by SIG
Chinese version/中文版
On the morning of Tuesday, October 8th at 10 AM, the National Development and Reform Commission (NDRC) held a State Council press conference. NDRC chairman Zheng Zhaojie and four deputy chairmen appeared collectively. Compared to previous press conferences held by the State Council Information Office, the attendance of "one chairman and four deputies" is relatively rare, indicating that the NDRC has recognized the grave situation of economic decline and lack of confidence.
Throughout the press conference, the NDRC made deployments regarding government investment, the direction of special debt investment, policies to boost consumption and benefit people's livelihoods, and the development of the private economy. The overall tone of the meeting was positive, but there was little emphasis on the actual implementation level, and it still requires the support and coordination of executable fiscal policies.
P1
The policy tone expressed in this NDRC press conference is consistent with the September Politburo meeting: it acknowledges that the current situation has become more complex and severe with increasing downward pressure on the domestic economy. The main economic indicators such as industry, investment, and consumption have fluctuated since the third quarter. At the same time, it repeatedly emphasizes that "there are conditions, abilities, and more confidence to achieve the expected goals for the annual economic and social development." It clearly expresses a positive attitude to "strive to achieve the economic growth target."
The specific measures include five aspects: 1) Increasing counter-cyclical macro-policy adjustments, 2) Expanding domestic effective demand, 3) Strengthening assistance and support for enterprises, 4) Promoting the real estate market to stop the decline and stabilize, and 5) Boosting the capital market.
Accelerated deployment of government investment: In terms of new funds, the most clear increment is that 200 billion yuan will be allocated to local investment projects by the end of this month to support their early implementation, involving areas such as "ongoing infrastructure, urbanization of agricultural transfer population, high-standard farmland construction, underground pipe network construction, and urban renewal." According to the report, the invested and planned projects are all at the trillion-level. However, the problem is that the current 50-58% of the projects have not yet started, and they need to start quickly within this year to form workload.
Expanding the use of special bonds: Measures will be taken as soon as possible to reasonably expand the scope of local government special bond support, accelerate the issuance of the remaining 290 billion yuan of special bonds by the end of this year, and expand the financing role of new PPP mechanisms and infrastructure REITs. This is obviously empowering local governments and expanding their financing channels. However, given the huge total local debt and relatively low investment returns, whether local governments can improve management, use funds reasonably, and select projects properly, the execution details need further observation.
Regarding the support for people's livelihoods, the press conference mentioned that some preferential tax and fee policies are expected to continue. However, considering the background of delayed retirement, the fiscal capacity to make up for the shortfall is clearly declining. It is not optimistic whether the policies supporting unemployment insurance, stabilizing employment, and skills upgrade subsidies that will expire at the end of this year can be continued.
In addition, there are also statements to support the development of the private economy and boost market confidence: The press conference stated that "the legislative process of the Promotion of Private Enterprises Law will be accelerated, the law enforcement and supervision of enterprises will be standardized, and there should be no illegal cross-regional law enforcement and profit-driven law enforcement, as well as random fines, inspections, and seizures." This is the voice of "private enterprises and entrepreneurs are our own people, and we must help enterprises overcome difficulties." However, the actual implementation effect is worrying.
In terms of boosting consumption and stabilizing the real estate market, there is a statement of "using special bonds to activate idle land." This part is rather abstract and lacks specific implementation. However, this is the most important part for people's livelihoods. Among the three major economic drivers, net exports are fluctuating, and investment has also lost its pillar role. The market consensus is to enhance household consumption, but the NDRC did not provide the strong answers the market expected in this regard.
P2
Overall, the tone of this NDRC press conference is about "aggressive fiscal expansion policies, leveraging up, pushing forward relevant government investment projects, as well as policies to benefit people's livelihoods and boost consumption."
However, upon closer examination, this NDRC press conference is clearly below market expectations and seems quite rushed. This is reflected in the following aspects:
1, Overly broad and superficial, with more talk than substance and insufficient preparation for implementation details. Although the press conference had a high-level lineup, it touched on many topics but remained superficial, making implementation difficult. For example, in the area of government investment, while it announced details of local investment projects, there was no concrete progress on actual project implementation.
