The economy is facing triple pressures, and efforts to stabilize growth have been intensified. From December 8 to 10, 2021, the central economic work conference was held in Beijing, setting the tone and making arrangements for next year’s economic work. The key points are as follows:
1. Triple economic pressure. The meeting pointed out that “China’s economic development faces the triple pressure of shrinking demand, supply shock and weakening expectation”. We believe that it is unlikely that the GDP growth target in 2022 will be lower than 5%.
2. Steady growth. The meeting pointed out that “stability comes first and progress is sought in stability”, which is consistent with the meeting of the Political Bureau. The meeting demanded that “all regions and departments should shoulder the responsibility of stabilizing the macro economy, all parties should actively launch policies conducive to economic stability, and the policy force should be appropriately advanced”. Therefore, all regions and departments are required to bear the responsibility of stabilizing the economy, and the measures to stabilize growth may exceed expectations. In addition, policies that promote economic growth may increase and policies that affect growth may decrease, thereby reducing risk matters.
3. Fiscal policy. The meeting pointed out that “we should ensure the intensity of fiscal expenditure and speed up the progress of expenditure” and “carry out infrastructure investment moderately in advance”. This year’s deficit rate is 3.2%, and the scale of special debt is 3.65 trillion yuan. Next year may not be lower than this year’s level. Energy reform and affordable housing construction may be the focus. “Resolutely curb the new implicit debt of local governments”, and the financing of local urban investment platforms may still be limited.
4. Monetary policy. The meeting pointed out that “prudent monetary policy should be flexible and appropriate, and maintain reasonable and sufficient liquidity”, and deleted “maintain the basic matching between the growth rate of money supply and social financing scale and economic growth, and maintain the basic stability of macro leverage”. The overall wording is similar to that of last year, but it is estimated that the actual operation level will be loose. Next year, the reserve requirement and interest rate may be reduced, and the macro leverage ratio has a certain room to rise.
5. Structural policies highlight supply side reform and manufacturing upgrading. The meeting pointed out that “to deepen the supply side structural reform, we should focus on unblocking China’s big cycle and breaking through the blocking point of supply constraints”. The supply side constraints may be relaxed next year. There is a low possibility of power and production restrictions again, there is a high possibility of maintaining a tight supply balance, and there may still be structural opportunities for cyclical products.
6. Based on the basic national conditions dominated by coal. In terms of energy supply, “based on the basic national conditions dominated by coal, pay attention to the clean and efficient utilization of coal, increase the consumption capacity of new energy, and promote the optimal combination of coal and new energy”. It is expected that coal production and supply will not be compressed in the short term, and coal energy prices are expected to remain relatively stable.
7. The tone of housing and housing remains unchanged, and the policy turns to marginal easing. The meeting pointed out that “we should adhere to the positioning that houses are used for living, not for speculation”, indicating that “real estate is not fried” is still an unshakable bottom line, and the overall policy tone of the real estate industry will not change. However, it is still emphasized to better meet the reasonable housing demand.
8. Five correct understandings and grasps. The meeting put forward five correct understandings and grasps on the five aspects of “common prosperity, capital market, primary product supply, risk prevention and carbon neutralization”. It defines the strategic objectives and practical ways to achieve common prosperity. First make a big cake, and then cut and divide the cake. We should set up a “traffic light” for capital and clearly put forward the full implementation of the stock issuance registration system.
The Political Bureau of the CPC Central Committee held a meeting on December 6 to analyze and study the economic work in 2022. Key points of the meeting:
1. Clarify the tone of steady growth. Compared with the July meeting, the “six stabilities” and “six guarantees” were re mentioned, the “efforts to stabilize the macro-economic market” was added, and the word “stability” was added before the “seeking progress in stability”. Steady economic growth will be strengthened.
2. Active fiscal policy and prudent monetary policy. The overall fiscal and monetary policies continued the keynote of the Politburo meeting in July, emphasizing that “macro policies should be stable and effective”. In terms of monetary policy, in addition to emphasizing “maintaining reasonable and sufficient liquidity”, a new “flexible and appropriate” is added; The fiscal policy added “precision and sustainability”.
