Macro team
Six understandings of the central economic work conference ( The Pacific Securities Co.Ltd(601099) securities macro Yuan Ye)
The central economic work conference will be held in 2021. On the whole, In the 2022 economic deployment, more attention is paid to steady growth (focusing on “adhering to economic construction as the center”) The re mention of this basic line has appeared in 2008, 2014 and 2018 in the past, corresponding to the economic deployment in 2009, 2015 and 2019 respectively), and investment is the most important in steady growth. Emphasizing the short-term steady growth does not mean the change of medium and long-term development direction. It is the coordination of short-term and medium and long-term development and a pragmatic adjustment under different environments. China’s economy will have a “window period with less pressure on steady growth” in 2021, and this “advantage” will be reversed regularly in 2022. In order to prevent economic ups and downs and affect the stability of the overall social situation, it is particularly necessary to pay more attention to the short term in 2022.
First of all, the main problems currently facing are the triple pressure of demand contraction, supply shock and weakening expectation. When the economy suffers from external shocks and the pressure to stabilize growth is great, the government often plays a leading role in solving the contradiction between supply and demand in advance, guides expectations to improve, and leads the market to react on supply and demand, driving supply and demand back to a virtuous circle. Therefore, in order to alleviate the triple pressure, it is necessary to clarify the role path of government before market. The central economic work conference has clearly required that the policy efforts of all regions and departments should be appropriately advanced, that is, the government should do what can be done first and do what can be done well. It is very important to clarify this logical main line for understanding the full text, that is, to grasp two points: first, the role of government and market has priority. Since there are priorities, they are not simultaneous and run through the whole year. Second, the government is the “requirement” and the market is the “guidance”. The role of the government is more controllable, while the market force is uncertain.
Secondly, demand contraction and supply shock correspond to monetary policy and fiscal policy respectively. Fiscal policy – ensure the intensity of fiscal expenditure and accelerate the progress of expenditure. Implement new tax reduction and fee reduction policies, strengthen support for small, medium-sized and micro enterprises, individual industrial and commercial households, manufacturing and risk resolution, and moderately advance infrastructure investment We will resolutely curb new implicit debts of local governments. There should be a triple understanding of the expression of fiscal policy in 2022: first, the growth rate of public financial expenditure will be higher than that in 2021. From the low base of fiscal expenditure in 2021, it is inevitable that the growth rate of fiscal revenue will decrease and the growth rate of expenditure will increase in 2022. Considering the tax reduction and fee reduction and implicit debt control in 2022, the actual scale expansion of fiscal expenditure does not have much room for imagination. The focus is on accelerating the progress of expenditure, that is, the limited growth of fiscal expenditure should move forward. Second, reduce taxes and fees. From the tax reduction and fee reduction in 2018 and 2019, we can expect more tax return in 2022, which is mainly good for the manufacturing industry. Third, infrastructure investment. Infrastructure investment in 2021 is relatively poor, mainly due to implicit debt control and insufficient infrastructure projects that meet the requirements. It can solve the problem of insufficient projects to carry out infrastructure investment moderately in advance. However, considering that the control of implicit debt has increased from “paying close attention to resolving the risk of implicit debt of local government” in 2021 to “Resolutely Curbing the new implicit debt of local government”, all the income from local land transfer in 2022 will be collected by national tax. We are not optimistic about the annual infrastructure investment in 2022, but only optimistic about its performance in the first half of the year. The expression of monetary policy has not changed much. It is required that “fiscal policy and monetary policy should be coordinated and linked”. When the downward pressure on the economy is large, the coordinated linkage of Finance and currency is either complementary to each other or at the same time. In combination with the requirements of properly advancing the policy in 2022, we adhere to the previous judgment and believe that under the requirements of steady growth and forward inclination of monetary policy and hedging against global liquidity tightening, there is a high probability of interest rate reduction in January next year, the end of the first quarter or the beginning of the second quarter, and the operation of reserve requirement reduction or interest rate reduction may be started in the fourth quarter.
