China Govt Work Report: Analysis & Official Interpretation
China Govt Work Report: Analysis & Official Interpretation
From Luo Zhiheng at Yuekai Securities and Huang Shouhong, lead drafter of the govt work report, respectively.
This morning, Mar. 5, 2024, the Second Session of the 14th National People's Congress (NPC) opened, with Premier Li Qiang delivering the Government Work Report. By Chinese law, it remains a draft awaiting review and adoption at the session and the official release by Xinhua News Agency.
In today's newsletter, we spotlight two analyses of this significant document: one from a non-governmental securities firm perspective and the other from an official governmental viewpoint.
The first analysis comes from a team led by Luo Zhiheng 罗志恒, Chief Economist and President of the Research Institute at Yuekai Securities. Luo sat at Li Qiang’s roundtable on Jul. 6, 2023. [Luo’s perspectives were featured in a The East is Read post.]
The second is the official interpretation of the Government Work Report, presented during a press briefing by the State Council Information Office. Huang Shouhong 黄守宏, director of the State Council Research Office and lead of the report's drafting team, gave the interpretation.
This is a very, very long newsletter. - Yuxuan Jia and Zichen Wang
For your convenience, three officially translated documents available for the session today have been uploaded here. For more, please refer to this X (Twitter) thread
Luo Zhiheng: Nine Messages from the Government Work Report
Outline
The government work report introduces many new contents. It emphasizes considerably more dilemmas in making policy decisions. It stresses that enterprise-related policies should pay attention to the views of market entities and address their concerns; in policy implementation, it is essential to avoid focusing on one single policy to the detriment of others or letting one policy impede another. The degree of satisfaction among enterprises and the people should be taken as an important yardstick, and policy adjustments and improvements must be made timely. Policies should be communicated to the public in a well-targeted way to create a stable, transparent, and predictable policy environment.
The deficit ratio is maintained at 3.0%, with all new deficits undertaken by the central government, which accounts for 82.3% of the total deficit, reaching the highest level in recent years, indicating a significant leveraging at the central level. In the coming years, the issuance of ultra-long special treasury bonds is planned, with 1 trillion yuan [138.95 billion U.S. dollars] of such bonds issued this year. The sum of the deficit, special-purpose bonds, and ultra-long special treasury bonds reaches 8.96 trillion yuan [1.25 trillion U.S. dollars]. Considering that the 1 trillion yuan of special treasury bonds issued at the end of last year will mainly form expenditures this year, the proactive fiscal measures are substantial. Through optimizing policy combinations, the principle of "enhancing intensity and efficiency, improving quality and effectiveness" is upheld, taking into account both development needs and fiscal sustainability. It proposes to transform local financing platforms on a categorized basis and make plans for new reforms for the fiscal and tax systems, providing a fiscal and taxation system foundation for high-quality development.
It proposes to enhance the underlying stability of the capital market.
Analysis
I. The achievements of the previous year are highly affirmed, and the assessment of the current situation emphasizes "a lack of effective demand", and "relatively low public expectations", but overall favorable conditions, with high-quality development being the primary policy goal.
From the layout of the report, the report includes three main parts: I. A Review of Our Work in 2023, II. Overall Requirements and Policy Orientation for Economic and Social Development in 2024, and III. Major Tasks for 2024. The work focus for 2024 includes ten aspects, with "Invigorating China through science and education and consolidating the foundations for high-quality development" and "Promoting integrated development between urban and rural areas, advancing coordinated development between regions, and optimizing regional economic layout" added compared to last year.
From the frequency of words, the frequencies of policy, innovation, technology, security, risk, and high-quality have significantly increased, reflecting the government's emphasis on strengthening macro regulation, accelerating technological innovation, preventing and defusing risks, and promoting high-quality development.
Secondly, it highly affirms the achievements of 2023 and emphasizes that they did not come easily, with considerably more dilemmas in making policy decisions. The GDP grew by 5.2%; a total of 12.44 million urban jobs were added; additional tax and fee relief measures amounted to 2.2 trillion yuan [305.70 billion U.S. dollars]; China accounted for over 60 percent of global electric vehicle output and sales; and there was a nearly 30-percent increase in exports of the "new trio," namely, electric vehicles, lithium-ion batteries, and photovoltaic products.
Thirdly, regarding the future situation and risk challenges, it points out that China’s external environment is complex and severe, while the country is internally facing a lack of effective demand, overcapacity in some industries, and relatively low public expectations. However, it also points out China has distinctive institutional strengths and the advantages of a vast market, a complete industrial system to ensure supply, and a huge and high-caliber workforce showing that the overall picture will feature both strategic opportunities and challenges. While affirming the achievements, the report also presents the current economic problems and challenges:
Global economic growth lacks steam, and regional hotspot issues keep erupting. This has made China’s external environment more complex, severe, and uncertain.
The foundation for China’s sustained economic recovery and growth is not solid enough, as evidenced by a lack of effective demand, overcapacity in some industries, low public expectations, and many lingering risks and hidden dangers.
Furthermore, there are blockages in domestic economic circulation, and the global economy is affected by disruptions.
Some small and medium-sized enterprises (SMEs) face difficulties in their operations. China is confronted with both pressure on overall job creation and structural employment problems, and there are still many weak links in public services. Some grassroots-level governments are facing fiscal difficulties.
China’s capacity for scientific and technological innovation needs to be further improved.
Fourthly, it particularly emphasizes the evaluation of the consistency of policies, strengthening coordination and interplay between policies to avoid letting one policy impede another.
“In policymaking, all localities and government departments should heed and draw on the propositions and views of all parties concerned. They should pay attention to the views of market entities and address their concerns when formulating enterprise-related policies.
In policy implementation, we should strengthen coordination and interplay between policies to see that together they deliver greater outcomes. We should avoid focusing on one single policy to the detriment of others or letting one policy impede another. We should strengthen follow-up evaluations of policy implementation, taking the degree of satisfaction among enterprises and the people as an important yardstick, and make timely policy adjustments and improvements. We should communicate policies to the public in a well-targeted way to create a stable, transparent, and predictable policy environment.”
II. The target of around 5% GDP growth rate signals steady growth, the employment goal is further strengthened, and the importance of accelerating price stabilization and recovery is highlighted.
The main targets for development in 2024 are projected are:
GDP growth of around 5 percent
over 12 million new urban jobs
surveyed urban unemployment rate of around 5.5 percent
CPI increase of around 3 percent
Firstly, the target of around 5% GDP growth rate is in line with the market's expectations for keeping economic growth, reflecting the policy orientation "to pursue progress and strive to deliver." From the perspective of necessity, without a certain economic growth rate, there will be a negative cycle of a sluggish real economy, lackluster capital markets, and anxious social sentiment, making it difficult for the economy, finance, and society to stabilize and boost up confidence. Maintaining the economic growth rate target at "around 5%" as in 2023 sends a clear signal for steady growth, which helps to enhance market expectations and confidence. From the perspective of possibility, 2024 is the second year after the pandemic, with the scar effect gradually fading. By expanding total demand, relaxing supply constraints, boosting market entity confidence, stimulating local government vitality, and focusing on stabilizing the real estate sector, achieving an economic growth rate of about 5% is highly probable.
