Matters:
Recently, China’s policy has ushered in a series of changes. Since March 2022, the number of confirmed cases of covid-19 epidemic in China has risen rapidly; On March 16, Liu He, vice premier of the Finance Commission of the State Council, made a speech. Subsequently, the central bank, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, the Ministry of industry and information technology and other ministries and commissions announced that they would actively implement the policy tone; On March 18, Xi Jinping president and US President Biden had a video call to communicate on China US relations and Ukraine issues.
Ping An View:
Recently, China’s capital market has ushered in a series of policy changes. China US relations, epidemic prevention and control, real estate policy, monetary policy, fiscal policy, financial policy and industrial policy jointly release policy dividends.
First, new developments have emerged in China US relations, releasing the signal of relaxation. On March 18, president Xi Jinping and US President Biden had a video call. The two sides had a frank and in-depth exchange of views on issues of common concern such as China US relations and the situation in Ukraine. As for China US relations, Xi Jinping pointed out that “China US relations have not been out of the dilemma created by the last US government, but have encountered more and more challenges.” “China and the United States have differences in the past and now, and there will be differences in the future. The key is to manage and control differences.” “The US side misread and misjudged China’s strategic intention.” On the Ukrainian crisis, “all parties should jointly support Russia Ukraine dialogue and negotiation, talk about results and peace.” The two sides believed that the video call was constructive and instructed the working teams of the two countries to follow up in time. This is a four month video call between the two countries since November 16, 2021. It releases the benefits of relaxation in the current situation and is of constructive significance to the development of China US relations in the future.
Second, new changes in epidemic prevention and control policies. Although the epidemic is serious, it may accelerate the transformation of epidemic prevention and control to a new management mode. First, from the perspective of the epidemic situation, the local epidemic situation in China is still in the development stage. From March 1 to 18, China reported more than 29000 cases of covid-19 pneumonia infection, affecting 28 provinces; However, the epidemic situation in Hong Kong has entered a high platform period. The rapid rise of the epidemic situation in Hong Kong has been controlled and shows a downward trend. Recently, the positive infected people are still at a high level of 2 Fawer Automotive Parts Limited Company(000030) 000 per day. Of course, the situation is still grim. In this context, the meeting of the Standing Committee of the Political Bureau of the CPC Central Committee on March 17 focused on the analysis of the epidemic situation of covid-19 pneumonia and the deployment of strict epidemic prevention and control; On March 19, the joint prevention and control mechanism of the State Council held a press conference to elaborate on the recent epidemic prevention and control. The general tone of “dynamic zeroing” of epidemic prevention and control remains unchanged, and the bottom line of epidemic prevention and control without large-scale rebound is firmly maintained. However, there have been two changes from theory to practice. One is the latest interpretation of “dynamic reset” by experts from the National Health Commission, which believes that “dynamic reset” has two meanings. First, ideally, there are no patients in society, but the uniqueness of covid-19 virus determines that it cannot be done temporarily. The second meaning is that once an epidemic occurs, it can be quickly identified and disposed of, cut off the transmission chain, and move towards dynamic zeroing in the society as a whole. The other is that there are new changes in the implementation method. On the one hand, we should optimize the epidemic prevention and control measures, strive to achieve the maximum prevention and control effect at the least cost, and minimize the impact on economic and social development; On the other hand, we should strengthen scientific and technological research on vaccines, rapid detection reagents and drug research and development.