Third, emphasize investment and weaken consumption? This is the relationship between “controllable” and “guiding” between the government and the market mentioned earlier. The deployment of stable growth certainly emphasizes the greater part that can be controlled and grasped. What is not emphasized does not mean that it is not supported, but only that it is highly uncertain and needs guidance. In the economic deployment in 2022, a number of industrial infrastructure reconstruction projects should be launched for the manufacturing industry to stimulate the emergence of a large number of “specialized, special and new” enterprises. Accelerate the formation of a safe and efficient logistics network with internal and external connectivity. Accelerate digital transformation and promote the upgrading of traditional industries. In terms of tax reduction and fee reduction, high-end manufacturing industry should be the first choice for investment in 2022. For real estate, it is in line with expectations to mention that real estate is not fried, but it also adds “support the commercial housing market to better meet the reasonable housing needs of buyers, and promote the virtuous circle and healthy development of the real estate industry due to urban policies”. Compared with the extensive emphasis on rental housing construction in 2021, there have been new changes. As for the real estate tax, a policy with contraction effect, or the tax rate is relatively low, or other policies need to be prepared for appropriate hedging. Therefore, adhere to the early judgment and look forward to the healthy development of real estate in 2022. In terms of consumption, there are relatively few statements in 2022 compared with “fully tap the consumption potential of counties and townships” and “reasonably increase public consumption” in 2021. Less expression does not mean less support, but there are not many new ones. From a policy perspective, it may be due to limited considerations such as fiscal expenditure. The fundamental recovery of consumption lies in employment and the growth of labor income, which is restricted by the change of covid-19 epidemic. In 2022, the employment may be supplemented by the recovery of the real estate industry, but it may also be dragged down by the decline of infrastructure investment. There is great uncertainty. It depends on the early effect of the government. In terms of investment, consumption focuses on the logic of inflation.
Fourth, grain and oil security under the supply shock. We will strengthen China’s capacity to guarantee resource production, accelerate the development and application of advanced exploitation technologies for oil and gas and other resources, and speed up the construction of a waste recycling system. We will thoroughly implement the action to revitalize the seed industry and improve the level of agricultural machinery and equipment. Among them, the revitalization of seed industry and agricultural machinery are not only the fundamental requirements of agricultural security, but also an important way to realize agricultural industrialization in common prosperity. It is recommended to focus on.
Fifth, the development of new energy is unclear and needs to wait for new information confirmation. In the description of the energy structure, carbon peaking and carbon neutralization are still the firm promotion direction, but it has been clearly stated that “it is impossible to complete the work in one service”, which should be a pragmatic adjustment after orderly power consumption in the fourth quarter of this year. For the rapid development of new energy, our early understanding is that it is forced to develop rapidly under the requirements of energy security to make up for the lack of domestic production of traditional energy. There is no problem with the direction, but the pace of development should be pragmatic to form a “safe and reliable alternative” with traditional energy. There are also two changes in the expression of new energy supply and demand: first, we should be based on the basic national conditions dominated by coal. The expression of 2021 is “promote coal consumption to reach the peak as soon as possible and vigorously develop new energy”. Re confirm that coal is the main energy consumption. To achieve the double carbon goal, we must first pay attention to the clean and efficient utilization of coal, and then supplement and optimize new energy. With this characterization, in the implementation process of local governments, whether there will be priority coal use and slow down the construction of wind power and photovoltaic projects still need to wait for further official interpretation of the policy. Second, renewable energy and raw material energy consumption are not included in the total energy consumption control. This can be understood as the full release of the supply of new energy raw materials, such as the release of silicon capacity. The repositioning of the energy consumption structure by the economic deployment in 2022 is difficult to interpret as a positive addition to new energy, which needs to be judged after waiting for the follow-up clear official information.
Finally, from the perspective of economic work deployment in 2022, It is suggested to grasp the short-term national security strategy (national defense, energy, food and supply chain), the medium-term strategy of expanding domestic demand and stabilizing growth (poverty alleviation – Rural Revitalization – common prosperity) and the long-term strategy of high-quality development (innovation and green). The three strategies should be promoted at the same time (it is easy to confuse the direction) and step by step (grasp the main contradiction in the promotion process of each strategy).
Risks needing attention in the near future: first, the Federal Reserve may accelerate the taper on December 15, and may raise interest rates for the first time at the beginning of the second quarter of next year. Second, the US debt ceiling will be postponed to 2023, which will have an impact on the restart of large-scale financial debt financing.
