Key investment points
Event: Recently, the central economic work conference was held in Beijing. In his speech, the leaders summarized the economic work in 2021, analyzed the current economic situation and deployed the economic work in 2022. In this regard, our interpretation is as follows:
Triple pressure appears and establish firm confidence. For the summary of this year’s economy, the economic work conference continued the judgment of the Politburo meeting and pointed out that “this year is a landmark year in the history of the party and the country”. We have made good achievements in economic development and epidemic prevention and control, national strategic scientific and technological strength, industrial chain resilience, reform and opening up, people’s livelihood guarantee and ecological civilization construction, and “achieved a good start in the 14th five year plan”. However, the meeting also pointed out that China’s economic development is facing the “triple pressure” of shrinking demand, supply shock and weakening expectation, which means that the resolution of pressure should not only promote demand expansion, but also take into account the stability of supply, but also pay attention to the guidance of expectation. We have firm confidence in doing a good job next year and have a positive attitude, because the “Fundamentals of China’s strong economic toughness and long-term improvement” have not changed.
“Stability” is the core demand, and the policy force is ahead. The meeting held that the 20th CPC National Congress will be held next year, which is a major event in the political life of the party and the state. In order to meet the victory of the 20th National Congress of the Communist Party of China, we need a “stable and healthy economic environment”, which makes “stability first and seeking progress in stability” become the keynote of economic work. The meeting mentioned the need to “strive to stabilize the macro-economic market and keep the economy running within a reasonable range”. Based on this, we believe that the demand for stable growth next year will make the economic growth tend to be stable, and the probability of breaking through the lower edge of the potential growth range of 5% is very low. The meeting also pointed out that “the policy force should be properly advanced”, which means that in terms of the rhythm of economic operation, the annual economic growth may be high in the front and low in the back. It is expected to usher in the continuous policy force at the beginning of next year, including the whole first half of the year.
Policy coordination and linkage, and the organic combination of “cross” and “reverse”. In terms of macro policy, the meeting stressed the need to achieve “coordination and linkage between fiscal policy and monetary policy”, and the two will jointly contribute to steady growth. It is particularly noteworthy that the meeting mentioned for the first time the “organic combination” of “cross cyclical and counter cyclical macro-control policies”. We believe that counter cyclical and cross cyclical policies are not antagonistic to each other. Relatively speaking, counter cyclical policies focus on the response to short-term economic pressure, while cross cyclical policies focus more on the optimization of medium and long-term economic development. In the case of short-term stable growth demand, the counter cyclical policy will be strengthened. If we coordinate the policy balance adjustment with the cross cyclical perspective, especially the prevention and resolution of the “sequela”, which is focused on the debt bubbles such as the counter cyclical, it will consolidate the quality of China’s economic development and truly achieve the goal of achieving steady and steady progress.
The financial strength ensures fast progress, and the currency is more flexible to help small and micro enterprises. In terms of fiscal policy, the meeting mentioned the need to “improve efficiency and pay attention to accuracy”. In particular, in view of the fact that this year’s fiscal “more revenue and less expenditure”, the positive efforts are relatively limited and the expenditure progress is obviously slow, the meeting mentioned the need to “ensure the intensity of fiscal expenditure and speed up the expenditure progress”. However, it should be noted that last year’s economic work conference also mentioned the need to “maintain an appropriate expenditure intensity” for finance. In fact, this year’s fiscal strength is difficult to be positive. We believe that the strength of fiscal policy next year may be more reflected in the front rhythm. In terms of specific methods, the meeting proposed to implement the “new tax reduction and fee reduction policy” and “moderately advance infrastructure investment”. The positive financial strength seems to have been strengthened in terms of policy statement, but it also emphasized “serious financial discipline” and “resolutely curb the new hidden debt of local governments”. Compared with the “work to effectively resolve the risk of hidden debt of local governments” in last year’s economic work conference, the statement is further stricter. In terms of monetary policy, the meeting continued to follow the expression of “prudent monetary policy, flexibility and moderation” in the Politburo meeting, but deleted the emphasis on “stable macro leverage” in last year’s economic work meeting, which can be seen as paving the way for the implementation of broad credit measures. In addition, in emphasizing the support of financial institutions to the real economy, the “small and micro enterprises” were mentioned at the forefront, highlighting the focus of the policy, and further mentioned the “financing increment, expansion and price reduction of small, medium and micro enterprises”. Combined with the recent series of monetary policy easing measures, we believe that emphasizing support for enterprises means that interest rate cuts may also be on the way.