Secondly, employment is pivotal to people’s well-being, and the employment goal is further strengthened, with the objective of new urban jobs increasing from "about 12 million" in 2023 to "over 12 million" this year. As of January 2024, the unemployment rate among youth aged 16-24 (excluding students) was 14.6%, at a relatively high level. The total number of college graduates in 2024 is expected to be 11.79 million, an increase of 210,000 compared to the previous year. Together with the employment issues of migrant workers and the unemployed, there is still a long way to go in stabilizing employment. Implementing and refining pro-employment policies and raising the employment target are necessary actions.
Thirdly, the target for the CPI increase of around 3% remains unchanged, but the importance of accelerating the stabilization and recovery of prices is highlighted. As of January 2024, China's CPI and PPI have been in negative growth for four and sixteen consecutive months, respectively. Persistently low prices will drag down the nominal growth rate of the economy, adversely affect corporate profits, household income, employment, etc., and exacerbate the disconnect between micro perceptions and macro data. The significant rise in Japan's stock market compared to the downturn in China's stock market in 2023, against the backdrop of distinctly different price levels and nominal economic growth rates of the two countries, is noteworthy. Although Japan's real GDP growth rate of 1.9% was significantly lower than China's 5.2%, Japan's nominal GDP growth rate was as high as 5.7%, significantly higher than China's 4.6%. The issue of persistently low prices in China urgently needs to be addressed, whether from the perspective of the underlying problems such as a lack of effective demand and overcapacity in some industries, or considering its negative impact on the situation and expectations of micro entities. The Government Work Report's adjustment from "increases in broad money supply and aggregate financing should generally be in step with nominal economic growth" to "aggregate financing and money supply [should] stay in step with the projected economic growth and CPI increase" is a requirement to boost the current low prices.
III. To "appropriately enhance the intensity of our proactive fiscal policy and improve its quality and effectiveness"; a total of 8.96 trillion yuan [1.25 trillion U.S. dollars] in government deficit, special-purpose bonds, and ultra-long special treasury bonds; central government increases leverage, optimizes expenditure structure, and plans reforms
The expressions regarding China's fiscal policy align with results from the Communist Party of China (CPC) Central Committee meeting and the Central Economic Work Conference and is roughly the same as the expressions from last year's Government Work Report. The Report emphasizes not only enhancing intensity and utilizing fiscal space but also optimizing policy combinations, expenditure structures, and expenditure efficiency. The goal is to spend money wisely, balancing intensity with efficiency and effectiveness, and considering both development needs and fiscal sustainability. Additionally, there's a plan for a new round of fiscal and taxation system reform to strengthen support for high-quality development from the fiscal and taxation perspective.
For 2024, the deficit-to-GDP ratio is set at 3 percent, the same as the previous year; the government deficit is set at 4.06 trillion yuan [564.15 billion U.S. dollars], an increase of 180 billion yuan over the 2023 budget figure; special-purpose bonds are planned to be 3.9 trillion yuan [541.92 billion U.S. dollars], an increase of 100 billion yuan over last year. More importantly, in the coming years, there will be continuous issuance of ultra-long special treasury bonds specifically "to implement major national strategies and build up security capacity in key areas," with 1 trillion yuan to be issued this year.
The total government deficit, special-purpose bonds, and ultra-long special treasury bonds is 8.96 trillion yuan [1.25 trillion U.S. dollars], exceeding last year's deficit and special-purpose bonds total of 7.68 trillion yuan [1.07 trillion U.S. dollars] and also last year's total of deficit, special-purpose bonds, and special treasury bonds of 8.68 trillion yuan. Considering the 1 trillion yuan of special treasury bonds issued in Q4, 2023 for disaster relief, which will mainly be used this year, the actual fiscal expenditure effort in 2024 will significantly increase.
In summary, fiscal policy in 2024 is characterized by significant intensity but more emphasis on optimizing policy combination and expenditure efficiency; prudently defusing debt risks by addressing both symptoms and root causes, with long-term planning for a new round of fiscal and taxation system reform.
Firstly, the keynote of a proactive fiscal policy remains unchanged. To "appropriately enhance the intensity" is contingent upon the present situation characterized by insufficient macroeconomic demand and a foundational deficit in micro-entity confidence. In this year's economic climate, it is imperative to bolster the intensity and sustain necessary expenditure levels, as measures responsive to prevailing economic conditions and goals. Currently, China's macroeconomy is generally in a post-pandemic recovery period but faces some difficulties and challenges:
Insufficient effective demand, with weak consumer spending and corporate investment willingness
Some industries face redundant layouts and excessive competition, leading to overcapacity
Low price levels, especially significant PPI declines, have led to decreased corporate profits, increased debt burdens, reduced investment willingness, and slowed fiscal revenue.
Secondly, there is an increase in the deficit scale and special-purpose bonds, the issuance of ultra-long special treasury bonds, and increased leverage for the Central Government to implement major national strategies and expand effective demand.
1) In 2024, the deficit-to-GDP ratio is set to remain at 3%, but the deficit scale has increased for the first time to over 4 trillion yuan [555.81 billion U.S. dollars]. The deficit-to-GDP ratio alone holds little statistical significance in the Chinese context as it only covers the general public budget, which is relatively small and not sufficient to judge the intensity of China's fiscal policy. The real issues are: how substantial the fiscal expenditure is and what combination of policy tools is employed. Maintaining the deficit-to-GDP ratio constant, while expanding expenditures via special-purpose bonds, special treasury bonds, and other transferred funds, has the same effect as increasing the deficit-to-GDP ratio. Therefore, fiscal policy has indeed intensified.
However, given the great uncertainty in fiscal revenue, especially land transfer income, it's essential to dynamically adjust the deficit and debt levels in the upcoming year based on revenue performance, just like the strategic issuance of 1 trillion yuan in special treasury bonds at the previous year's end, a decision made in response to evolving circumstances. Furthermore, structural shifts are critical, as evidenced by the Central Government's deficit contribution of 3.34 trillion yuan, including an additional 180 billion yuan from the previous year, fully absorbed by the Central Government. This action elevates the Central Government's share of the deficit to 82.3%, marking the highest proportion in recent years and signifying an enhanced leverage of the Central Government. This leverage is further accentuated with the issuance of 1 trillion yuan in ultra-long-term special treasury bonds, thereby optimizing the debt structure.
