December 13, 2019 Source: Securities Times

On December 12, according to Xinhua News Agency, the Central Economic Work Conference was held in Beijing from December 10 to 12. Xi Jinping, General Secretary of the CPC Central Committee, State President and Chairman of the Central Military Commission, Li Keqiang, member of the Politburo Standing Committee of the CPC Central Committee, Premier Li Keqiang, Li Zhanshu, Wang Yang, Wang Huning, Zhao Leji, and Han Zheng attended the meeting.

Xi Jinping delivered an important speech at the meeting, summarizing the economic work in 2019, analyzing the current economic situation, and deploying economic work in 2020. In his speech, Li Keqiang made specific arrangements for economic work next year and made a concluding speech.

First look at the key expressions of this Central Economic Conference:

1. We must scientifically and steadily grasp the counter-cyclical adjustment of macroeconomic policies, seek dynamic balance among multiple objectives, strengthen risk awareness, and firmly hold to the bottom line that no systemic risk occurs.

2. The basic trend of China's economic stability and long-term improvement has not changed. We have the strong leadership of the party and the significant advantages of the socialist system with Chinese characteristics. We have the solid material and technological foundation accumulated since the reform and opening up. We have the advantages of a large-scale market and the potential for domestic demand. We have huge human capital and human resources.

3. Achieving the goal of building a well-off society in an all-round way and the "Thirteenth Five-Year Plan" is the top priority of the work of the whole party next year. To achieve the expected goals for next year, we must adhere to the word stability, adhere to the policy framework of macro policy stability, micro policy livelihood, and social policy underpinning, and improve the forward-looking, targeted, and effectiveness of macro-control.

4. China's financial system is generally healthy and capable of resolving various risks. It is necessary to keep the macro-leverage ratio basically stable and compact the responsibilities of all parties.

5. It is necessary to stabilize the total employment, improve the employment structure, improve the quality of employment, highlight the employment of key groups, and ensure that zero-employment families are dynamically reset. It is necessary to get around the bottom line of basic living, ensure that pensions are paid in full and on time, and accelerate the nationwide coordination of pension insurance.

6. We must adhere to the positioning of houses for living, not for speculation, comprehensively implement the long-term management and regulation mechanism that implements policies based on the city, stabilizes land prices, housing prices, and expectations, and promotes the stable and healthy development of the real estate market.

7. Active fiscal policy must vigorously improve quality and efficiency, pay more attention to structural adjustment, resolutely reduce general expenditures, provide guarantees in key areas, and support grass-roots wages, operations and basic livelihoods. A sound monetary policy should be flexible and appropriate, maintain reasonable and adequate liquidity, and increase the scale of monetary credit and social financing in line with economic development, and reduce social financing costs. Increase the medium and long-term financing of the manufacturing industry to better alleviate the problem of difficult and expensive financing for private and small and medium-sized enterprises. Fiscal and monetary policies should work together with consumption, investment, employment, industry, and regional policies to guide investment in areas such as advanced manufacturing, livelihood construction, and infrastructure shortcomings that benefit from both supply and demand, with multiplier effects, and leverage the foundation of consumption. Role and the key role of investment.

8. It is necessary to implement the tax and fee reduction policies, reduce the cost of electricity, gas and logistics for enterprises, and promote the disposal of "zombie enterprises" in an orderly manner. It is necessary to improve the institutional mechanism and build a group of advanced manufacturing clusters with international competitiveness. It is necessary to focus on the long-term development of the country, strengthen the construction of strategic and network infrastructure, promote the construction of major projects such as the Sichuan-Tibet Railway, steadily advance the construction of communication networks, accelerate the implementation of major projects for the prevention and control of natural disasters, and strengthen municipal pipeline networks, urban parking lots, and cold chains. The construction of logistics and other facilities will speed up the construction of rural roads, information and water conservancy facilities.

9. Deepen the reform of the economic system. It is necessary to accelerate the reform of state-owned and state-owned enterprises, improve the legal environment to support the development of the private economy, and improve the policy system for the development of small and medium-sized enterprises. It is necessary to formulate and implement a three-year action plan for the reform of state-owned enterprises, improve the comprehensive effectiveness of state-owned and state-owned enterprise reform, and optimize the environment for the development of the private economy.

