Economic Recovery: NDRC Explains Incremental Policies

2024-06-30 198 Comments

On October 8th, the first working day after the National Day holiday, the State Council Information Office held a press conference where Zheng Shanjie, Director of the National Development and Reform Commission (NDRC), along with Deputy Directors Liu Sushe, Zhao Chenxin, Li Chunlin, and Zheng Bei, appeared together to introduce the situation regarding "Systematically Implementing a Package of Incremental Policies to Solidly Promote Economic Upward Structure Optimization and Continuously Positive Development Trends."

In response to new situations and issues in the current economic operation, while effectively implementing existing policies, Zheng Shanjie introduced a set of incremental policies aimed at five aspects: intensifying counter-cyclical macro policy adjustments, expanding domestic effective demand, increasing support for enterprises, promoting the stabilization and recovery of the real estate market, and boosting the capital market, to promote a sustained economic rebound and improvement.

Zheng Shanjie mentioned that a list of "two heavy" construction projects worth 100 billion yuan for 2025 and a central budget investment plan of 100 billion yuan will be advanced this year. The enforcement and regulatory actions involving enterprises will be standardized, with more inclusive and prudent regulatory approaches and flexible law enforcement methods. It is not allowed to enforce laws in different places in violation of regulations or for profit, and timely reminders will be given to places with abnormal growth in confiscated income, with necessary supervision if needed.

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It is worth noting that Li Qiang, a member of the Standing Committee of the Political Bureau of the CPC Central Committee and Premier of the State Council, presided over a symposium with economic experts and entrepreneurs on the afternoon of the 8th, listening to opinions and suggestions on the current economic situation and the next steps in economic work.

Li Qiang emphasized the importance of doing a good job in the next stage of economic work. All parties need to enhance their sense of responsibility and urgency, deeply implement the decisions and deployments of the Party Central Committee, and strive to complete the annual goals and tasks of economic and social development. It is necessary to quickly implement a package of incremental policies to stabilize the economy, accelerate the implementation of policies already introduced to ensure early implementation and early effectiveness, and quickly formulate specific plans for policies under study. Track and evaluate the transmission effects of policies, optimize where necessary, and intensify efforts where needed. At the same time, in conjunction with planning next year's economic work, research and reserve a batch of policies and measures to stabilize the economy and promote development, and launch them in a timely manner according to changes in the economic situation.

Market expectations have significantly improved. China's economic growth of 5% in the first half of this year laid the foundation for the annual target of around 5%. In July and August, the economy was generally stable, with some economic indicators fluctuating, and market institutions predicted that the economic growth rate in the third quarter would be roughly between 4.6% and 4.8%.

On September 26th, the Political Bureau of the CPC Central Committee held a meeting to analyze and study the current economic situation and deploy the next steps in economic work, introducing a package of incremental policies, demonstrating confidence and determination to promote a sustained economic rebound and improvement. On September 29th, the State Council held an executive meeting to specifically study and deploy the specific implementation of a package of incremental policies.

As a leading indicator, the manufacturing PMI released by the National Bureau of Statistics on September 30th was 49.8%, an increase of 0.7 percentage points from the previous month. Industry analysis suggests that the rebound in the September PMI index is not only due to certain seasonal factors but also indicates that the Chinese economy is showing initial signs of stabilization.

While recognizing the achievements, scores, and highlights of economic development, it is also necessary to face the existing difficulties and problems. On the one hand, the external environment is becoming more complex and severe, with an increase in uncertain and unstable factors. On the other hand, the domestic economic downward pressure has increased, and since the third quarter, the main economic indicators such as industry, investment, and consumption have fluctuated. Some industries are facing "involution" competition, some enterprises are not yet adapting to optimization, upgrading, or transformation and development changes, some are increasing production but not income or profits, some are facing relatively difficult production and operations, and there are still significant risks and hidden dangers in some areas.He emphasized that, from the perspective of development trends, the fundamentals of China's economic development have not changed, and the favorable conditions such as large market potential and strong economic resilience have not changed. With the continued release of the effects of various existing policies, especially the introduction and implementation of incremental policies, recent market expectations have significantly improved. The manufacturing purchasing managers' index (PMI) has rebounded quickly, the stock market has warmed up and risen, and market consumption has been vigorous during the "Eleventh" holiday. We are full of confidence in achieving the goals and tasks of economic and social development for the whole year, and in maintaining the sustained and stable healthy development of the economy and society.