2) the report proposes to "appropriately expand the range of areas and uses to which funds from the sale of local government special-purpose bonds can be channeled". Also, "These funds will be weighted toward regions where projects are well-prepared and investments are more effective. We will ensure all funds are used in a coordinated manner and guard against ineffective and wasteful investments." this will help to address the ongoing issue of declining returns on special-purpose bond projects. There is a strong consensus among all parties on the continuous decline in returns on special-purpose bond projects, which poses debt risks and diminishes the fiscal system's ability to coordinate effectively. Some special-purpose bond funds, being idle, have failed to unlock the potential of fiscal resources in bolstering economic stability. Broadening the permissible uses of these funds as capital will earmark a greater number of projects with superior returns, promote implementation of projects, reduce risks, and promote stable growth. More importantly, directing these funds towards regions demonstrating higher investment efficiency is actually optimizing the debt structure, i.e., optimizing the regional structure of the debt. While the debt expands, debt-related risks are also reduced through project returns.
3) the report proposes that "starting this year and over each of the next several years, ultra-long special treasury bonds be issued. These bonds will be used to implement major national strategies and build up security capacity in key areas. One trillion yuan of such bonds will be issued in 2024." This will help expand aggregate demand, optimize the supply structure, improve economic efficiency, and increase China's potential growth rate. At the same time, the issuance of ultra-long special treasury bonds optimizes the debt structure and reduces debt risks. The Central Government's bond issuance has lower costs and longer cycles compared to local governments, forming high-quality assets. More importantly, it avoids the risks caused by local government leveraging, creating fiscal space for local governments.
Thirdly, "structural tax and fee reduction policies" make a reappearance. Tax and fee reduction policies in China have shifted the focus from scale to precision and effectiveness, supporting technological innovation and the development of the manufacturing sector while also further stabilizing the macro tax burden. China has been implementing a proactive fiscal policy for over a decade, during which time the large-scale tax cuts and fee reductions have gradually reduced the macro tax burden, albeit with fiscal space continuing to contract overall. The ratio of general public budget revenue to GDP has decreased to 17.2%, a drop of 4.9 percentage points from its peak in 2015. A major country must ensure sufficient macro-regulatory capability to address challenges such as the fiscalization of economic-social issues, necessitating the stabilization of the macro tax burden. Therefore, future tax cuts and fee reductions must focus on efficiency and effectiveness, emphasizing structural tax and fee reductions, particularly in supporting technological innovation and manufacturing, which will help stabilize the macro tax burden.
Fourthly, the report proposes to increase transfer payments to local governments to ensure "basic living needs are met, salaries are paid, and governments function smoothly", which will help alleviate the financial pressure and revenue-expenditure contradictions at the primary level. Recent impacts from the pandemic and the downturn in the real estate sector have led to a downward trend in macro tax burdens, fiscalization of economic and social risks, tight fiscal revenue and expenditure, and multiple debt maturities, raising liquidity risks for some districts and counties. Directly affecting enterprises and residents, basic living needs, salaries, and government functioning are crucial for market entity satisfaction. Hence, the financial department continues to increase local transfer payments and demands provinces to increase transfer payments to cities and counties. The central transfer payments to localities are expected to reach 10.2 trillion yuan [1.42 trillion U.S. dollars] in 2024. After deducting one-off factors like special transfer payments for implementing tax and fee reductions and key livelihoods, post-disaster recovery and reconstruction, and improving disaster prevention, mitigation, and relief capabilities, transfer payments in 2024 will see an increase of 4.1%.
Fifthly, the report says, "We will make concerted efforts to defuse local government debt risks while ensuring stable development. We will implement a package of measures to defuse risks...develop government debt management mechanisms that meet the needs of high-quality development." Debt itself constitutes no risk; the key lies in the expenditure efficiency and structure of debt. Optimizing the regional structure, investment structure, term structure, and subject structure of debt is crucial, as investments in high-quality development fields and regions can expand the debt scale without increasing risks. Promoting the transformation of local financing platforms is a key step after implementing the package of debt resolution measures, as the financing platforms are the main body breeding implicit debt. It is essential to clarify the relationships between local governments and financing platforms and promote business transformation.
Sixthly, the report identifies a new round of fiscal and tax system reforms as a critical objective for the upcoming period. These reforms will not only fundamentally address the existing constraints in fiscal operations but also lay the institutional groundwork for high-quality development. The tax-sharing system implemented since thirty years ago is in need of further and deeper reforms. Issues including unclear boundaries between government and market, unclear division of responsibilities and spending obligations between central and local governments, excessive responsibilities and spending obligations borne by local governments, uncoordinated fiscal strength, irregular transfer payments, and the lack of deeper fiscal reforms below the provincial level need further resolution in future reforms. It is anticipated that future reforms will further clarify the relationship between government and the market, define the scale of government, prevent the continuous expansion of government spending responsibilities; centralize some responsibilities and spending obligations to reduce the spending responsibilities and burdens of local governments; further stabilize the macro tax burden, reform consumption taxes, improve value-added taxes; strengthen the overall planning of fiscal resources, improve budget management integrity; and continuously standardize transfer payments, especially in transfer payments projects concerning shared obligations from the central and local government.
IV. Flexible monetary policy: monetary policy is “targeted and effective,” with a focus on structural monetary policy tools to help resolve real estate risks and undertake the “Five Major Initiatives” (technology finance, green finance, inclusive finance, elderly care finance, and digital finance)
The monetary policy in the Government Work Report maintains the expression of "flexible, appropriate, targeted, and effective" monetary policy proposed at the Central Economic Work Conference.
Firstly, the overall direction leans towards easing, with room for further cuts in reserve requirements and interest rates. There are five reasons for this approach:
1) It's essential to consolidate the current economic rebound, making it necessary to maintain reasonably ample market liquidity through interest rate cuts, which serves to expand domestic demand and stabilize expectations.
2)With continuous low inflation, leading to relatively high real interest rates, it's still necessary to guide the real economy's financing costs to genuinely decrease through interest rate cuts. In December 2023, the weighted average interest rate of newly issued loans was 3.83%, the lowest since data have been recorded starting in 2008. However, considering the sluggish price factors, the real interest rate has actually been rising and is at a historical high, which has suppressed the recovery of consumer spending and business investment. Since the beginning of 2024, the 5-year Loan Prime Rate (LPR) has been cut by 25 basis points, and it is clear that there is an intention to boost expectations through proactive monetary policy.
3)With inflation falling in the United States and the Federal Reserve shifting from tightening to easing monetary policy, external resistance to cutting interest rates significantly decreases.
4)Policy needs to maintain stability and continuity, as the report once again emphasizes efforts to "create a stable, transparent, and predictable policy environment."
5)Alongside interest rate cuts, the central bank needs to stabilize the cost of bank liabilities, with further cuts in reserve requirements and guidance for lowering deposit interest rates still possible. Pan Gongsheng, Governor of the People’s Bank of China (PBoC), has repeatedly said that the PBOC has significant room to reduce the reserve requirement ratio. Lowering the deposit interest rate and the rates for re-lending and re-discounting will also help to drive down the LPR.
Secondly, structural monetary policy tools are the main direction, embodying the strategic principles of “pursuing progress while ensuring stability, promoting stability through progress” at the monetary level.
