The main focus of stabilizing the economy in 2022 is infrastructure. How to capture the direction and intensity of infrastructure development? Common methods include tracking the issuance speed of special bonds, paying attention to the approval of key projects by the central and local development and reform commissions, etc. In addition, we found that the number of local governments adjusting the use of special bonds increased significantly in the second half of 2021. The reason may be that, on the one hand, at the Political Bureau meeting in July 2021 and after that, the senior management repeatedly stressed “reasonably grasp the progress of investment in the budget and the issuance of local government bonds, and promote the formation of physical workload at the end of this year and the beginning of next year”. On the other hand, in November 2021, the Ministry of Finance issued the operation guidelines for the adjustment of the use of local government special bonds (hereinafter referred to as the guidelines), It further standardized the procedures for local governments to adjust the passage of special bonds and improved transparency. By observing the adjustment of this round of special bond funds, we see the big from the small. We believe that the “idle” degree of local special funds may be greater than expected by the market, and local governments will play a greater role in the investment force in 2022.
From the perspective of the source of funds for the purpose adjustment, the funds for the special debt project may be “idle” to a large extent. According to the data of the local government debt information disclosure platform, as of December 31, 2021, the total amount of adjustment disclosed by 18 provinces and cities was about 38.4 billion yuan. From the year of raising special debt funds, it can be traced back to 2018, and the scale of idle funds in 2020 is the largest. This reflects from the side that the idle of special bond funds is not only reflected in the changes of Financial deposits (special bonds are included in the budget revenue and expenditure management of government funds, and the unified collection and payment system of the National Treasury is implemented), but also a large part of funds may be deposited in the accounts of the project company, including funds that have not yet formed a physical amount and funds whose uses need to be adjusted. According to our calculation, the general public finance balance may increase by nearly 800 billion yuan in 2021, and the revenue and expenditure surplus of government funds may be about 1.6 trillion yuan. Superimposed on the funds deposited in the project company, the capital guarantee of infrastructure investment in 2022 is relatively sufficient.
From the perspective of adjusted use, municipal infrastructure and affordable housing have become an important direction. Since the guidelines strictly stipulate the principles of project use adjustment, for example, give priority to supporting qualified major projects and give priority to projects of the same type and field as the originally arranged projects. From the purpose adjustment, we can see what areas the qualified project reserves of local governments are mainly concentrated in. From the distribution of capital investment before and after the adjustment, municipal infrastructure, especially the infrastructure related to the park, is an important investment. In addition, affordable housing is also an important project reserve of local governments.
According to the project plan, local governments will play a greater role in supporting investment in fixed assets in 2022. After the project adjustment, the local government has also determined the planned completion year accordingly. From the data, nearly half of the project completion date is set in 2022, which may also reflect that the local project promotion will accelerate in 2022. It is worth noting that affordable housing may be an important direction for local governments next year, but the construction of affordable housing undertaken by the project company (non real estate enterprises) is neither infrastructure investment nor real estate investment. This part of new investment will support fixed asset investment, but will not underpin real estate or infrastructure.
In general, combined with the statement of the Ministry of Finance on the key support areas of special bonds in 2022, we can outline the development direction of government investment. On the one hand, the central government will mainly invest in major projects such as “two new and one heavy” (new infrastructure construction, new urbanization construction, transportation, water conservancy and other major projects) (this can focus on the major projects approved and approved by the national development and Reform Commission); On the other hand, in addition to cooperating with the central government, the qualified project reserves are mainly concentrated in the construction of municipal infrastructure and affordable housing.
Weekly market review (December 24-31, 2021): in the last week of 2021, the style of the stock market continued to differentiate, and the performance of small and medium-sized stocks was relatively good. The small and medium-sized 100 and China Securities 500 indexes rose by 1.4% and 0.3% respectively, while the Shanghai Stock Exchange 50, Shanghai and Shenzhen 300 and other large indexes recorded declines. In terms of sectors, leisure services, national defense and military industry, medicine and biology rank among the top three, which are mainly affected by policy support and price rise logic.
Risk tip: the epidemic spread exceeded expectations, and China’s foreign policies exceeded expectations