3. Real estate is slightly positive. Compared with the July meeting, before the “healthy development” of real estate, a “stable” and a “virtuous circle” were added. On the premise of no speculation in real estate, it was generally positive. In terms of methods, it is also clearly proposed to “promote the construction of affordable housing and support the commercial housing market to better meet the reasonable housing needs of buyers”. It is expected that promoting the construction of affordable housing may become one of the important driving points of finance, and housing loans may focus more on the first house purchase.
4. Expand domestic demand. The phrase “implement the strategy of expanding domestic demand, promote the sustained recovery of consumption, and actively expand effective investment” was added. It is expected that relevant policies to support the recovery of consumption may be issued in the future, and the investment center may focus on “new infrastructure”.
5. A virtuous circle of science and technology, industry and finance. The meeting proposed that “the implementation of science and technology policies should be accelerated to realize a virtuous cycle of science and technology, industry and finance”. On the whole, the Politburo meeting set the tone that the intensity of steady growth will be strengthened next year. The policy environment is stable and loose, which is good for the market. We can pay attention to the investment opportunities in the fields of expanding domestic demand and the virtuous circle of science and technology industry and finance mentioned in the meeting.
The central bank raised the foreign exchange reserve ratio again during the year. On December 9, the central bank announced that from December 15, 2021, the foreign exchange deposit reserve ratio of financial institutions will be increased by 2 percentage points, that is, the foreign exchange deposit reserve ratio will be increased from the current 7% to 9%. This is the second time that the central bank raised the foreign exchange deposit reserve ratio in the year. The balance of foreign exchange deposits in November was US $1020 billion. This increase recovered about US $20 billion in liquidity. The RMB appreciated for two months from the beginning of April this year, rising to a maximum of 6.3607 on May 31. After the central bank announced an increase in the foreign exchange reserve ratio, the RMB exchange rate fluctuated again between 6.4 and 6.5. However, since mid August, the RMB has reopened a wave of rise, and the recent appreciation rate has accelerated. On December 8, the exchange rate reached a new high since 2018. From the perspective of economic growth, export situation and inflation background, there is a possibility of long-term appreciation of RMB, but too fast short-term appreciation may have a certain negative impact on the export industry. The central bank will raise the foreign exchange reserve ratio again during the year and reduce the supply and liquidity of US dollars, which can alleviate the pressure of rapid appreciation of RMB and promote the reasonable and stable exchange rate.
The market fluctuated upward this week. On the disk, the food and beverage, media and household appliances industries led the increase, while the defense and military industries, communications and electronics industries led the decline. At the weekend, the central economic work conference was held to emphasize “stable growth”, and the industry opportunities involve “double carbon”, new infrastructure, science and technology, high-end manufacturing, common prosperity and other directions. It is expected that with the implementation of a series of steady growth stimulus measures, combined with the recent signals of comprehensive reserve requirement reduction and targeted interest rate reduction, the liquidity is expected to be reasonably abundant from the end of the year to before the festival. It is suggested that bargain hunting should pay attention to growth, consumption and sectors, and be optimistic about the structural market before the festival.
The global covid-19 epidemic diagnosis slowed down month on month. As of December 11, 269 million cases of covid-19 pneumonia had been confirmed worldwide, 4.17 million more than the previous week and 154000 lower than the previous week. Among the countries with more than 10000 new diagnoses this week, the countries with the highest increase in diagnoses were Zimbabwe, South Korea and Norway. In China, as of December 11, there were 10 newly diagnosed cases in China, which was significantly lower than that in the early stage.
This week, 2 new fixed increase projects were approved by the CSRC, 1 by the development and Examination Commission, 6 by the general meeting of shareholders and 12 by the board of directors. As of Friday, the additional issuance plans priced by bidding included 103 approved by the CSRC, 15 approved by the development and Examination Commission, 180 approved by the general meeting of shareholders and 76 approved by the board of directors.