1)On the stability front, financial support for real estate will continue to increase, aiding in the resolution of real estate risks and establishing a new model for real estate development. This includes continued implementation of loan support plans to ensure project completions and equal support for reasonable financing needs of real estate enterprises regardless of ownership. Moreover, policy-based and development-oriented financial institutions are expected to further provide credit support for affordable housing construction, urban village redevelopment, and dual-use infrastructure projects. Funds from tools like the Pledged Supplementary Lending (PSL) are likely to continue being allocated within 2024.
2)On the progress front, "Five Major Initiatives" will support the development of the real economy. For instance, in the field of inclusive finance, on January 24, 2024, Governor Pan Gongsheng announced at a press conference held by the State Council Information Office that the criteria for recognizing inclusive small-and-micro loans would be relaxed. The threshold for such loans would be increased from the current credit line of no more than 10 million yuan per household to no more than 20 million yuan. Similarly, in the green finance sector, the carbon emission reduction support tool will continue to be implemented until the end of 2024. Notably, the PBoC has established a 信贷市场司 Credit Market Department focusing exclusively on technology, green, inclusive, elderly care, and digital sectors among the "Five Major Initiatives."
Thirdly, the report proposes to “put idle funds to good use” and guide stock loans towards key areas.” Currently, China's RMB loan balance exceeds 230 trillion yuan [31.96 trillion U.S. dollars], ten times the annual increase. While activating inefficiently utilized financial resources may not translate into an increase in loans, it will improve the efficiency of using financial resources by entities and inject new momentum into high-quality economic development. Another instance is, to maintain the stable operation of commercial banks, increasing the write-off of non-performing loans will put pressure on loan growth. However, the funds from the written-off loans still support the real economy and have been included in the statistics for the social financing scale.
V. Domestic demand expansion: to “unlock potential demand”, “increase effective investment”, and promote “sound economic flows”
The report says "We will take a full range of steps to unlock potential demand by increasing incomes, improving supply, and reducing restrictions." Against the backdrop of unstable and uncertain external markets, it's essential to adhere to the strategic base of expanding domestic demand, rely more on the domestic market, and promote sound economic circulation.
Stimulating consumption requires addressing two key issues: insufficient consumer spending power and weak willingness to consume. Especially in situations where there is a lack of consumer confidence, providing cash subsidies to low- and middle-income groups can help to increase their spending power. By tilting fiscal expenditure towards public consumption areas such as healthcare, education, and pensions, it is conducive to addressing people's concerns for the future and enhancing their willingness to consume. In the medium to long term, to fundamentally solve the problem of weak consumption, efforts should be made to deepen the reform of the income distribution system, accelerating the construction of the public service system, guiding the upgrade of medium- and long-term consumption, and improving the social security system. From the perspective of consumption categories, one approach is to promote new types of consumption such as digital, green, and healthy consumption, and actively cultivate new growth points in consumption such as smart homes, cultural and entertainment tourism, sports events, and trendy domestic products; the second is to stabilize and expand traditional consumption, encourage and promote the trade-in of old goods for new ones, and boost major consumption items such as smart connected new energy vehicles and electronic products, tapping into the potential for growth from existing stocks.
The report says, "We will work to increase effective investment," which means more funds will be directed to major national strategies, industrial structure upgrading, the people’s well-being, and weak links in areas that are important to people’s lives, away from the blind pursuit of the number of projects or GDP growth. Specifically, this involves two main strategies:
Leveraging government investment effectively: Priority should be given to areas such as technological innovation, new infrastructure, energy conservation and carbon reduction, improving people's livelihoods, flood prevention and disaster relief infrastructure construction, equipment upgrades, and technological transformations. In terms of funding, 700 billion yuan of central budget funds will be allocated, expanding the fields and scope of local government special bonds used as capital.
Encouraging and supporting private investment: This includes further removing unreasonable access restrictions, creating a favorable business environment, providing more fiscal and monetary policy support, boosting the confidence of private entrepreneurs, invigorating the dynamism of micro entities, and ensuring private investment is willing, daring, and able to proceed.
It is important to coordinate the expansion of effective demand and supply-side structural reforms to promote sound economic flows. Consumption and investment are interconnected; both effective investment and consumption supported by income are key to expanding domestic demand. Investment activities generate economic demand in the short term but will form economic supply in the medium to long term, optimizing the supply structure to ultimately serve consumption. Moreover, the income of individuals involved in investment activities will drive consumption growth, which in turn spurs further investment. An increase in end-consumer demand is beneficial for enhancing investments in manufacturing and others, while high-quality investments create high-quality supply, facilitating the release of consumption.
VI. Stabilize real estate: Accelerate the creation of a new model for real estate development, supporting the reasonable financing needs of real estate enterprises.
Stabilizing real estate is of paramount importance for maintaining economic and financial stability in 2024. The report mentions "housing/real estate" 15 times, close to last year's 17 times, and arranges real estate-related work in the risk prevention section, highlighting real estate as the foremost of the three key areas for coordinated development, safety, and risk prevention.
From the recent situation, although the intensity of policies to stabilize real estate has increased, the overall real estate market remains relatively weak, with sales and investment at a bottom-finding stage. Since the third quarter of 2023, central and local governments have intensively introduced policies to stabilize real estate, continuously relaxing controls on lending, purchasing, and pricing. However, problems such as strong wait-and-see attitudes among residents, financial strains on real estate enterprises, and lack of investment confidence have not been completely reversed. The national sales area of commercial housing decreased by 8.5% year-on-year in 2023; since the beginning of 2024, the commercial housing market has continued to perform weakly, with the cumulative sales area of residential housing in key hundred cities decreasing by more than 40% year-on-year in January and February.
Looking at future policies, the new real estate model will be accelerated in 2024, with support policies for both supply and demand intensively implemented. On the basis of building a new development model, real estate policies will continue to be optimized. We believe that three major tasks need to be accomplished: ensuring supply, promoting demand, and stabilizing housing prices. According to the trend of new urbanization development and changes in the supply-demand relationship of the real estate market, housing control measures should be optimized regionally to promote the release of relevant demand and increase the construction of affordable housing in areas with population inflow.
First, on the supply side, ensure project delivery, implement the 三个不低于 "three no lower than" [1) Each bank's own real estate loan growth rate shall be no lower than the average real estate loan growth rate of the banking industry; 2) The growth rate of corporate loans to non-state-owned real estate enterprises shall be no lower than the growth rate of the bank's own real estate loans; 3) The growth rate of personal mortgages for non-state-owned real estate enterprises shall be no lower than the bank's own mortgage growth rate.] support from financial institutions for real estate enterprises, and the 白名单 "whitelist" for real estate projects. This report again emphasizes treating different ownership enterprises equally, supporting the reasonable financing needs of real estate enterprises of different ownerships, and continuing the policy idea of prioritizing projects over entities. For real estate projects, a real estate financing coordination mechanism will be fully established, and the project financing "whitelist" will be implemented as soon as possible to ease the liquidity pressure on real estate enterprises. By March 15, all cities at the prefectural level and above are to establish financing coordination mechanisms, forming a list of the first batch of qualified projects after confirmation by financial institutions, which will further enhance expectations for delivery. For real estate enterprises, implementing the "three no lower than" for real estate credit support, appropriately adjusting the assessment indicators for financial institutions, avoiding the hard landing of real estate crashes, and preventing the spread of debt risks among real estate enterprises of different ownerships.