2, Avoiding specific figures and targets. This clearly indicates a lack of thorough homework, failure to coordinate with various departments and local governments, and possibly even a lack of endorsement from the top of the State Council. This is evident in the questions from the Reuters reporter (excerpt from the meeting transcript).
Overall, the NDRC's approach in this press conference seems to be more about making a strong statement through high-profile messaging, rather than providing solid, executable policies and implementation plans that the market had expected:
[Reuters reporter's question: I would like to ask, what is the estimated scale of this package of policies, and what are the targets we need to achieve? Will the economic growth target of around 5% this year be achieved? Will the current deflationary pressures facing the economy be alleviated? Thank you. (2024-10-08 11:17:05)
Zheng Zhaojie: Thank you for your question. Please let my colleague, Deputy Director Zhao Chenxin, answer this question. (2024-10-08 11:17:21)
NDRC Deputy Director Zhao Chenxin:
Thank you for the question from the Reuters reporter. The answers to the questions you are concerned about can be found in the content that Chairman Zheng just reported. For example, the research and formulation of this package of incremental policies reflects the "three more emphasis" and "four insistences" - that is, to place more emphasis on the quality of economic development, more emphasis on supporting the healthy development of the real economy and business entities, and more emphasis on coordinating high-quality development and high-level security; insist on goal-oriented, problem-oriented, and systematic approach, as well as combining short-term and long-term measures. Chairman Zheng's report also mentioned many key words, such as the package of incremental policies being comprehensive and systematic, and in the process of implementation, the need to improve the pertinence and precision, enhance the effectiveness and sustainability. As long as we grasp these core contents, we will be able to understand and grasp the package of incremental policies well. The purpose of the package of incremental policies is to fully stimulate the proactiveness, initiative and creativity of the whole society in promoting high-quality development, and to promote the economy to continue to rebound and improve.
In the first half of this year, China's economic growth rate was 5%, with employment and prices remaining basically stable. Today is October 8th, and the first three quarters have passed. From the information we have, China's economy in the first three quarters has maintained an overall stable and progressive development trend. With the implementation of the Party Central Committee and the State Council's various policy decisions, especially as the effects of the package of incremental policies continue to emerge, the vitality and driving force of development will be further released, market confidence will be further enhanced, and the foundation for high-quality development and the stable operation of the economy will be further consolidated. We have the conditions, capabilities, and more confidence to achieve the expected goals for the annual economic and social development.]说了很多，但其实什么也没说，以至于网上有人把这段对话总结为：
It is clear that this meeting was purely for the purpose of appeasing the market and "boosting market confidence", rather than truly announcing major fiscal measures.
3, Consistent with the previous point, the entire press conference was filled with a lot of uncertain phrases such as "will", "will study", "to be studied", "have confidence", which proves that the NDRC itself does not have a definite direction and policy recommendations. Therefore, it is not surprising that in the subsequent extensive commentary, there are also many evasive phrases such as "expected to", "will", "believe".
Given these three points, it is understandable why the effect of this meeting fell short of market expectations.
The NDRC's approach seems to be more focused on making a strong statement through high-profile messaging, rather than providing solid, executable policies and implementation plans that the market had expected. The extensive use of uncertain language and lack of concrete details suggest the NDRC itself may not have a clear, coordinated plan ready for immediate implementation. This has resulted in the meeting falling short of the market's desired response to the economic challenges.。
P3
At the time of publishing this article, a newly update information has been received:
It is reported that the State Council Information Office will hold a press conference at 10 AM on Saturday, October 12, 2024, where the Minister of Finance, Lan Fuan, will be introduced to discuss "increasing the counter-cyclical adjustment strength of fiscal policy and promoting high-quality economic development", and take questions from reporters.
It is suggested that the Ministry of Finance should prepare well for the upcoming meeting. If it is similar to the October 8th meeting, then it would reveal the true nature of the Chinese leadership's policymaking - being at a loss.
Risk alert: Low efficiency of policy implementation, and monetary policy of major economies exceeding expectations.
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