Five correct understandings and important policy guidelines. Compared with the full text of last year’s economic work conference, the biggest difference in the full text of this conference is that it reduces the space for deploying key economic work, and especially increases the correct understanding and grasp of five major theoretical and practical issues, They are “strategic objectives and practical approaches to achieve common prosperity, characteristics and behavior laws of capital, supply guarantee of primary products, prevention and resolution of major risks and carbon peak and carbon neutralization”. Since this should be the last central economic work conference before the 20th National Congress, its special background determines that this conference should not only make arrangements for the specific tasks of economic work, but also further rise to the height of theoretical guidance, point out the direction for the economic work in the new development stage, and help to unify understanding, so as to be complete, accurate Comprehensively implement the new development concept.
We will give priority to employment and improve factor distribution. Common prosperity is the essential requirement of socialism. The meeting mentioned that the realization of the goal of common prosperity is a long-term historical process. In the process of moving towards this goal, we should “strengthen the priority orientation of employment and improve the employment driving force of economic growth”. It can be seen that common prosperity is not simply “robbing the rich to help the poor”, but emphasizes optimizing factor distribution through a reasonable system, adhering to the dominant position of distribution according to work, preventing the savage growth of capital, excessively expanding its proportion in distribution, and setting a “red and green light” for capital. The meeting has given strong support to small, medium-sized and micro enterprises in terms of fiscal and monetary policies. In fact, the fundamental starting point lies in the strong employment driving role of small and micro enterprises. With the transformation of China’s economic structure, the surplus labor force in the primary and secondary industries will gradually transfer to the service industry. Industries and enterprises that can effectively drive and solve employment will still be favored by the policy.
Due to the virtuous circle of urban policy implementation, explore new models for development. For real estate, the economic work conference continued the statement of the Political Bureau meeting. Under the positioning of adhering to the principle of not speculation in real estate, it stressed the need to “support the commercial housing market to better meet the reasonable housing needs of buyers”, and “implement policies based on the city” to promote the virtuous cycle of the real estate industry. In particular, the conference mentioned the need to “explore a new development model”. We believe that in the past, economic growth was excessively dependent on real estate, and the rapid growth of the real estate industry under the debt expansion mode can not be continued. The promotion of long-term rental housing market and affordable housing construction has become an important part of the long-term mechanism of real estate, which will inevitably lead to the weakening of real estate related indicators. However, under the constraint of “bottom line thinking”, there is little risk of rapid decline in the short term.
The policy is established first and then broken, and the cost pressure is reduced. For the carbon peak and carbon neutralization work, combined with the power shortage caused by supply shortage in many places at the end of the third quarter of this year, the meeting specially pointed out that we should unswervingly promote it, but it is impossible to complete its work in one battle. The keynote of “standing first and breaking later” also runs through the policy-making of this meeting. Based on China’s basic national conditions dominated by coal, the meeting proposed that “the gradual withdrawal of traditional energy should be based on the safe and reliable substitution of new energy”, and said that “the new renewable energy and raw material energy will not be included in the total energy consumption control”. We expect that the promotion of double carbon work next year may reduce the degree of economic interference, especially its push up of enterprise costs, or it will be a relatively gentle process, and the price rate of bulk commodities, especially those priced in China, may not rise significantly.
Risk tip: the policy changes and the economic recovery is less than expected