On the morning of October 8th, Li Qiang emphasized at the 10th special study session of the State Council, to strengthen policy coordination and departmental collaboration, to play a good "combination punch" of policies, and to form a strong force for promoting high-quality development from all aspects.

Li Qiang pointed out that it is necessary to accurately grasp the focus of the consistency of macro policy orientation. When planning and formulating policies, it is essential to fully consider the original intention of the policy, the target orientation, and the functional positioning to ensure that various policies are coordinated and form a joint force. It is necessary to strengthen the synergy of policy objectives, to set goals based on the overall needs of economic and social development, and to consciously obey and serve the overall situation. Especially under the condition of relatively large downward pressure on the economy, all parties should actively introduce policies that are conducive to stable growth and stable expectations, and be cautious about introducing policies that have a contracting and inhibitory effect. It is also necessary to strengthen the synergy of policy measures, pay attention to system integration and mutual supplementation, and prevent each from acting on its own. The implementation and evaluation of policies should also reflect the requirements of consistency. The implementation of policies should grasp the timing, intensity, and rhythm to ensure that the policy effects meet expectations.

Strengthen the expansion of effective investment

Stabilizing investment is the top priority in stabilizing growth. This year, the National Development and Reform Commission has focused on key areas and links, expanded effective investment, played the leading role of government investment, and fully mobilized the enthusiasm of private investment.

At present, the 700 billion yuan of central budget investment has been fully issued, and the 1 trillion yuan of ultra-long-term special treasury bonds for "two heavy" construction (implementation of national major strategies and construction of safety capabilities in key areas) and "two new" work (large-scale equipment renewal and consumer goods replacement) have been fully issued to projects and places, and are currently accelerating the construction of projects and the disbursement of funds.

At present, there is a large demand for incremental funds in areas such as the construction of infrastructure, urbanization of agricultural transfer population, construction of high-standard farmland, construction of underground pipelines, and urban renewal. Next year, ultra-long-term special treasury bonds will continue to be issued and optimized to support "two heavy" construction.

Zheng Shanjie revealed that 10 billion yuan of central budget investment plan for next year and 10 billion yuan of "two heavy" construction project list will be issued in advance within the year to support localities to accelerate the early work and start construction in advance. At the same time, an important related work is to accelerate the construction of new urbanization centered on people.

The executive meeting of the State Council held on September 29th deployed measures to accelerate the implementation of 102 major projects in the "14th Five-Year Plan", proposing to focus on the overall situation to grasp the implementation of major projects, further压实 the responsibilities of all parties, strengthen departmental collaboration and central-local linkage, strengthen financial support and resource support, solve difficulties and blockages, and ensure that the construction of major projects achieves the expected results.

At the press conference, Liu Sushe said that 92% of the 5,100 specific projects involved in the 102 major projects have been started or completed. Next, further efforts will be made to coordinate,压实 the responsibilities of all parties, strengthen financial support and resource support, promote the 409 projects that have not yet started construction to start construction as soon as possible, and ensure that the 102 major projects of the "14th Five-Year Plan" are successfully concluded by the end of next year.Make Full Use of Special Purpose Bonds

As an important policy tool for stable growth, local government special purpose bonds have also received new deployments. Zheng Shanjie stated that the issuance and use of local government special purpose bonds should be accelerated to support the commencement of projects. Efforts should be made to promptly study the appropriate expansion of the fields, scale, and proportion of special purpose bonds used as capital, and to introduce specific reform measures to reasonably expand the scope of support provided by local government special purpose bonds.

Liu Sushe introduced at the meeting that this year's 3.12 trillion yuan of local government special purpose bonds allocated for project construction have already seen 2.83 trillion yuan issued by the end of September, with an issuance rate of 90% and a project commencement rate of 85%. The study will be conducted to pilot the autonomous authority for special bond project review, implement a "green channel" for ongoing projects, and introduce new measures to optimize and improve the management of local government special purpose bonds as soon as possible.