Third, new changes in real estate policies and greater efforts to resolve real estate risks. On March 16, 2022, at the meeting of the Finance Committee of the State Council, vice premier Liu He put forward the central tone on real estate enterprises, “as for real estate enterprises, we should timely study and put forward effective countermeasures to prevent and resolve risks, and put forward matching measures for transformation to a new development model”, which strengthened our confidence in resolving real estate risks. The central bank presided over the real estate market meeting on the same day and stressed “keeping the real estate market safe and resolving risks”; At the special meeting of the CBRC, Guo Shuqing stressed the need to adhere to the principle of housing without speculation, continuously improve the long-term real estate mechanism of “stabilizing land prices, housing prices and expectations”, actively promote the transformation of the development mode of the real estate industry, encourage institutions to carry out M & A loans in a stable and orderly manner, focus on supporting high-quality real estate enterprises to merge and acquire high-quality projects of difficult real estate enterprises, and promote the virtuous circle and healthy development of the real estate industry; In the evening, the reporter of Xinhua news agency interviewed the relevant person in charge of the Ministry of Finance on the pilot reform of real estate tax. The relevant person in charge said that the pilot of real estate tax reform was carried out in accordance with the authorization of the Standing Committee of the National People’s Congress. Some cities have carried out investigation and preliminary research, but considering all aspects of the situation, they do not have the conditions to expand the pilot cities of real estate tax reform this year. On March 18, 2022, the CSRC also announced to further promote the pilot of public offering REITs, further promote the virtuous cycle of investment and financing, and stressed the need to speed up the implementation of public offering REITs pilot projects of affordable rental housing, and promote the transformation of the industry to a new development model. Looking back at the policy context, in fact, since 2021, the real estate tax pilot has entered the acceleration stage, and the preparations for the real estate tax have been ready, but the conditions are not yet met. On May 21, 2021, the Ministry of Finance and other four ministries and commissions jointly held a symposium on the pilot of real estate tax reform, which released the signal of pilot projects in some cities. On October 19, 2021, when explaining the decision on Authorizing the State Council to carry out the pilot work of real estate tax reform in some regions (Draft), Liu Kun, Minister of finance, said that Shanghai will further deepen the pilot work of real estate tax reform and accumulate experience for the future unified legislation of the whole country. On October 23, 2021, the Standing Committee of the National People’s Congress decided to authorize the State Council to carry out the pilot work of real estate tax reform in some regions, and then the work was steadily promoted. On December 27, 2021, when summarizing the financial work in 2021, the national financial work video pointed out that we should make good preparations for real estate tax. However, at the same time, the operation of real estate enterprises is not optimistic, and the real estate liquidity risk continues to ferment. Since 2021, the credit risk of many real estate enterprises has erupted, and the sales have continued to decline year-on-year. The sales of the top 100 real estate enterprises in the first two months of 2022 have decreased by 43% year-on-year. The medium and long-term loans of residents are negative for the first time in a single month since statistics, and the middle of 2022 is the peak of concentrated repayment of real estate. The real estate policy is the most concerned policy after the meeting of the financial committee, and the follow-up implementation is worth looking forward to.
Fourth, the new changes in monetary policy and fiscal policy. Monetary policy should respond actively and fiscal policy should be active and promising; Although the tone remains unchanged, the Ministry of finance is accelerating the implementation. On the one hand, vice premier Liu he proposed at the financial commission of the State Council that new loans should maintain a moderate growth; The central bank also proposed to vigorously support small, medium-sized and micro enterprises and firmly support the development of the real economy; The CBRC also said that it should meet the reasonable financing needs of market subjects, increase financing supply, and maintain a moderate growth in new loans. Promote the financing increment, expansion and price reduction of small, medium-sized and micro enterprises. All departments and local offices should encourage banking and insurance institutions to innovate, support national scientific and technological research, and better serve key core technology research enterprises and “specialized and special new” enterprises. Recently, the yield of 10-year Treasury bonds fluctuated around 2.8%. On the other hand, the Ministry of finance is also making a positive statement. In addition to the real estate tax, fiscal expenditure is making great efforts. In the first two months, the national general public budget pointed out that the progress was the highest in nearly five years.
On March 18, 2022, the Ministry of Finance announced the announcement on further implementing the preferential income tax policies for small and micro enterprises. The part of the annual taxable income of small and micro profit enterprises that exceeds 1 million yuan but does not exceed 3 million yuan will be included in the taxable income at a reduced rate of 25%, and the enterprise income tax will be paid at a tax rate of 20%.
Fifth, the new changes in financial policies are to increase efforts to maintain the smooth operation of the capital market. Of course, for financial supervision, increasing service to the real economy has always been the same tone. The CSRC also proposed to solidly promote the full implementation of the reform of the stock issuance registration system and improve the bond financing support mechanism of private enterprises. However, this time, the financial committee focuses more on how to maintain the stability of the capital market, which is mainly promoted by internal and external aspects. On the one hand, we should strengthen the medium and long-term system construction of the market, give play to the role of the endogenous stability mechanism of the market, encourage listed companies to increase their holdings and repurchase, and guide fund companies to purchase their own shares; Improve the system and mechanism conducive to the participation of long-term institutional investors in the capital market, increase the cultivation of public funds and other institutional investors, and encourage long-term investment and value investment. On the other hand, we should further promote high-level opening to the outside world, strengthen practical cooperation between the mainland and Hong Kong capital markets, and jointly safeguard the healthy and stable development of the Hong Kong market; We will continue to strengthen communication with US regulators, speed up the implementation of new regulations on the supervision of overseas listing of enterprises, support all kinds of qualified enterprises to list abroad, and maintain smooth overseas listing channels. After the announcement of the official website, the payment of the provision for the healthy development of China’s stock market will be reduced to the lowest level since February 17, 2024, and the payment proportion of the relevant funds will be reduced from February 17, 2024.
