Event:
On May 18, Premier Li Keqiang hosted a symposium in Yunnan to study and deploy further steady growth, stabilize market players and ensure employment. The meeting clearly required that “all regions and departments should enhance their sense of urgency, tap the potential of policies, and make sure that new measures that are accurate can be used up and put out in May”.
The interpretation is as follows:
We judge that the current epidemic peak has passed, but the policy peak of steady growth is coming. The “new measures” mentioned in the symposium mainly refer to the timely introduction of incremental policy tools and the strengthening of counter cyclical regulation of macro policies on the basis of accelerating the implementation of the determined policies in May. Among them, in view of the impact of the epidemic and other factors, the downward pressure on the economy since March has exceeded the expectations at the beginning of the year. In order to “ensure that the economy operates within a reasonable range in the first half of the year and the whole year, and strive to return the economy to normal track quickly”, we can consider starting the fiscal budget adjustment plan in May, appropriately raising the target fiscal deficit ratio, or brewing the issuance of special treasury bonds. A similar situation occurred when the Asian financial crisis brought unexpected shocks in 1998.
In terms of monetary policy, the scale of small refinancing will be increased in May, and banks and other financial institutions will be guided to postpone the repayment of principal and interest on loans to small, medium-sized and micro enterprises and individual industrial and commercial households seriously affected by the epidemic, which will not affect the credit investigation record; In addition, we judge that the LPR quotation on May 20 may be reduced by 10 basis points. On the one hand, the urgency of reducing the loan interest rate of enterprises and residents is further strengthened; On the other hand, the market interest rate has dropped significantly recently, and the regulators are promoting the rapid decline of bank deposit costs, so more quotation banks have the power to reduce LPR quotations. Therefore, although the MLF interest rate remained unchanged in May and no comprehensive RRR reduction was implemented, the LPR quotation is expected to be reduced separately. At the same time, we do not rule out the possibility of policy interest rate cuts or targeted interest rate cuts in June (similar to the central bank’s announcement on May 15 to cut the lower limit of the first home mortgage interest rate by 20 basis points).
In terms of employment policy, it is urgent to keep the existing jobs and open up new jobs for college students. There are two key points to keep the existing jobs: the first is to keep the main body of the market. The current focus is to alleviate the pressure of enterprise cash flow under the adverse conditions of rising costs and declining revenue, so as to avoid the inability of enterprises to operate due to the rupture of cash flow. Speeding up the pace of tax rebate and tax reduction, delaying the payment of interest and even delaying the repayment of loan principal can directly supplement the cash flow of enterprises and enhance their ability of sustainable operation; The second is to guide enterprises to minimize layoffs. In these areas, the government will promptly raise the standards of job stabilization subsidies and retention subsidies, and reduce social security contributions in stages; Finally, in May, other tax and fee reduction measures for enterprises may be directly linked to stabilizing jobs, or further strengthen the implementation.
We note that the recent policy support for platform economy and digital economy is increasing. One reason is that enterprises in these fields have always been the key areas to explore new jobs for college students. Under the current situation, targeted reward and subsidy measures may also be introduced in stages to encourage digital platform companies to strengthen school recruitment. At the same time, state-owned enterprises, central enterprises and some public institutions will also expand the job placement for college graduates. Finally, the financial, financial and other departments will introduce more effective measures to encourage college students to start their own businesses or engage in freelance work, so as to alleviate the pressure of new employment caused by the graduation season.
In terms of industrial policy, it is expected that with the mitigation of the impact of the epidemic, the construction progress of some major projects affected in the early stage will be accelerated, and the pace of project approval will be significantly accelerated. We judge that the growth rate of infrastructure investment (excluding electricity) is likely to rebound to near double digits in May. At the same time, one of the most urgent tasks in May is to restore transportation and logistics as soon as possible, which not only plays an important role in boosting China’s economic cycle, but also a key link in restoring foreign trade and expanding the driving force of foreign demand as soon as possible.