Second, on the demand side, eliminate restrictive measures on purchasing apartments, and the direction of relaxing control policies in first-tier cities remains unchanged. Recently, first-tier cities have successively optimized purchase restrictions, currently still mainly making gradual adjustments, targeting key populations and demands. For example, Beijing relaxed purchase restrictions in Tongzhou District, Shanghai optimized purchase restrictions for non-registered and single people outside the outer ring, and Guangzhou canceled purchase restrictions for apartments bigger than 120 square meters. In 2024, first-tier cities may optimize housing purchase and lending restrictions by area and demand, increasing the quota eligibility for people with housing needs, and supporting both essential and improvement demands. For instance, reducing the requirements for the number of years of social security or personal tax payments to release the essential demand of those without the eligibility to purchase; and canceling the limit on the number of houses for families with multiple children. Against the backdrop of overall adjustments in the real estate market, restrictive policies on second-home purchases and high transaction taxes and fees are also important factors restricting the transaction of existing homes. Future policies on existing home transactions need further optimization, such as increasing the deduction of mortgage interest from personal income tax and reducing transaction-related taxes and fees to activate existing home transactions and further release purchasing demand.
Third, first-tier cities should quickly launch the construction of high-quality housing in prime locations, increase the supply of high-quality land, and simultaneously promote stable land prices and housing prices. Since the beginning of 2024, major cities have increased the supply of high-quality land plots, with a significant increase in the number of residential land plots launched in central urban areas. In January and February, the total land transfer sales revenue for residential land in first-tier cities reached 50 billion yuan [6.95 bln USD], a significant increase from the same period last year (13.2 billion yuan), showing that demand for high-quality land plots in core cities remains, the willingness of real estate enterprises to acquire land has recovered, and the warming of the land market also helps boost confidence in the real estate market.
Fourth, high-energy/expanding cities should accelerate the development and construction of affordable housing, with fiscal and monetary support in coordination. This report mentions "improve the basic systems for commodity housing" to meet residents' essential and improvement housing needs. To accelerate the construction of a new real estate model, it is necessary to run market and security tracks in parallel, increasing the construction and supply of government-subsidized housing. With the current imbalance between commodity housing and government-subsidized housing, the new development model should simultaneously expand the supply of affordable housing and address the dysfunction of the commodity housing market, achieving the dual goals of stabilizing the market and strengthening housing security, avoiding policy "fallacies of composition" causing new market shocks. For high-energy/expanding cities with population inflow, accelerate the development and construction of government-subsidized housing, while low-energy/shrinking cities may consider converting some commodity housing into government-subsidized housing through government acquisition, using the central bank's rental housing loan support plan, and expanding the supply of rental-type government-subsidized housing.
VII. “A stable, transparent, and predictable policy environment” for the private economy
The report says, “SOEs, private businesses, and foreign-funded companies all play an important role in China’s modernization drive.” Over the past year, central policies have been timely and effective, with noticeable improvements in the business environment. However, it is also important to pay attention to the divergence between macro policy improvements and entrepreneurs' business expectations. This divergence reflects that entrepreneurs and enterprises need not only policy support and assistance but also a revival in macro demand, as well as improvement in internal and external orders. Only when overall demand rebounds, orders improve, and income increases, can other policies in conjunction work to improve business conditions, further increase investment, and form sound economic circulation.
First is to accelerate the legislative work for the 民营经济促进法 Promotion of Private Economy Law, using legal means to ensure policy stability. In February, the Ministry of Justice and other departments held a legislative symposium on the Promotion of Private Economy Law, which was also mentioned at the press conferences of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). The legislation focuses on protecting the property rights of private enterprises and the rights and interests of entrepreneurs, ensuring fair competition, and safeguarding the consistency of policy-making and the stability of policy implementation through the rule of law, providing protection for private enterprises. Enterprises of different ownerships must be treated equally without exception; it is necessary to perfect the construction of the rule of law to avoid substituting standardized institutions with short-term policies.
Second is to create a stable, transparent, and predictable policy environment. This report emphasizes that "pay attention to the views of market entities and address their concerns when formulating enterprise-related policies.," and listen to and absorb opinions from various sides. Before introducing policies involving directional adjustments, it is important to fully listen to the opinions of entrepreneurs, set up timetables and roadmaps to avoid excessive policy swings. Publicity departments need to improve the level of publicity, respond to public concerns in a timely manner, avoid disconnection between one-sided positive propaganda and the feelings of residents and businesses, innovate forms of publicity, and maintain the government's credibility. At the same time, present examples of government-business relations from both positive and negative aspects to clear up chaos and establish models.
Third, perfect the system that supports financing for private companies. The report says, “The share of loans to private businesses will be increased, and the scale of financing for private businesses raised through bond issuance will be expanded." For a long time, due to the implicit government guarantees for state-owned enterprises (SOEs), the limited financial resources have been more inclined towards SOEs, leaving fewer financial resources for private enterprises. Future policies supporting financing for private enterprises need to be implemented effectively, requiring reforms to the assessment mechanisms of financial institutions to encourage bank credit towards private enterprises from an innovation support perspective. It is also necessary to complement capital market reforms to improve related systems, encourage private enterprises to issue bonds on the public market for financing, and expand direct financing.
Fourth, solving the issue of insufficient confidence among private enterprises by expanding overall demand. Currently, a lack of overall demand has led to China's economy facing periodic pressure, and the private economy's ability to withstand risks during economic downturns is clearly weaker than that of SOEs, leading to further contraction in their development pace due to considerations of investment returns. Therefore, it is necessary to expand macroeconomic demand through short-term policies and long-term reforms, driving macroeconomic operation back to a higher level, in order to fundamentally boost the confidence of private enterprises.
VIII. “The underlying stability of the capital market should be enhanced” to prevent market abnormal fluctuations from triggering downturn expectations, thereby impacting the development of the real economy.
