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Central Economic Work Conference readout & notes
A near-full tranlsation with analysis
Below is a near-full translation of today’s - okay technically, in GMT+8, yesterday’s - readout (Chinese) of the annual Central Economic Work Conference, with some notes from Chinese experts and your Pekingnologist.
Errors may well exit. Also, this does NOT represent official translation or views. If this is not clear enough, please read the About page.
Xi Jinping delivered an important speech at the meeting, summarizing the economic work in 2021, analyzing the current economic situation, and deploying economic work in 2022. Li Keqiang made specific plans for next year's economic work and gave a concluding speech.
The meeting held that this year is a landmark year in the history of the Party and the country. We celebrated the centenary of the founding of the Communist Party of China, achieved the first centenary goal, opened a new march to the second centennial goal, calmly cope with changes unseen in a century and the epidemic of the century, took new stepts toward builing a new development paradigm, achieved new results in high-quality development, achieved a good start to the "14th Five-Year" period. China sustained a leading position globally in economic development and epidemic prevention and control. The national strategic scientific and technological forces accelerated their growth. The resilience of the industrial chain has been enhanced. The reform and opening up deepened. Protection of people's livelihood proved powerful and effective. Ecological civilization construction continued. These achievements are the result of the strong leadership of the Party Central Committee with Comrade Xi Jinping as the core, and the result of the dedicated efforts and hard work of the entire Party and the people of all ethnic groups.
The meeting pointed out that, while fully affirming the achievements, it must be seen that China's economic development is facing a triple pressure of demand contraction, supply turbulence, and weakening expectations. Impacted by the epidemic of the century, changes unseen in a century accelerated, and the external environment is more complex and severe and uncertain. We must face up to the difficulties, but also be fully confident. Our economy is resilient, the long-term positive fundamentals will not change. Regardless of how the international landscape changes, we must firmly do our own work, and continue to strengthen the economic base, enhance the ability of science and technology innovation, adhere to multilateralism, take the initiative to use high standards of international economic and trade rules as the benchmark, with a high level of openness to promote deep reform and promote high-quality development.
Note: Economists including Zhang Liqun and Wang Xiaosong told China News Service this meeting emphasizes preserving employment, people's livelihood, and market entities, reflecting the idea of safeguarding the baseline. The focus for next year should be on the most difficult aspects. Against the background of the gradual withdrawal of the extraordinary fiscal and monetary policies in response to the epidemic, consumer demand and investment demand have shown a significant decline since this year. The continuous rise in international commodity prices has brought cost pressure to many industries; the return to normal monetary policy has led to narrower funding, difficulties in corporate financing, and shrinking production, thus also bringing about a shortage of supply. From the purchasing managers' index and residents' confidence index of future income, the current market players are less optimistic about future expectations, which will further lead to less spending and insufficient corporate investment, thus exacerbating the demand contraction.
In the last sentence highlighted in the paragraph, the implementation of RCEP and China’s application to join CPTPP comes to mind. Pekingnology published Prof. Zheng Yongnian’s piece a few days ago where he said it is indeed necessary for China to join the CPTPP to advance domestic reforms, not merely to integrate into the world.
We must adhere to high-quality development. Taking economic development as the central task is the requirement of the Party's basic line, and the entire Party must concentrate on its implementation of the implementation, and promote the economy to achieve a steady improvement in quality and reasonable growth in quantity. We must stick to making progress while ensuring stability. When adjusting policies and promoting reforms, we should grasp the timing, scale, and effectiveness; adhere to establishing the new first and then abolish the old; go ahead steadily and strike sure blows. We must enhance coordination and apply systems thinking
Note: Economic development is extremely important. It doesn’t work if you spend time & energy doing a lot of other stuff but the economy is in trouble. Do not make abrupt changes that have not taken everything into consideration.
The meeting stressed that next year we will hold the 20th Party Congress, which is a major event in the political life of the Party and the country. We shall maintain a stable and healthy economic environment, a peaceful and secure social environment, and a clean and righteous political environment.
The meeting requested that next year's economic work shall highlight stability and make progress while ensuring stability. All regions and departments shall assume responsibility for the stability of the macroeconomy, all parties/aspects shall actively launch policies conducive to economic stability, and the release of the force of the policies shall be appropriately earlier.
Note: The reduction of the reserve requirement ratio for banks this week comes to mind.