This year, the local government's new special bond quota is 3.9 trillion yuan, and the actual issuance of 3.6 trillion yuan of new special bonds in the first three quarters is nearing completion. The new special bonds are mainly invested in municipal and industrial park, transportation, social undertaking, and other projects, which are also referred to as special bonds for project construction. In addition, some of the special bond funds are used to replenish the capital of small and medium-sized banks and to repay existing debts.

Liu Sushe stated that special purpose bonds should be fully utilized. On one hand, localities should be urged to complete the issuance of the remaining approximately 290 billion yuan of local government special purpose bond quotas by the end of October. At the same time, the implementation and fund usage of already issued local government special purpose bond projects should be accelerated to promote the creation of more tangible work volumes.

On the other hand, in response to some prominent issues existing in the issuance, use, and management of local government special purpose bonds, the National Development and Reform Commission and the Ministry of Finance are actively studying the reasonable expansion of the scope of support for local government special purpose bonds, appropriately expanding the fields, scale, and proportion used as capital, studying the pilot of project review autonomous authority, implementing a "green channel" for ongoing projects, and introducing new measures to optimize and improve the management of local government special purpose bonds as soon as possible.

Zhao Quanhou, director of the Financial Research Office of the Chinese Academy of Fiscal Sciences, believes that it is possible to consider no longer establishing a positive list for the direction of special bonds. As long as it is within the scope of the government investment regulations, projects can be financed through special bonds. Appropriate authority should be delegated to localities in these fields, allowing them to improve project quality as the foundation. On one hand, bond funds can support project development, and on the other hand, cash flow can better match its entire lifecycle. Of course, due to the significant expansion of the direction of special bonds, risks must also be controlled. The central government can moderately delegate authority to localities and guide them to invest special bond funds in the fields expected by the central government through some capital incentives.

Increase the intensity of enterprise assistance and support

Increasing the intensity of enterprise assistance and support is also one of the key points of incremental policies. The Central Political Bureau meeting on September 26 pointed out the need to help enterprises overcome difficulties, further standardize enterprise-related law enforcement and regulatory actions, and further optimize a first-class market-oriented, rule-of-law, and international business environment.

Li Qiang emphasized at the above-mentioned symposium that the key to stabilizing the economy is to stabilize enterprises. It is necessary to effectively carry out enterprise assistance and relief work, guide localities to make good use of various pro-business policies, resolutely address issues such as arbitrary fines, inspections, and seizures, continuously optimize the business environment, and stimulate enterprise vitality.To regulate law enforcement and regulatory actions involving enterprises, further standardize the administrative law enforcement actions of law enforcement units, adopt more inclusive, prudent regulation, and flexible enforcement methods, and avoid illegal cross-regional enforcement and profit-driven enforcement. There should be no arbitrary fines, inspections, or seizures. Timely reminders should be given to places with abnormal growth in confiscated income, and supervision should be conducted when necessary. Accelerate the legislative process for promoting the private economy to create a favorable environment for the development of the non-public sector.

Zheng Bei stated at the press conference that further regulation of law enforcement and regulatory actions involving enterprises is needed. Efforts will be made to accelerate the improvement of administrative discretion benchmarks, with administrative law enforcement adopting more inclusive, prudent regulation, and flexible enforcement methods to minimize the impact on the normal production and business activities of operators. The regulation of cross-regional administrative law enforcement actions will be standardized, and a system for assisting in cross-regional administrative law enforcement will be established to prevent selective and profit-driven enforcement. Strengthen the supervision of administrative law enforcement, and resolutely correct and seriously hold accountable actions of arbitrary fees, fines, and apportionments.

Zheng Shanjie indicated that by the end of 2024, some policies such as tax and fee support, unemployment insurance assistance for enterprise stability, and skill improvement subsidies will be expiring. It is necessary to clarify the follow-up arrangements for these phased policies in advance. "Relevant departments will, based on research and evaluation, expedite the clarification of whether the policies will continue to be implemented. If they are to continue, the duration of the continuation will be clarified as soon as possible. Policies that are conducive to the production, operation, and healthy development of enterprises will not be stopped or reduced."

The next step will be to closely monitor changes in the situation, assess the effectiveness of policy implementation in real-time, study new incremental policies in a timely manner, and prepare for policy research and reserve. It is essential to coordinate the policy and work connections for this year and next year, and to solidly promote the stable upward structure and the continuous improvement of the development trend.

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