The report proposes "the underlying stability of the capital market should be enhanced," which means ensuring the stability of the system as well as the stability of prices. Firstly, the direct financing system represented by the capital market is more aligned and adaptable to the development of emerging industries such as advanced manufacturing, technological innovation, green low-carbon, and the digital economy. It is important to ensure that financing channels are smooth, forming a positive substitute for loans to meet the requirements of industrial development. Historical experience shows that suspending IPOs does not lead to a long bull or slow bull market. Moreover, the function of the capital market to weed out the weak [companies]should be predicated on a stable delisting mechanism. Secondly, the capital market is a "place" for forming and trading expectations, with asset prices, especially stock prices, being the most direct carrier of expectations. Rapid rises and falls are signs of an imperfect capital market system and immature market entities. Price stability should be maintained through system improvement and optimization. Specifically, capital market construction can be strengthened in the following areas:
First, improve the quality of listed companies by ensuring easy entry while increasing the intensity of delistings and the punishment for illegal and irregular behaviors. First, allow a sufficient number of potential high-quality enterprises to enter the market, improve the supply of investment targets from an incremental perspective, and enhance the overall quality of listed companies. This requires ensuring the continuity of the system, conveying the signal of easy entry, and taking the opportunity of the 《中国证监会关于高质量建设北京证券交易所的意见》 Opinions of the China Securities Regulatory Commission on the High-quality Building of the Beijing Stock Exchange for deep reforms at the Beijing Stock Exchange to promote a batch of high-quality, compliant technology companies to go public. Next, intensify efforts to delist companies, especially strengthening guidance for voluntary delistings, through a market mechanism that allows the survival of the fittest, clearing shell companies and underperforming companies that have lost the ability to continue operations, and ensuring that the quality of existing listed companies gradually improves. Lastly, regulatory authorities should impose heavy and swift penalties for illegal and irregular behaviors such as fraudulent issuance and financial fraud.
Second, continue to strengthen incentives for issuing dividends to investors, optimize dividend and repurchase systems, and enhance the market's long-term attractiveness. Currently, the State-owned Assets Supervision and Administration Commission (SASAC) and the China Securities Regulatory Commission (CSRC) have proposed incorporating market capitalization into the assessment and evaluation system for central and state-owned enterprises. In the future, further encouragement may be given to corporate executives to pay attention to the market performance of their listed companies, transmit confidence, stabilize expectations through market-based means such as increased holdings and repurchases in a timely manner, increase cash dividends, and better reward investors.
Third, continuously increase the introduction of long-term funds. On one hand, efforts will be made around unblocking the systemic "bottlenecks" of long-term funds entering the market. In the future, further support will be given to expanding the investment scope of social security and annuities, including equity products such as index funds in the investment options, allowing long-term funds to participate in private offerings of stocks, and gradually increasing the allocation proportion of long-term funds in equity assets. At the same time, accelerate the establishment of a long-cycle assessment mechanism for long-term funds of more than three years, optimize supporting systems such as taxation and accounting, and enhance the stability of long-term fund investment behaviors. On the other hand, further diversified risk management tools will be increased, restrictions on institutional investors' use of derivatives will be relaxed, and more domestic and foreign investment institutions will be allowed to use derivatives to manage risks under prudent conditions.
Fourth, further optimize the stock market's basic system. For example, in terms of the trading system, it may be possible to extend trading hours further. If pre-market auction and post-market block trading durations are not considered, the current trading duration of the A-share market is only 4 hours, which is relatively short compared to other mature capital markets. This somewhat weakens the pricing efficiency of the A-share market, especially for small and medium investors who, due to the lack of trading tools and capabilities, are more vulnerable to losses in the face of overnight risks from overseas markets. Further improve the market maker system and optimize the incentive compensation mechanism. In addition, there are multiple discussions about the "T+0" settlement system and the price fluctuation limit system in the market. From a system reserve perspective, it may be possible to study and make it an option for a T+0 system that fits China's market characteristics, changing the current situation where the spot market operates under a T+1 system and the derivatives market operates under a T+0 system, etc.
Fifth, accelerate the construction of the bond market. Continue to promote the development of corporate bonds and financial bonds markets. It is expected that in 2024, the central bank will further intensify the construction of the bond market, improve the pricing efficiency of the interbank bond market, optimize the supporting measures and detailed rules of "Bond Connect", and expand the high-level opening up of the bond market.
IX. “Striving to modernize the industrial system and developing new quality productive forces at a faster pace”, outlining the development focuses of traditional industries, strategic emerging industries, and future industries.
The attention given to building industries has further increased, with the construction of a modern industrial system and the development of 新质生产力 New Productive Forces (NPF) listed as the number one task for the government in 2024.
First, the development of NPF is an inevitable choice for China's technological and industrial breakthrough. On the one hand, developed economies represented by the United States are accelerating their layout in areas such as artificial intelligence, quantum information science, advanced manufacturing, and biotechnology to seize the high ground of technological innovation. Since 2021, the U.S. government has successively launched the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the National Biotechnology and Biomanufacturing Initiative, providing massive funding and subsidies to industries such as semiconductors, biology, and new energy while strengthening infrastructure and stimulating the economy. In April 2022, Japan released the "AI Strategy 2022" and the "Quantum Future Society Vision (Draft)", specifying the introduction of quantum technology across the entire socioeconomic system, including finance, healthcare, transportation, and aviation, to improve production efficiency and safety. On the other hand, the West continues to impose restrictions on related industries in China. The United States has taken a series of restrictive measures in strategic areas such as 5G, 6G, artificial intelligence, quantum, and semiconductors to limit the development of cutting-edge technologies and block technological exchanges. For example, the CHIPS and Science Act not only involves massive subsidies and tax incentives but also specifically sets restrictions on China's chip technology and corporate development, completely banning Chinese companies from importing chip manufacturing equipment and foreign companies from setting up factories in China. Against this backdrop, the development of NPF has actually become the "main battlefield" and "initial move" in major country competition.
Second, industries are the carriers of NPF, and the formation of these forces is closely linked to the construction of a modern industrial system. It is necessary to properly manage the relationships between traditional industries, strategic emerging industries, and future industries. In particular, traditional industries should not be simply phased out as "low-end industries." It should be clearly stated at the top level that traditional industries, emerging industries, and future industries are not in a relationship of elimination and substitution but are intrinsically unified. Traditional pillar industries can rejuvenate and shape new advantages through technological transformation. For example, the automobile manufacturing industry, a typical traditional industry, has seen an increasing demand for new energy and intelligent connected vehicles with the acceleration of electrification, intelligence, and networking, becoming a "rich mine" to expand domestic demand.
Therefore, industrial development will focus on consolidating strategic emerging industries, preemptively laying out future industries, and transforming and upgrading traditional industries, following a systematic path of development to address weaknesses, extend strengths, and forge new advantages. Traditional industry development should be considered in conjunction with recent policies such as 设备更新改造 "equipment renewal and transformation," with the overall approach being the optimization and upgrade of industrial and supply chains. As related policies are implemented in detail, this will lead to an increase in investment in technological transformations, benefiting the steady operation of the industrial economy and stabilizing the economic foundation, while also increasing demand for digital and green technologies, thereby forming a synergistic development of the industrial chain. The report explicitly states: "We will carry out technology transformation and upgrading in the manufacturing sector...to make traditional industries higher-end, smarter, and more eco-friendly." Strategic emerging industries should integrate cluster development to adapt to the objective law of technological group breakthroughs, with biomanufacturing, commercial aerospace, and the low-altitude economy facing significant development opportunities. Future industry development plans and policies will be accelerated. In 2024, support for future industries such as 类脑智能 brain-like intelligence, quantum information, and genetic technology will significantly increase. Relevant ministries such as the National Development and Reform Commission and the Ministry of Industry and Information Technology will also accelerate the release of plans or action schemes, with future industries possibly entering a policy introduction phase.