10. Regarding the capital market, this time involved the following 99 words: to accelerate the reform of the financial system, improve the basic system of the capital market, improve the quality of listed companies, improve the exit mechanism, steadily promote the reform of the GEM and the New Third Board, and guide the services of large banks The focus is sinking, pushing small and medium-sized banks to focus on their main responsibilities, deepening the reform of rural credit cooperatives, and guiding insurance companies to return to the security function.

Point one: Four points summing up the understanding of economic work this year

In summing up the economic work in 2019, the meeting pointed out that since the beginning of this year, in the face of the complex situation of rising risks and challenges at home and abroad, the entire party and the country have adhered to the general tone of steady progress and the focus on supply-side structural reforms to promote high-quality Development, do a good job of "six stability", maintain sustained and healthy economic and social development, make key progress in the three major battles, achieve significant results in targeted poverty alleviation, effectively prevent and control financial risks, improve the overall quality of the ecological environment, and take important steps in reform and opening up. Structural reforms continued to deepen, new breakthroughs were made in scientific and technological innovation, and the people's sense of gain, happiness, and security improved. The progress of the main indicators of the "Thirteenth Five-Year Plan" was in line with expectations, and new major progress was made in building a well-off society in a comprehensive manner.

The meeting pointed out that the hard-won achievements are rooted in our adherence to the central and unified leadership of the Party Central Committee, maintaining strategic determination, advancing in stability, deepening reform and opening up, and giving full play to the central and local enthusiasm. In our work, we have formed some important insights:

1. It is necessary to scientifically and steadily grasp the counter-cyclical adjustment of macro policies, enhance the vitality of micro-subjects, and run the main line of structural reform on the supply side through the entire process of macro-control;

2. It is necessary to optimize economic governance from the perspective of system theory, strengthen the overall concept, and seek dynamic balance among multiple goals;

3. We must be good at removing the institutional and institutional barriers to development through reform, activating the dormant development potential, and letting various market players work hard on the front line of technological innovation and domestic and international market competition;

4. It is necessary to strengthen the awareness of risk and firmly hold to the bottom line that no systemic risk occurs.

From the above four aspects, we can see that the main line of economic policy since the beginning of this year is a double bottom line thinking of equal growth and risk prevention. Among them, "scientific and stable grasp of the counter-cyclical adjustment of macro policies" shows that despite the need for stable growth, The great counter-cyclical adjustment efforts, but this is not the same as resuming the strong stimulus of "flooding floods". This is evidenced by the structural looseness of monetary policy this year and the emphasis on precision drip irrigation. And "seeking dynamic balance in multiple objectives" and "strengthening risk awareness" also show that while maintaining stable economic growth, we must also take care to prevent and resolve financial risks. The macro-leverage ratio has now changed from deleveraging to stable leverage.

Point two: "steady" appears frequently

While affirming the achievements of economic work this year, the meeting also emphasized the challenges of current economic operations. The meeting emphasized that China is in the tackling phase of transforming the development mode, optimizing the economic structure, and transforming the growth momentum. Structural, institutional, and cyclical issues are intertwined. The impact of the "three-phase superposition" continues to deepen and the downward pressure on the economy is increasing. The current world economic growth continues to slow down and is still in the period of deep adjustment after the international financial crisis. The characteristics of accelerated changes in the world ’s great changes are becoming more obvious, and the sources of global turbulence and risk points have increased significantly.

However, the meeting pointed out that the basic trend of China's economic stability and long-term improvement has not changed. This is mainly based on the judgement of the following situations:

1. We have the strong leadership of the party and the significant advantages of the socialist system with Chinese characteristics;

2. A solid material and technical foundation accumulated since reform and opening up;

3.Huge scale market advantage and domestic demand potential;

4.Huge human capital and talent resources;

Next year will be the year when a well-off society will be fully established and the “Thirteenth Five-Year Plan” ends. It is necessary to achieve the goal of the first century, to lay the foundation for the development of the 14th Five-Year Plan and to achieve the goal of the second century, and to do a good job in economic work. Very important.

Based on the above judgments on the current economic situation, the meeting set the tone, next year will closely follow the goals and tasks of building a well-off society in an all-round way, adhere to the general tone of steady progress, adhere to the new development concept, and adhere to the supply-side structural reform as the main line. Adhere to reform and opening up as the driving force, promote high-quality development, resolutely win the three major battles, do a good job of the "six stability", coordinate and promote stable growth, promote reform, adjust the structure, benefit the people's livelihood, prevent risks, and maintain stability, and maintain The economic operation is in a reasonable range to ensure the successful completion of a well-off society and the 13th Five-Year Plan. The meeting pointed out that to achieve the expected goals next year, we must adhere to the stability of the word, adhere to the policy framework of macro policy stability, micro policy live, social policy bottom, and improve the forward-looking, targeted and effective macro-control.