Wang Jun, an economist with Zhongyuan Bank, says these are obviously clear and firm signals of stabilizing growth. Because high-quality development and building a new development paradigm need to be achieved under the premise of stable growth. To this end, the stabilization of the macro-economic macroeconomic first needs a realistic, practical, and feasible numerical target which could play the role of stabilizing expectations and encouraging confidence in economic growth.
First, the macro policy should be stable and effective. We shall continue to implement a proactive fiscal policy and prudent monetary policy. The proactive fiscal policy shall enhance its effectiveness, pay more attention to precision and sustainability. We shall ensure the intensity of fiscal spending and accelerate the progress of spending. Implement new policies to reduce taxes and fees, strengthen support for small and medium-sized enterprises, individual business households, manufacturing, and risk resolution, and carry out appropriate forward-thinking infrastructure investment. Party and government organs should insist on tightening their belt and apply strict fiscal discipline. We shall resolutely curb the addition of hidden local government debt. The stable monetary policy should be flexible and moderate to maintain a reasonable abundance of liquidity. We shall guide financial institutions to increase support for the real economy, especially for small and micro enterprises, science and technology innovation, and green development. Fiscal policy and monetary policy should be coordinated and linked, and cross-cycle and counter-cyclical macroeconomic policies should be organically combined. Implement a good strategy to expand domestic demand and enhance the endogenous power of development.
Note: Fiscal especially infrastructure spending shall come - Build Ahead Better.
Second, micro policy should continue to stimulate the vitality of market entities. We shall boost the confidence of market entities, deepen the implementation of fair competition policy, strengthen anti-monopoly and anti-unfair competition, and safeguard fair competition with fair supervision. Strengthen the protection of intellectual property rights and create a good environment for enterprises of all ownership types to compete for development.
Third, structural policies should focus on the smooth flow of the national economic cycle. We shall deepen the supply-side structural reform focusing on the smooth domestic circulation, focusing on breaking through the blockage and constraints of supply, focusing on streamlining the production, distribution, circulation, and consumption links. We shall enhance the core competitiveness of the manufacturing industry, start a number of industrial infrastructure re-establishing projects, and stimulate the emergence of a large number of "specialized, refined, featured, and novel" enterprises. Accelerate the formation of internal and external connectivity, safe and efficient logistics network. Accelerate the digital transformation and promote the upgrading of traditional industries. Adhere to the positioning of houses are for living in, not for speculation; strengthen the guidance of expectations, explore new development models, adhere to cultivate both renting and purchasing, accelerate the development of long-term rental housing market, promote the construction of subsidized housing, support the commercial housing market to better meet the reasonable housing needs of homebuyers, and promote the virtuous cycle and healthy development of the real estate industry via specific policies for specific cities.
Note: The term “专精特新”企业 "specialized, refined, featured, and novel" enterprises have been popular in official speeches and documents for quite some time.
The term 产业基础再造工程项目 industrial infrastructure re-establishing projects is not totally new, but it’s fairly new, in your Pekingnologist’s observation.
“Houses are for living in, not for speculation” is repeated.
Fourth, science and technology policies should be solidly implemented on the ground. We shall implement the three-year action plan for the reform of the science and technology system, and design and implement a ten-year plan for basic research. Strengthen the national strategic science and technology forces, enable national laboratories to play a good role, reorganize the national key laboratories, and promote the reform of research institutes. Strengthen that the enterprises should be the main innovative entities, deepen the combination of industry, academia, and research. Improve and optimize the science and technology innovation ecology, and form a style that emphasizes solid research. Continue to carry out international cooperation in science and technology.
Fifth, the reform and opening-up policy shall activate the development momentum. We shall grasp the pilot comprehensive reforms in market-oriented allocation of (production) factors, fully implement registration-based IPOs, the completion of the three-year action task of reform of state-owned enterprises, and steadily promote the reform of power grids, railroads, and other natural monopolies. Incentivize local reform, encourage local levels to initiate reforms based on local conditions. Expand the high level of opening up to the outside world, promote institutional opening-up, implement the national treatment of foreign-invested enterprises, attract more multinational companies to invest, and promote the speedy implementation of major foreign investment projects. Promote the joint, high-quality development of the Belt and Road.
Note: The main boards at Shanghai and Shenzhen stock exchanges haven’t implemented registration-based IPOs. So they will be.
Sixth, regional policies shall enhance the balance and coordination of development. We should implement major regional strategies and regional coordinated development strategies, and promote the coordinated development of the East, Central, West, and Northeast regions. We shall comprehensively promote the revitalization of the countryside and improve the quality of new urbanization construction.
