise tariff rates to 10%, 20% and 25% on $60 billion of goods with tariffs of 5% and 10%.
On May 15, 2019, U.S. President Trump signed an executive order declaring that the United States has entered a "state of emergency" and that U.S. enterprises should not use telecommunications equipment produced by enterprises that pose a risk to national security. The U.S. Department of Commerce's Bureau of Industry and Security has listed Huawei as an export control entity.
In the second quarter, the meeting of the Political Bureau put forward the idea of "opening wider to the outside world and stepping up the implementation of a series of major opening-up measures". Continuing the spirit of the previous 419 Politburo meetings, more substantive measures for opening up will be taken one after another. On June 28, at the G20 Osaka Summit, the General Secretary put forward that China would accelerate the formation of a new situation of opening up. Specific measures include issuing the negative list of foreign investment access in the 2019 edition; further expanding the opening of agriculture, mining, manufacturing and service industries; establishing six new free trade pilot zones, adding new areas of Shanghai free trade pilot zone; and implementing a new foreign investment legal system on January 1, 2020. On June 30, the State Development and Reform Commission and the Ministry of Commerce issued the Special Administrative Measures for Foreign Investment Access (2019 edition). The list items were reduced from 48 to 40. On July 20, the Financial Stability and Development Commission of the State Council issued 11 measures to further expand the opening of the financial industry to the outside world.
We suggest that China take the initiative to promote the establishment of a Sino-US FTA with zero tariffs, zero non-tariff barriers and zero subsidies. Free trade is conducive to promoting international division of labor, bringing into full play the respective factor endowments of China and the United States, and achieving win-win results. It is also naturally conducive to large manufacturing countries. This is evident in the European Area, their respective trade zones and the process of globalization. China has been the biggest beneficiary of globalization in the past 40 years, and Germany is the most important member of the European Economic Alliance. Big beneficiaries. In theory, China's labor factor is lower than that of the United States as a whole, and its manufacturing industry chain is more complete. The Sino-US FTA can achieve a win-win situation, and China will be the biggest beneficiary, which is also the need of China's own development. Therefore, the establishment of Sino-US FTA will help to resolve Sino-US trade frictions and turn dry war into jade silk. Following the establishment of special zones in the 1980s and China's entry into WTO in 2001, the establishment of Sino-US FTA will usher in the third round of China's reform and opening-up and help China move from a big manufacturing country to a strong manufacturing country.
Source: Zeping Macro