Incremental Policies to Boost Economic Fundamentals
【Introduction】Incremental policy introduction is expected to drive the economic fundamentals to warm up
As a barometer of economic operations and an important platform for resource allocation, the capital market deeply reflects the pulse and direction of the macroeconomy. China Fund News specially launches the "Viewing the Macro from the Capital Market" column, striving to keenly capture the dynamics of the capital market, provide forward-looking insights into the macro trend, and grasp the internal logic and core driving force of economic operations.
China Fund News reporters Li Shu Chao and Zhang Ling
Recently, the State Council Information Office held a press conference where the Ministry of Finance introduced the situation regarding "increasing the counter-cyclical adjustment of fiscal policy and promoting high-quality economic development." At the meeting, the relevant leaders of the Ministry of Finance stated that around stable growth, expanding domestic demand, and resolving risks, a series of targeted incremental policy measures will be introduced in the near future.
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Industry insiders said that the Ministry of Finance's press conference set a positive tone, and the debt resolution policy is a timely rain for the market. Multiple real estate policies have created favorable conditions for the industry to stop falling and stabilize, which is conducive to consolidating the confidence of market entities and stabilizing the expectations of the capital market.
Balancing stable growth and risk resolution
Incremental policies are expected to promote the stable development of the market
On October 12, the Ministry of Finance released a definite signal that a series of incremental policy measures are about to be introduced. The incremental policies mainly include the following four aspects: increasing support for local governments to resolve government debt risks, supporting large state-owned commercial banks to replenish core tier-one capital, supporting the promotion of the real estate market to stop falling and stabilize, and increasing support and protection for key groups.
Wen Bin, the chief economist of Minsheng Bank, believes that the Ministry of Finance has clearly focused on stable growth and expanding domestic demand to strengthen policy supply. The aim is to form a joint force with previously introduced policies, amplify the policy effect, promote the economy to move upward in a structurally superior direction, and maintain a continuous positive development trend, further consolidating the economic fundamentals, consolidating the confidence and expectations of market entities, and ultimately forming a virtuous growth cycle.
CITIC Securities Research also stated that the meeting conveyed a positive signal of fiscal policy, with short-term incremental policies clearly resolving risks and increasing the enthusiasm of various market entities. In the long term, it clearly pointed out that the central finance still has a large space for borrowing and increasing the deficit.Discussing the impact of the aforementioned fiscal policies on the capital market, Manulife Fund believes that, in conjunction with the recent Politburo meeting, the central bank and the China Banking and Insurance Regulatory Commission, as well as the press conference held by the Ministry of Finance, the relevant departments have shown a positive attitude towards stabilizing growth. The institution expects that this round of policy efforts will have strong continuity and is expected to gradually improve the expectations for the economic fundamentals.
Guotai Fund also stated that the positive tone set by the Ministry of Finance's press conference, which clearly defines the policy direction of the central government's leverage increase, is conducive to stabilizing the medium-term expectations of the capital market. The previous sharp rise in the stock market was not conducive to the healthy development of the capital market, and it is expected that the market will gradually stabilize as policy expectations become more stable.
Timely debt policy as a timely rain
Will promote sustained economic growth in regions
The Minister of Finance, Lan Fu'an, stated at the press conference that, in addition to continuing to allocate a certain scale of bonds in the newly added special debt limit every year to support the resolution of existing government investment project debts, it is proposed to increase the debt limit by a large scale in one go to replace the existing implicit debt of local governments, and to increase efforts to support local governments in resolving debt risks. The relevant policies will be detailed to the public after going through the legal procedures.
Historically, there have been four rounds of local debt swaps, and this swap is the fifth. Minsheng Research interprets this as follows: in terms of the scale of the swap, it is expected to far exceed the second, third, and fourth rounds and can be compared with the first round; in terms of the main use, it focuses on supporting local governments, especially high-risk areas, to resolve existing debt risks, thereby freeing up more energy and financial space for development and livelihood protection; in terms of the debt主体, considering the relatively large fiscal debt pressure of local governments in recent years, and the Ministry of Finance clearly stated that "the central finance has a relatively large space in terms of borrowing and increasing the deficit," it is expected that the method of issuing national bonds by the central government and then lending them to local governments will be adopted, with interest shared by the central and local governments.
Zheshang Securities believes that the "proposed one-time increase in a large-scale debt limit to replace local hidden debt" mentioned at the press conference is a timely policy rain, taking into account both short-term and medium-term considerations. In the short term, some local areas are affected by the slowdown in fiscal revenue growth, the decline in land transfer income, and the burden of local government debt, which puts pressure on grassroots governments to protect basic livelihoods, wages, and operations. The proposed large-scale increase in the debt limit will help alleviate the repayment pressure of local governments, reduce short-term financial risks, and consolidate the grassroots "three guarantees."
In the medium term, local governments will further release economic development momentum, allocate more resources to high-quality economic development, develop new quality productive forces according to local conditions, promote sustained economic growth in regions, and at the same time enhance the confidence of local enterprises in investing in government projects, stimulating the participation of various types of enterprises in major projects.
Huafu Research Macro also stated that increasing support for local governments to resolve government debt risks, significantly increasing the debt limit, and supporting local governments in resolving implicit debt, is not only conducive to ensuring the stable and healthy development of the economy but also has significant importance for promoting economic growth and boosting the confidence of market entities.
Creating favorable conditions for the real estate market to stop falling and stabilize.The conference focused on three main points regarding real estate-related policies: First, it allows the use of special-purpose bonds for land reserve, recycling, and reducing idle land; Second, the use of special-purpose bonds is expanded to include the acquisition of existing housing, increasing the supply of affordable housing, and directing subsidies for affordable housing projects towards the acquisition of existing housing; Third, it is urgent to study and clarify the value-added tax and land value-added tax policies that are aligned with the cancellation of standards for ordinary and non-ordinary residential properties, to reduce transaction fees.
Yan Yuejin, Deputy Dean of the Shanghai Yiju Real Estate Research Institute, stated that the Ministry of Finance mentioned several real estate policy contents at a press conference, creating favorable conditions for the real estate market to stop falling and stabilize. In particular, the mention of the collection of existing land and housing will help better improve the supply and demand relationship, creating better conditions for the stable and healthy development of the real estate market in the fourth quarter and next year, effectively achieving the work goal of "strictly controlling the increase, optimizing the stock, and improving the quality."
Guolian Fund stated that using special-purpose bonds as capital for the acquisition of existing housing can unblock some of the current policy bottlenecks, supplement the capital for the acquisition of existing housing, and promote the implementation effect of the policy. It is expected that the progress of the central bank's support for the use of special loans for the acquisition of existing housing will be accelerated.
Yang Chang, Chief Macro Analyst at Zhongtai Securities, also believes that the above policy statements reflect multiple intentions. First, it expands the scope of use for local government special-purpose bonds. At the same time, by acquiring existing housing, it provides support for local governments to alleviate inventory pressure. In addition, through local government special-purpose bonds, the local government's main responsibility for real estate is also clarified.