In a series of policy proposals released during the two sessions of China this week, it is undoubtedly a crucial change to use fiscal policy as the main force to promote economic growth。
Other important changes include increasing the emphasis on controlling implicit debt, increasing efforts to promote financial support for private companies, and there is more evidence that Chinese President Xi Jinping's manufacturing leadership program is still in progress. There are other signs that China is unlikely to make a big concession in the US trade negotiations。
“The government relies more on fiscal policy to support economic growth, but this is different from past fiscal policy,” said Trey McArver, co-founder of Trivium China, a Beijing-based research firm. “It’s not a massive infrastructure spending, it’s going to be Unbelievable plans to promote business development。”
The following are the five key policy changes revealed in the first week of the two sessions：
Fiscal firepower
Turning to fiscal policy to support economic growth, highlighting the determination of Chinese Premier Li Keqiang to stop the resumption of credit carnival。Although the 2.8% budget deficit rate target is only 0.2 percentage points higher than last year's target, economists say the actual number may be higher than the target。
The amount of tax reduction and reduction measures announced by the two associations in 2019 is close to 2 trillion yuan, and Finance Minister Liu Kun said on Thursday that the actual amount may be higher. He said that with the economic growth rate and the decline in inflation, it is indeed very difficult to balance the income and expenditure this year. Morgan Stanley said that the scale of fiscal easing is "not small"。Standard Chartered Bank estimates that this will stimulate nearly 2% of gross domestic product (GDP)。
Considering the pressure this year, China’s actual deficit situation is likely to exceed its target as in previous years。
Private and state-owned
Among the fiscal stimulus measures, support for troubled private enterprises is particularly prominent. Morgan Stanley said that the VAT reduction is equivalent to a maximum of 800 billion yuan ($119 billion), which is conducive to improving corporate profitability. Li Keqiang also mentioned in the annual government work report that certain state-owned financial institutions and central enterprises should increase profits paid to the central government this year。
Qu Hongbin, HSBC's chief Chinese economist and co-director of Asian economic research, believes that this monetary and fiscal stimulus is focused on revitalizing the private sector rather than highly leveraged real estate and state-owned enterprises。
Implicit debt
Efforts to rectify the hidden liabilities of local governments are also strengthening. To this end, China's largest policy bank is joining the ranks of helping to resolve hidden debt problems. Zheng Zhijie, president of the China Development Bank, said in Beijing on Tuesday that he hoped that the central ministries would arrange for CDB to provide loans to resolve hidden debts, and had communicated with the Ministry of Finance on specific projects. CDB is one of China's three major policy banks. As of the end of 2017, the asset size was 16 trillion yuan (2.4 trillion US dollars). According to a report by Bloomberg News last month, Jiangsu Province allegedly considered Zhenjiang City as a pilot for debt relief in the province, and mentioned that it will provide long-term low-interest loan support from CDB and other companies。
Made in China 2025
In the two major economic plan reports totaling 103 pages, there is no plan to establish China's leading position in manufacturing. However, the Chinese-made 2025 can still be seen between the lines. This controversial plan once occupied a prominent position in the 2018 government work report, and it is also a trigger for the Sino-US conflict. Both reports emphasize China's intention to strengthen big data and artificial intelligence research and development, and foster emerging industries such as next-generation information technology, high-end equipment, biomedicine, new energy vehicles and new materials, which are the core elements of China Manufacturing 2025。
trading
Just as Donald Trump urged his negotiators to reach an agreement with China as soon as possible, China almost did not mention trade negotiations. Former Treasury Secretary Lou Jiwei warned that China will not make a big concession. Some of the demands of the United States are nitpicking, and many of them are actually consistent with China’s own requirements. He has been the Minister of Finance until 2016 and is currently the Chairman of the National Council for Social Security Funds。
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