Sixth, the change of industrial policy, that is, the industrial investment policy will be more clear, the platform economic governance should be steadily promoted, and the contractive policy should be carefully introduced. China is in a critical period of economic transformation and the initial stage of the construction of common prosperity. The asset prices of the corresponding market sectors in the Internet platform economy, education and pharmaceutical industries have been continuously adjusted since last year, and the wind zhonggai 100 index has declined by more than 60% since its high point last year. In this context, vice premier Liu he proposed that “with regard to the governance of platform economy, relevant departments should improve the established plan in accordance with the principles of marketization, legalization and internationalization, adhere to seeking progress while maintaining stability, steadily promote and complete the rectification of large platform companies as soon as possible through standardized, transparent and predictable supervision, and set up red lights and green lights to promote the stable and healthy development of platform economy and improve international competitiveness.” The central bank and the China Banking and Insurance Regulatory Commission also made statements on the same day.
Subsequently, on March 17, 2022, Xiao Yaqing, the Ministry of industry and information technology, held a special meeting, which clearly proposed to seize the current positive trend of the manufacturing industry, strengthen the implementation of policies and measures such as tax reduction and fee reduction and R & D expenses plus deduction, actively launch more policies conducive to steady growth, and carefully introduce contractive policies to ensure that the industrial economy operates within a reasonable range. We will firmly implement the major policy of “two unwavering”. While giving play to the important role of state-owned enterprises in stabilizing growth, we will further support the innovative development of private manufacturing enterprises, especially small and medium-sized enterprises, strengthen relief and excellence, do everything possible to help enterprises solve practical difficulties and improve the development level of “specialization and innovation”. We will implement various policies and measures for opening up to the outside world and support foreign-funded enterprises to increase investment in medium – and high-end manufacturing. We will improve fair, open and transparent platform enterprise governance rules, strengthen standard setting, promote business and data connectivity, guide platform enterprises to compete fairly, innovate and develop, and better enable the transformation and upgrading of the manufacturing industry. At the same time, the meeting also called for strengthening cross regional and cross sectoral coordination to effectively ensure the stable operation of key industrial chains. Focusing on expanding effective investment in manufacturing, accelerate the implementation of major projects in the 14th five year plan, vigorously promote the construction and application of 5g, industrial Internet and other new infrastructure, start a number of manufacturing innovation centers, industrial infrastructure reconstruction, digital and green transformation projects, and cultivate and develop advanced manufacturing clusters. Further expand the consumption of new energy vehicles, smart appliances and other bulk industrial products, and expand green consumption and digital consumption. Accelerate the promotion of electronic licenses and improve the convenience of enterprises. We will strengthen coordination between industrial and financial policies, deepen industrial and financial cooperation, support the growth of high-quality manufacturing enterprises, encourage more qualified enterprises to go public, and introduce more fresh water into the capital market.
In fact, since the statement of the financial commission on the 16th, the capital market has ushered in a rebound. The wind Zhongkui 100 index rebounded by nearly 40% in three days, Hang Seng technology rose by nearly 30%, and the gem rebounded by more than 8%. The policy tone helped the market regain confidence. However, a series of policy benefits are more than that. As the so-called “good things come when the tide is over”, changes in China US relations and epidemic prevention policies will further consolidate the policy bottom. Under the new changing tone, more policies are expected to be implemented, and the coordination between more policies will be further improved, so as to jointly promote the stable growth of macro economy and the transformation of old and new kinetic energy, and help the smooth operation of capital market. The rebound window is still in the short term. In addition to the previous oversold sectors, it is suggested that more growth sectors with greater layout flexibility, especially the semiconductor, new energy, new energy vehicles and other sectors of advanced manufacturing industry in the policy direction.
Risk tips: 1) covid-19 epidemic spread beyond expectations; 2) China’s economic downturn exceeded expectations; 3) The pace of policy promotion is less than expected; 4) The geopolitical environment has become more volatile.