These tuned expressions are in the same vein as the recent session of the Political Bureau of the Central Political Bureau. It can be seen that the word "stable" appears more frequently and reflects the importance of stable growth. UBS China Chief Economist Wang Tao believes that “maintaining economic operations in a reasonable range” is generally considered to be the key to achieving many policy objectives. It is expected that the macro policy will be further relaxed slightly to ensure stable growth next year.

However, Wang Tao also emphasized that although stable growth is still the primary policy objective, preventing risks (including financial system risks, etc.) is equally important. Decision-makers are expected to reduce the 2020 economic growth target to "about 6%", and large-scale stimulus measures are not required to achieve this target.

Point Three: The order of the three major battles has changed.

It is worth noting that although this year's economic work reflects the dual bottom-line thinking of stable growth and risk prevention, from the above-mentioned setting of economic work for next year, the policy focus will be more inclined to the stable growth side, and prevention and resolution of major risks must Steady progress under the premise of steady growth. The meeting pointed out that achieving the goal of building a well-off society in an all-round way and the "Thirteenth Five-Year Plan" is the top priority of the whole party's work next year. It is necessary to improve and strengthen the "six stability" measures, improve the coordination, transmission, and implementation of policies such as finance, currency, and employment to ensure that the economy operates within a reasonable range. It is necessary to consolidate and expand the effect of tax and fee reduction, vigorously optimize the structure of fiscal expenditures, further alleviate the problem of difficult financing for enterprises, and take various measures to maintain a stable employment situation.

Based on the above-mentioned overall adjustment of economic work for the next year, the meeting formulated specific key tasks for the next year, including six major areas:

First, unswervingly implement the new development concept. Unswervingly implement the new development concepts of innovation, coordination, greenness, openness and sharing, and promote high-quality development. Focus on solving imbalances. In accordance with the laws of economic and social development, major policies are introduced and adjusted to carry out comprehensive impact assessments, and all forms of formalism and bureaucracy are resolutely eliminated. Adhering to the concept of new development should be taken as an important criterion for testing leading cadres at all levels.

The second is to resolutely fight three major offensives. China's financial system is generally healthy and capable of mitigating various risks. It is necessary to keep the macro-leverage ratio basically stable and compact the responsibilities of all parties.

It is interesting that the order of the three major battles was adjusted at this meeting. The "prevention and resolution of major risks", which was the first of the three major battles, was placed in the third place. This shows that the pressure for steady growth of macroeconomic work next year will increase, and the margins of policy requirements for risk prevention will weaken.

The third is to ensure effective protection and improvement of people's livelihood, especially the basic lives of people in need. It is necessary to stabilize the total employment, improve the employment structure, improve the quality of employment, focus on the employment of key groups, and ensure that zero-employment families are dynamically cleared. It is necessary to get around the bottom line of basic living, ensure that pensions are paid in full and on time, and accelerate the nationwide coordination of pension insurance. It is necessary to increase housing security for urban residents in need, strengthen urban renewal and upgrading of existing housing, do a good job in urban old quarters, and vigorously develop rental housing. We must adhere to the positioning of houses for living, not for speculation, comprehensively implement the long-term management and regulation mechanism based on city policies, stable land prices, stable house prices, and stable expectations to promote the stable and healthy development of the real estate market.

The Central Political Bureau meeting did not mention real estate. At that time, many analysts believed that next year's real estate regulation and control policy is expected to be more prominent in the policy of "housing and living without speculation". From the content of today's meeting, while re-emphasizing "do not speculate on housing and housing," the city's policy has proposed "comprehensive implementation" and emphasized the establishment of long-term effects of "three stability" (steady land prices, stable house prices, stable expectations). Manage the regulatory mechanism. It is expected that the real estate regulation and control policies of many cities next year will be loosened under the general tone of "no housing or speculation."

"We don't think the government will relax the overall real estate policy, including lowering the down payment ratio or substantially relaxing the credit policy; however, it may allow some local governments to slightly relax the purchase restriction policy, such as by simplifying settlement requirements and talent introduction policies. Tight financing conditions may also loosen margins. "Wang Tao said.