Seventh, social policies shall hold firmly the baseline of people's livelihood. We shall coordinate the promotion of economic development and livelihood protection, and improve the system of providing basic public services in people’s permanent residence. Solve the employment problems of college graduates and other young people, and improve labor and social security policies on flexible employment. Promote the national coordination of basic pension insurance. Promote the implementation of the new maternity policy to take effect, and actively cope with an aging population.
The new policy on population needs to 见效 take effect. We shall see.
Also, more basic public services shall be provided to people at their 常住地 permanent residence, which apparently aims to further basic delink public services with 户口所在地 household registration places.
The meeting held that entering a new development stage, the internal and external environment of China's development has undergone profound changes, and we are facing many new major theoretical and practical issues, which need to be correctly understood and grasped.
Note: On the “new major theoretical and practical issues”, there are five of them listed in the readout
regulation of capital;
primary products (agricultural production, energy resources, etc.);
carbon peak & carbon neutrality;
We shall correctly understand and grasp the strategic goals and practical ways to achieve common prosperity. Under China's socialist system, it is necessary to continuously liberate and develop the productive forces in society, create and accumulate wealth in society, and prevent polarization. To achieve the goal of common prosperity, we must first make the "cake" bigger and better through the common endeavor of the whole nation, and then cut and divide the "cake" well through reasonable institutional arrangements. This is a long-term historical process, and we should steadily move toward this goal. We shall promote high-quality development to strengthen the orientation that prioritizes employment, and improve economic growth’s contribution to empowering employment. We shall enable the function and role of distribution, adhere to distribution according to work as the mainstay, improve the policies on distribution according to factors, and increase the adjustment (of distribution) via taxation, social security, transfer payments, etc..
Support the enterprises and social groups with the willingness and ability to actively participate in public welfare and charity. We should insist on doing our best and also within our means, improve the policy, system, and institutions on public policy, and provide basic public services precisely in the areas of education, medical care, pensions, housing, and other areas of greatest concern to the people.
This paragraph lays out what policies are in play within the framework of common prosperity. That this is a long-term pursuit signal what Beijing has stated, in one way or another, it would not kill the goose that lays the golden eggs just for the meat which could fill the stomach for a very limited period of time.
What Beijing sees as common prosperity is not necessarily understood on the outside. For example, the paragraph talks about transfer payments 转移支付, which means transferring money from richer parts (say eastern, coastal provinces) to poorer (say Western inland) parts. So that counts, in Beijing’s understanding, part of efforts to promote common prosperity.
Jia Ruoxiang, an expert with a research institute under the economic planner NDRC, says highlighting education, medical care, pensions, housing, and other areas of greatest concern to the people because people need to be able to feel the effects of common prosperity - making it visible and touchable.
We must correctly understand the character and regularity of capital. The socialist market economy is a great innovation, with capital in various forms. We shall incentivize the capital’s role as an active part of the production factors and control its negative effects. We should be establish “traffic lights” for capital to strengthen supervision in accordance with the law, and the barbaric expansion of capital should be prevented. We must support and guide the healthy development of capital and uphold and enhance the basic economic system of socialism. We should unswervingly consolidate and develop the state-owned enterprises, encourage, support, and guide the economic development of non-state-owned enterprises.
Su Jian, a PKU expert, told China News Service that the monopoly and unfair competition are examples of the “negative effects”.
Sinocism says “Traffic lights 红绿灯” for capital are coming, whatever that means, but if I am a capitalist in China I am not thinking it is positive.”
Lu Zhengwei, the chief economist of Industrial Bank Co., Ltd, said if the rules can be set in advance, it would help stimulate vitality - publicize the rules so people wouldn’t worry about accidents.
Zhang Chenying, a member of the Expert Group of the Anti-monopoly Committee of the State Council and Director of the Competition Law Research Center of Tsinghua University School of Law, said in an interview tonight with China News Service that setting "traffic lights" means that the line between legal and illegal will be clearly drawn and regulated according to the law. This could entail clarifying the legal rules, through a variety of guidelines, interpretation, model cases, etc. There will be clear, detailed rules improving the transparency of legal rules, encouraging compliance, and prevention (before it is too late). Also, enforcement for all entities could be based on the same set of rules and even-handed.