Third, the formation of NPF cannot be separated from the support of factors, with core changes reflected in the acceleration of basic scientific research layout, increasing standardization of data elements, and rapid development of venture capital
One is the acceleration of basic scientific research layout. The formation of NPF requires collaborative efforts in key core technologies and breakthroughs in disruptive and cutting-edge technologies. Thus, at the national level, the layout of the basic research system will be strengthened, accelerating the establishment of a number of future industry technology research institutes, building interdisciplinary collaborative innovation platforms, and enhancing original innovation capabilities. At the same time, reforms in science and technology evaluation and awards will be deepened, forming a fundamental system that supports comprehensive innovation, strengthening intellectual property protection, and promoting the transformation of scientific and technological achievements.
Two is the increasing standardization of data elements. Currently, data has become a fundamental strategic resource and a key production factor for the country, as important and indispensable to economic development as oil and electricity are to industrial economy development. This report emphasizes: "We will step up R&D and application of big data and AI...We will pursue a profound and wide-ranging digital transformation to drive economic development, enrich people’s lives, and make new advances in modernizing social governance."
In the future, basic systems such as data property rights, circulation and transaction, and security governance will be accelerated, including advancing the construction of a standardized data system, establishing a national unified data format, interface, storage, and other software and hardware standards; improving the data property rights registration system, etc.
Three is the rapid development of venture capital investment. The Central Economic Work Conference in 2023 first proposed "encouraging the development of venture and equity investment," and this government work report reiterates it. Traditional fiscal funds are difficult to match the development demands of emerging industry enterprises, while the mechanism of risk-sharing and benefit-sharing in venture and equity investments can provide stable long-term funds for related enterprises, facilitating a positive "technology-industry-finance" cycle. The 《私募投资基金监督管理条例》 Regulation on the Supervision and Administration of Private Investment Funds released in 2023 includes a special chapter to support the development of venture capital funds, explicitly stating: "Provide policy support for venture capital funds, encourage and guide their investment in growth-oriented, innovative startups, and encourage long-term funds to invest in venture capital funds." Predictably, support for venture investment will further increase in 2024. On one hand, more leniency will be given in investment scope, investment strategy, leverage application, and duration; on the other hand, more convenience will be provided in investment exit, such as supporting their circulation in the private equity secondary market, conducting share transfers, and strengthening tax-related protection during the transfer process.
Huang Shouhong: Official Interpretation of the Government Work Report
***Note: The bolded sections in the following text are identical to those in the officially released version.***
This year’s report is characterized by three aspects
Firstly, the report successfully connects with high-level political directives [上接天线] and is grounded in reality [下接地气]. The term "connecting with high-level directives" refers to the report's accurate political positioning, fully implementing the decisions and arrangements of the CPC Central Committee with Comrade Xi Jinping at its core. "Grounded in reality" means the report accurately captures the pulse of society, fully reflecting the will and opinion of the people and addressing concerns from all sectors, especially the primary-level governments, the people, and enterprises. The policies and measures in the report are practical, close to the people, and close to businesses.
Various sectors of society have shown high interest in the drafting of the Government Work Report, offering a vast number of suggestions through different channels. For instance, the official website of the Chinese Government, in cooperation with 29 online media platforms, launched the campaign "@StateCouncil Suggestions for the Government Work Report @国务院 我为政府工作报告提建议." As of yesterday, over 1.6 million suggestions had been received via the Chinese Government's website, an 82% increase from last year. From these suggestions, 1,150 representative ones were selected and forwarded to the drafting team, presented in thick volumes of detailed content including rationales, suggestions, and even feasibility analyses of policy proposals, demonstrating thorough consideration. Among those who left messages, the ages ranged from 12 to 82 years, covering both males and females. Some netizens affirmed the Government Work Report for extensively soliciting opinions, saying, "Asking for needs and plans from the people makes the Government Work Report more grounded, confident, and lively."
Secondly, the report is coherent and integrated from top to bottom. It combines the decisions and arrangements of the CPC Central Committee and the State Council with the demands, opinions, and suggestions from all sectors of society, translating them into specific tasks, construction blueprints, and policy lists for the government and its related departments. The Central Economic Work Conference sets the overall tone, general roadmap, and macro policies, while enterprises and the public offer specific wishes and demands. These need to be detailed and made operational into concrete policies and actions. After several rounds of research and verification, the report formed specific work tasks and policy measures, organically integrating the CPC Central Committee's decisions and arrangements with the desires and demands of enterprises and the people.
Thirdly, the report is realistic, pragmatic, and down-to-earth. This year's report follows the stylistic norms of report writing, striving for simplicity and substance. Discussing last year's achievements, it focuses on facts and data without embellishment; highlighting the distinctive features and characteristics of last year's work without being exhaustive. Deploying this year's work, it focuses on new arrangements and measures; for important tasks that need continuous promotion and major strategies that need to be implemented consistently, an effort was made to concisely summarize them; in arranging various policies and actions, emphasis was placed on presenting substantial content, as what most interests and concerns the public is whether the report contains "substantial content." The report aims for targeted and effective policy measures, genuinely responding to the concerns of all sectors with practical, solid, and warm measures. The language strives to be popular and concise, making it understandable and relatable to the general public.
Last year's achievements were worthy of commendation
From the perspectives of macro policies and practical work, three key features of last year’s work deserve review:
1. Strengthening the Fundamentals: After three years of the pandemic, the overall Chinese economy, akin to convalescing from a severe illness, yet faces multiple difficulties and challenges, hence the increasing economic pressures. A method of strengthening fundamentals was adopted through comparative deliberation, coordinating stable growth with future potential enhancement. The measures taken were beneficial both for the current situation and future development.
2. Leveraging Combined Effects: Faced with multiple challenges last year, where the nature and characteristics behind each challenge varied, it was difficult for a single policy to be a "silver bullet." Thus, last year witnessed a greater emphasis on the combinatory and synergistic nature of policies. Around tasks such as expanding domestic demand, optimizing economic structures, boosting confidence, and preventing and defusing risks, a comprehensive utilization of fiscal, monetary, and employment policies was enacted, launching a powerful and effective policy combination strike and creating a synergistic force.
3. Focusing on Targeted Measures: Different measures were adopted for different contradictions and problems, ensuring targeted and effective solutions. For instance, last year, in response to the conditions and demands of different operating entities, respective policies were introduced to support SOEs, private businesses, and foreign investment development. There were common, unified policies, as well as some targeted measures for different difficulties and demands.