Li Chao, chief macro researcher of Huatai Securities, also said that the policy focused on steady growth in the face of increasing economic pressure. Although the liberalization of real estate regulation and control policies will still be more cautious in the short term, the idea of structural adjustment of credit will continue, but in the context of policy-based policies, some cities have adjusted their real estate policies in recent months, reflecting the relative real estate regulation and control. Flexibility, if the economic downturn pressure is further increased, real estate policies may structurally relax the rigid needs of first-tier and second-tier cities.

Point 4: Fine-tuning of fiscal and monetary policy expressions Counter-cyclical adjustments are expected to increase

In addition to the three key tasks mentioned above, the fourth key task proposed by the meeting is fiscal and monetary policies. However, it should be noted that, regarding the adjustment of fiscal and monetary policies for the next year, despite the continued emphasis on "implementing a proactive fiscal policy and "Prudent monetary policy", but there are many new expressions in the specific details of the two major policy areas, which generally reflects that the counter-cyclical adjustment efforts are expected to further increase, in order to protect the steady growth.

In terms of fiscal policy, the meeting pointed out that a proactive fiscal policy must vigorously improve quality and efficiency, pay more attention to structural adjustment, resolutely reduce general expenditures, ensure key areas, and support grass-roots wages, operations, and basic livelihoods.

Fiscal policy has been upgraded from "boosting and improving efficiency" proposed in the past to "improving quality and efficiency", indicating that next year's active fiscal policy is expected to further increase. In fact, this sign has been around recently. Recently, the Ministry of Finance has issued some 1 trillion yuan of new special debt limit in 2020 in advance. The executive meeting of the State Council held a few days ago also proposed to reduce the minimum capital ratio of some infrastructure projects. Analysts generally expect that fiscal policy will be more active next year, reflected in the overweight of countercyclical adjustment.

In terms of monetary policy, the meeting pointed out that a sound monetary policy should be flexible and appropriate, maintain reasonable and sufficient liquidity, and increase the scale of monetary credit and social financing in line with economic development and reduce social financing costs. It is necessary to deepen financial supply-side structural reforms, unblock monetary policy transmission mechanisms, increase manufacturing medium- and long-term financing, and better alleviate the difficulty of expensive financing for private and small, medium and micro enterprises.

Monetary policy has changed from "moderate tightness" to "flexible and moderate" in the past, which means that monetary policy will focus on strengthening pre-adjustment and fine-tuning in accordance with new changes in economic development. Under the pressure of steady growth, monetary policy is expected to be further marginal and loose. Still expected. The deputy director of CITIC Securities Research Institute stated clearly that the direction of monetary easing will remain unchanged next year, but the pace and intensity will be more flexible: on the one hand, structural monetary policies will be more created, improved and used (such as PSL); On the one hand, easing will not happen overnight.

In addition, the meeting emphasized that fiscal and monetary policies must work together with consumption, investment, employment, industry, and regional policies to guide investment in areas such as advanced manufacturing, livelihood construction, and infrastructure shortcomings that benefit from both supply and demand, with multiplier effects. To promote the "dual upgrade" of industry and consumption. It is necessary to fully tap the advantages of the ultra-large-scale market, give play to the basic role of consumption and the key role of investment.

Consumption and investment are the main drivers of steady growth from the total demand side. Among them, investment includes manufacturing investment and infrastructure investment. It is worth noting that this conference has a lot of influence on infrastructure investment, reflecting the stable infrastructure as a steady growth. Important gripper. The meeting pointed out that it is necessary to focus on the long-term development of the country, strengthen the construction of strategic and network infrastructure, promote the construction of major projects such as the Sichuan-Tibet Railway, steadily promote the construction of communication networks, accelerate the implementation of major natural disaster prevention projects, and strengthen municipal pipe networks and urban parking lots. And cold-chain logistics, and accelerate the construction of rural roads, information, and water conservancy facilities.

Everbright Securities' chief banking analyst Wang Yifeng believes that "strong infrastructure" will be an important starting point for "stable growth" in the next stage. From the perspective of recent policy directions, the use of special bonds for capital has been further broadened, and the minimum capital requirements for some infrastructure projects have also been lowered, indicating that infrastructure investment has been further strengthened.

"From the perspective of effects, 'strong infrastructure' will be reflected in the credit system's increased support for this area on the one hand; on the other hand, it will be reflected in the expansion of the local government debt system in 2020, with special debt and general government bonds It is expected to achieve a large capacity expansion to support the stability of local infrastructure systems. "Wang Yifeng said.

