The "Four Arrows" of Policy Stabilize the Economy

　　The Political Bureau meeting of the CPC Central Committee, held on September 26, proposed “increasing efforts to launch incremental policies.” Finance Minister Lan Fo'an announced four items at the State Council Information Office press conference focusing on the capital market, local government debt, private economy, and property market. Fiscal incremental policy tools have greatly boosted market sentiment and enhanced people's confidence.

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Incremental policies focus on core issues

　　The incremental policy combination captures the stock market and the property market, the two “barometers” and “wind vanes” that truly reflect the market's market conditions, and provides an objective and convincing measure of the effects of policy implementation.

　　Some of the suggestions that have been widely discussed in the past have not been included in the policy package. This involves more careful considerations. For example, many experts believe that direct payment or large-scale consumer coup issuance can stimulate consumption. However, universal money distribution is usually to cope with the impact of sudden disasters or crises, rather than to deal with cyclical, especially structural, economic difficulties. Spreading money universally is not only burdensome but also lacks sustainability and treats the symptoms rather than the root cause.

　　For another example, many people believe there is no need to worry about inflation and that large-scale infrastructure construction projects should be launched decisively. However, my country's infrastructure construction has tended to be generally saturated, and large-scale infrastructure construction is unsuitable for the current reality. In addition, based on historical lessons, the current heavy debt burden of local governments is mainly due to excessive investment in construction projects that lacked economic benefits in the past when funds were abundant, resulting in excessive debt.

　　In addition, some people suggest that the central government issue treasury bonds to repay local government debts to make it easier for local governments to carry out operations. Regardless of the feasibility of issuing tens of trillions of central government bonds at a time, under the current system, this will undoubtedly benefit local governments that borrow more, which will bring serious reverse stimulus and moral hazard. Risks.

　　Precisely because we are now facing the triple challenges of countercyclical adjustment, economic structural adjustment, and institutional reform, this time we have launched the “four arrows” of policies focusing on core issues.

The “four arrows” of policy cooperate

　　The first arrow shot into the capital market will not only help increase residents' property income and improve society's consumption capacity and level but also promote economic development, especially technological innovation and the development of new productive forces.

　　At the press conference of the Ministry of Finance, it was made clear that special government bond funds will be used to increase the core tier one capital of six large commercial banks, namely Industrial, Agricultural, Commercial Bank of China, China Construction, Communications, and Postal Savings Bank. Owners' equity continues to increase, reaching 15.1 trillion yuan as of the end of June 2024, an increase of 2.9% from the beginning of the year; capital strength is relatively sufficient, with the average core tier 1 capital adequacy ratio being 12.3% as of the end of June 2024.

　　Luo Zhiheng said that increasing coordination between finance and finance should not only play the role of finance in directly stabilizing economic growth but also play the role of finance in supporting finance to serve the real economy better. Replenishing banks' core capital enhances banks' ability to resist risks when interest spreads narrow and their lending capabilities to support household consumption and corporate investment, thereby expanding aggregate demand. In addition, one of the fiscal incremental measures is to increase support and guarantees for key groups such as people in need and student groups, thereby increasing overall consumption capacity.

　　The second arrow is aimed at the current heavy local government debt. Since it has caused many economic problems, market problems, and legal and discipline problems at the grassroots level, the measures and scale of fiscal debt have become the focus of market attention. The Finance Minister stated that the full-year budget target can be achieved this year, and the balance of payments can be achieved by increasing other additional revenue or increasing the fiscal deficit and issuing additional national debt.

　　Different from the successful replacement of high-interest local government debt in the previous period, the biggest feature of this debt swap is to trade time for space and resolve the debt chain. The Ministry of Finance increases the debt limit, replaces implicit debts in the form of government bonds, reduces the debt of local government financing platforms, and reduces potential default risks and regional fiscal and financial risks.

　　The third arrow is aimed at vigorously developing the private economy, creating a good business environment for enterprises, enhancing the confidence of entrepreneurs, and fully releasing market vitality. According to authoritative statistical data, private enterprises have the characteristics of “five, six, seven, eight, nine” in the national economy. The private economy and private enterprises have become truly important forces in creating GDP, carrying out scientific and technological innovation, absorbing social labor employment, and contributing to national tax revenue. If the private economy is active, the national economy will prosper.

　　The fourth arrow is aimed at stabilizing the property market. Make good use of special bonds to purchase existing commercial housing for use as affordable housing in various places. Liao Min said that the direction of subsidy funds for affordable housing projects will also be optimized and adjusted, the scale of new construction will be appropriately reduced, and local governments will be supported to raise more affordable housing sources by digesting existing housing. These two measures can not only digest the existing commercial housing and promote the balance between supply and demand in the real estate market but also optimize the supply of affordable housing to meet the housing needs of low- and middle-income groups.

　　Liao Min said that considering that there is currently a relatively large amount of idle undeveloped land in various places, local governments support to use special bonds to recover eligible idle stock land, and areas in real need can also be used for new land reserves projects, “This policy can not only adjust the supply and demand relationship in the land market, reduce idle land, enhance the ability to regulate land supply, but also help alleviate the liquidity and debt pressure of local governments and real estate companies. ”

　　It may take quite some time for the real estate market to truly emerge from the downturn. Land finance has long been the main source of funding for local governments in my country. This fundamental change in the revenue structure is inevitable. To solve the problem, the development of the real estate market needs to be integrated into the overall layout of new urbanization. Industrial workers are the main force of the working class, the backbone of creating social wealth, and the backbone of implementing the innovation-driven development strategy and accelerating the construction of a strong manufacturing country.

　　The majority of China's industrial workers today are migrant workers. Solving the housing and social welfare benefits in the places of employment for contemporary industrial workers and their families, who are mainly hundreds of millions of migrant workers, is not only the top priority for the effective implementation of the new urbanization strategy, but also the fundamental way to achieve the healthy development of the real estate market. Containing and reversing the decline of the real estate market will lay the foundation for the medium and long-term prosperity and development of the Chinese economy in the next 5 to 10 years.