We should be correctly aware and understand the importance of ensuring the supply of primary products. We must prioritize the spirit of thriftiness by implementing the strategy of conservation across the board. In the production area, we should promote all-around conservation, integration, and circulation of resources. In the area of consumption, we have to boost the awareness of thriftiness and encourage a moderate, green, and low-carbon lifestyle. We should strengthen the ability to ensure resource production at home and accelerate the development and application of advanced technology to exploit petroleum and natural gas. We must establish a system to recycle and reuse waste. We must put the overall agricultural production capacity at a more important place by promoting the development of high-standard farmlands, deepening the vitalization of the seed industry, improving the equipment of agricultural machinery, and protecting the revenue of farmers, ensuring the safety of our own agricultural production.
We have to be correctly aware of the prevention and resolution of major risks. We must continue the work to handle the risk in accordance with the policy of ensuring stability of the BigPicture, strengthening coordination, implementing policy in a differentiated manner, and defuse bombs in a targeted manner. We must strengthen the legal development of finance by ensuring the responsibilities of the regions, financial regulators, the departments in charge of the industry are fulfilled. We shall ensure the primary responsibility to conduct self-rescue rests with the enterprises. We must strengthen the competence of cadres who regulate finance. Resolving risks requires ample resources, it requires universal cooperation on studying and instating policies to resolve risks and enhancement of the mechanism to tackle financial risks.
Note: Evergrande comes to mind. As with the real estate giant, the responsibility to rescue them from crisis first and foremost rests with the companies themselves, which shall exhaust all its own resources first and foremost.
We must have a correct understanding of reaching carbon peak andcarbon neutrality. They are internal requirements of promoting high-quality development, which we should implement steadfastly but cannot wish to realize all of a sudden. We must stick to the principle of exercising nationwide planning/coordination, prioritizing conservation, leveraging the strengths of the government and the market, coordinating efforts on the domestic and international fronts, and guarding against risks. The phase-out of traditional energies should base on the replaceability of secure and reliable new energies. Based on the basic condition of this nation where coal is the main energy supply, we must promote the clean and effective use of coal, increase the capacity to absorb new energies into power grids, promote an enhanced combination of coal and new energies. We must redouble our efforts to make breakthroughs on green and low-carbon technologies. We should conduct scientific examinations, we should exclude the energy consumption of reusable energies and its raw materials from the restrain on the total energy consumption. We must create opportunities for achieving the transformation from controlling both the total amount and intensity of energy to controlling the total amount and intensity of carbon emissions. We should accelerate the establishment of an incentivization and control mechanism to reduce waste and carbon emissions and avoid simply setting an overall quota and passing down the quota down the chain of command. We must ensure the supply of energy. Major enterprises especially state-owned enterprises should take the initiative to guarantee supply and price stability.
Beijing doesn’t want to repeat the electricity rationing situation in Autumn.
Lin Boqiang, a known expert on energy at Xiamen University, told China News Service In the future, the way China's energy structure is transformed is still relatively clear - not from coal to oil and natural gas, but directly from coal to renewable energy. However, this process, how coal power and wind/solar power complement each other, is an important guarantee for a smooth low-carbon transition. That new energy is hereby NOT included in the total energy consumption control can encourage development.
Strengthen and improve macroeconomic regulation and control around maintaining economic operation in a reasonable range. Increase the cross-cycle adjustment of macroeconomic policies, and improve the foresight and targeting of macroeconomic regulation and control. Market entities carry hundreds of millions of people's employment and entrepreneurship. We should continue to implement new tax cuts and fee reductions for market entities to help them, especially small, medium and micro-enterprises and individual business households, reduce their burden and help them resume development.
Increase support for the financing of the real economy, and promote the financing of small and medium-sized micro-enterprises to increase, expand and reduce prices/interest payments…Promote financial resources to stream down, better support grassroots governments to implement policies to help enterprises to alleviate difficulties and to protect basic livelihoods and wages to ensure operation. Strengthen the adjustment of coal, electricity, oil, gas, and transportation, etc., to promote the adequate supply of electricity.
Deepen the reform of key areas, stimulate greater vitality and development of endogenous power of the market; use market-based mechanisms to incentivize enterprises to invest in innovation. Promote the common development of enterprises of all ownership types, optimize the environment for the development of the private economy, protect the property rights and legitimate rights and interests of all types of market entities in accordance with the law. Policies and treatment shall be equal for all. Expand high-level opening, take multiple measures to stabilize foreign trade, protect the stability of the industrial chain and supply chain, and increase efforts to attract foreign investment.
Please note again errors may exist; this is NOT a full translation; this does NOT represent official translation or views. If this is not clear enough, please read the About page.