Point 5: Two major directions for economic system reform

The fifth priority task identified at the meeting is to promote high-quality development. The meeting pointed out that it is necessary to accelerate the restoration of live pig production to ensure stable supply and price. It is necessary to support the development of strategic industries, increase investment in equipment upgrades and technological transformation, and promote the optimization and upgrading of traditional manufacturing industries. It is necessary to implement tax and fee reduction policies, reduce the cost of electricity, gas and logistics for enterprises, and promote the disposal of "zombie enterprises" in an orderly manner. It is necessary to improve the institutional mechanism and build a group of advanced manufacturing clusters with international competitiveness. We must pay attention to solving the problem of "one old and one small", speed up the construction of an elderly care system, and support social forces to develop inclusive childcare services.

The sixth priority is to deepen the reform of the economic system. Accelerate the reform of state-owned assets and state-owned enterprises, improve the legal environment to support the development of the private economy, and improve the policy system for the development of small and medium-sized enterprises. It is necessary to accelerate the reform of the financial system, improve the basic system of the capital market, improve the quality of listed companies, improve the exit mechanism, steadily promote the reform of the GEM and the New Third Board, guide the decline of the service focus of large banks, promote small and medium banks to focus on their main businesses, and deepen rural credit. Social reform, guiding insurance companies to return to security functions.

It can be seen that in the reform of the economic system, the reform of the financial system is the most important, including both the reform of the capital market and the reform of the banking and insurance system. However, from the perspective of specific financial sector deployments, this is in line with the tone of the financial system structural reforms this year, and has not changed much. It is still a continuation of the central government's clear financial supply-side structural reform requirements earlier this year.

For example, regarding the reform of the capital market, the Securities and Futures Commission recently proposed 12 key tasks for comprehensively deepening the reform of the capital market at present and in the future, involving the full use of the role of the test field of the science and technology board, the promotion of listed companies to improve quality, The shortcomings of the hierarchical capital market system and the promotion of more medium and long-term funds entering the market. The reform of the banking system focuses on building a multi-layered, widely-covered and differentiated banking system, optimizing the allocation of financial resources from the structure, and increasing support for private small and micro businesses.

In addition, in the reform of the economic system, reforming state-owned and state-owned enterprises and optimizing the business environment of the private economy are specific focuses. Especially in the reform of state-owned and state-owned enterprises, the meeting pointed out that it is necessary to formulate and implement a three-year action plan for the reform of state-owned enterprises, improve the overall effectiveness of state-owned and state-owned enterprise reform, and optimize the environment for the development of the private economy.

In fact, the third meeting of the State Council's State-owned Enterprise Reform Leading Group held in mid-November made it clear to study and formulate a three-year action plan for state-owned enterprise reform, and clearly put forward reform goals, timetables and road maps. In addition, in the several key areas and key links proposed at the meeting, promoting the reform of mixed ownership was given first priority, proposing to strengthen financial constraints, clarifying tasks and measures, and formulating quantitative and assessable specific indicators.

This is the first study to draw up a three-year action plan for the reform of state-owned enterprises that has attracted much attention. State-owned enterprise policy research expert Li Jin said that this meeting is a major deployment of state-owned enterprise reforms and is a major historical news. It means that state-owned enterprise reform has entered a critical historical stage. The new three-year state-owned enterprise reform plan is a "action for state-owned enterprise reform." Program "is worth looking forward to. According to general rules, it is expected that from now until before the next two sessions, it should be a key period for studying and formulating a three-year action plan for the reform of state-owned enterprises, and it should be announced at the latest in the first half of next year.

Zheng Zhigang, a professor at the School of Finance and Finance at Renmin University of China and a senior researcher at the Chongyang Institute of Finance, said in an interview with the Securities Times that state-owned enterprise reform has always been the focus of economic system reform. There are different goals for state-owned enterprise reform at different stages. The annual action plan has a realistic background and specific meaning. In the context of increasing downward pressure on the economy, there are two main ways to find a breakthrough to stop the economic growth from declining and stalling: one is to boost the confidence of private enterprises; the other is to effectively play the role of state-owned enterprises as "stabilizers" in the national economy. However, considering that the current state-owned enterprises are also facing problems such as high leverage, overcapacity, and zombie enterprises, starting from the needs of steady growth, the reform of state-owned enterprises needs to be further deepened.