Overall, last year's achievements were commendable, and the accumulated experience is invaluable. A thorough understanding of the past year's achievements provides deeper insight into why China's economy has been so successful over the past years. It also strengthens confidence in achieving this year's development goals, as the underlying logic and fundamental driving forces remain consistent.
Overall, opportunities outweigh challenges, making the achievement of around 5% growth rate entirely feasible this year.
The report suggests that overall, opportunities outweigh challenges, and favorable conditions outweigh unfavorable ones. With last year's economic growth reaching 5.2%, achieving around 5% growth this year is entirely possible. Of course, many goals require effort to be realized. Achieving a 5% growth rate this year will necessitate overcoming difficulties, requiring continued effort from all parties.
The report focuses on issues of public concern, proposing many policies and measures related to people's livelihoods.
The well-being of the people is the fundamental goal of development. This year's report focuses on issues of public concern, proposing many policies and measures related to people's livelihoods.
In education, the report proposes improving the conditions of rural boarding schools. With over 30 million students in compulsory education stages in boarding schools, many of whom are left-behind children, the conditions in rural boarding schools have improved significantly over the years but still have many weaknesses. This year's report addresses these weaknesses to ensure these children have access to quality education.
In healthcare, the report proposes to continue increasing basic medical financial subsidies this year, raising the standard of financial subsidies for urban and rural residents' medical insurance by 30 yuan to 670 yuan [93.10 U.S. dollars] per person per year. Addressing prominent issues reported by the public, such as difficulties in receiving medical treatment and reimbursement, it emphasizes implementing and improving offsite medical insurance settlement, focusing on patient-centered healthcare service improvements, and promoting mutual recognition of examination and test results.
In social security, the report proposes to increase the basic pension for retirees while also raising the minimum monthly standard for urban and rural residents' basic pensions by 20 yuan [2.78 USD] . Currently, 170 million elderly people receive urban and rural residents pension insurance benefits. This year, increasing the minimum standard by 20 yuan represents a 19.4% increase, one of the more significant adjustments in recent years.
Three main areas of policy initiatives are outlined to ensure employment for young people and college graduates
This year's Government Work Report places an even greater emphasis on pro-employment orientation, outlining a series of measures:
For a start, in terms of policy orientation, this year's Government Work Report sets the urban employment target at “over 12 million people”, compared to "around 12 million people" last year. This adjustment to "over" indicates the Party and government's strengthened commitment, resolve, and clear policy direction towards ensuring employment.
This year's Government Work Report outlines a series of measures to achieve employment targets, especially to ensure employment for young people and college graduates. Summarized into three main areas, these policy initiatives include:
1. Enhanced Policy Support. This encompasses macroeconomic policies, with the report calling for strengthened fiscal and financial policy support for employment this year, aiming to introduce more policies conducive to stabilizing expectations, growth, and employment. At the same time, special policies to promote employment are intensified, such as unemployment insurance premium refunds, special loans, and employment and social insurance subsidies.
2. Increased Support for Enterprises in Key Industries and Key Groups. The report demands stronger support for sectors and enterprises with a large capacity for creating jobs and intensified assistance for key groups like college graduates.
The report also makes arrangements for issues of social concern, such as fair employment and rights protection.
3. Strengthened Vocational Skill Training. The report proposes enhancing vocational skill training to adapt to talent demands in advanced manufacturing, modern services, elderly care, and other sectors.
Overall, there is significant pressure to stabilize employment this year, yet there is also considerable potential. The aim is to fully unleash this potential.
Setting this year's deficit rate at 3% aligns with the overall positive trend of China's economic operations
A deficit rate of 3% is the same as last year's initial budget level. Although it represents a decrease from the additional 1 trillion yuan [138.95 bln USD] of treasury bonds issued last year, overall, this level is considered appropriate. Such an arrangement aligns with the objective reality of China's economy trending positively, sends a positive signal externally, benefits in controlling the government debt ratio, enhances fiscal sustainability, and reserves policy space to address potential future risks and challenges. Considering these factors, a 3% deficit rate was determined for this year.
All market access restrictions on foreign investment in manufacturing will be abolished
Regarding attracting foreign investment, the Government Work Report outlines several measures.
1. Steadily expanding institutional opening up.
2. Continuing to relax market access for foreign investment. Over the years, the negative list for foreign investment has been continuously reduced, from 190 items in the first negative list in 2013 to 31 items nationwide and 27 items in the Free Trade Zones currently. This year, the report proposes completely abolishing restrictions on foreign investment in manufacturing, meaning manufacturing entries in the negative list will be cleared. Market access restrictions in services sectors, such as telecommunications and healthcare, will also be reduced. Regular cleanup actions are also planned against policies and measures that impede fair competition between domestic and foreign capital.
3. Strengthening services for foreign investors. This includes making China a favored destination for foreign investment and making it easier for foreign nationals to work, study, and travel in China, etc.
Three areas of measures are outlined to promote the development of private businesses
1. Improving and implementing supporting policies. Although many policies have been introduced in recent years to support private business development and have been generally well-implemented, some have not been fully realized, necessitating further improvement and implementation. New measures will be introduced based on enterprise concerns, such as addressing the prominently reported issue of overdue payments. The report demands that the long-term mechanism for preventing and settling overdue payments owed to private businesses be improved. It also proposes to increase the share of loans to private businesses and expand the scale of financing for private businesses raised through bond issuance.
2. Optimizing the business environment around enterprise concerns. The report emphasizes the need to address prominent problems encountered by private businesses concerning market access, access to factors of production, impartial law enforcement, and protection of rights and interests. These issues are frequently raised by private enterprises. Measures will also be taken in areas such as the deepening of the building of a unified national market to firmly ensure fair market competition.
3. Supporting the innovative development of the private sector. The report highlights the importance of encouraging entrepreneurship and supporting entrepreneurs in focusing on innovative development and leading their companies to greater success. On the one hand, the government should create a favorable environment and set the stage for private businesses; on the other hand, entrepreneurs are encouraged to be proactive, overcome difficulties, and embrace challenges.
This year, granting permanent urban residency to eligible people who have moved to cities from rural areas will be promoted as a matter of priority
Actively advancing people-oriented new urbanization. New urbanization brings comprehensive benefits and, from the perspective of domestic demand, serves as a large platform combining investment and consumption. Last year, China's urbanization rate of permanent residence was 66.2%, which still has a gap compared to over 80% in developed countries, and the urbanization rate of the registered population is even lower. In that sense, there is still much to be achieved in China’s urbanization endeavors. An increase in the urbanization rate is expected to bring substantial consumer and investment demand. It is estimated that the consumption demand brought by a person moving to the city is considerably higher than that of rural residents. In pushing forward new urbanization, this year's emphasis on promoting the urbanization of the agricultural transfer population In advancing new urbanization, this year, granting permanent urban residency to eligible people who have moved to cities from rural areas will be promoted as a matter of priority. Relevant arrangements are made in the Government Work Report.
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