By hannover-web.com Since September 24, a series of five key news conferences has been held over the course of a month, featuring representatives from ten government ministries and departments. The main focus has been on a comprehensive set of incremental policies. Why was this package introduced at this particular moment? What is its significance? What are its characteristics? What issues in China’s economic operations does it aim to address? And how might it positively influence macroeconomic regulation?
On September 24, the State Council Information Office hosted a press conference, during which the People’s Bank of China and two other departments unveiled policies aimed at boosting the capital markets.
Then, on October 8, the National Development and Reform Commission outlined five areas of incremental policies, emphasizing enhanced counter-cyclical macroeconomic adjustments, expanding domestic effective demand, increasing support for enterprises, stabilizing the real estate market, and invigorating the capital markets.
Following that, on October 12, the Ministry of Finance presented fiscal policies for counter-cyclical adjustments. These include strengthened support for local government debt risk mitigation, the issuance of special treasury bonds to bolster core capital in major state-owned commercial banks, allowing special bonds for land reserves, and intensifying aid for key demographics.
On October 14, the State Administration for Market Regulation and three other departments discussed the policies for assisting businesses, including the public solicitation of opinions on the draft of the Private Economy Promotion Law, optimizing policies for renewed loans without repayment, and targeted support for various business entities.
Finally, on October 17, the Ministry of Housing and Urban-Rural Development and other agencies announced policies to stabilize the real estate market. These measures included four cancellations and four reductions, increasing the credit scale for “white list” projects to 4 trillion yuan, and launching 1 million new urban village renovations and dilapidated housing upgrades.
Dong Yu, Executive Vice President of the Institute of China Development Planning at Tsinghua University, described this rollout of incremental policies as a milestone in the history of China’s macroeconomic regulation. He noted that such breadth, depth, and intensity in policy measures is quite rare historically.
The five press conferences center around the new directives from the Central Committee Political Bureau meeting held on September 26, which call for the effective implementation of existing policies while introducing new measures to enhance their relevance and effectiveness, all aimed at achieving the annual economic and social development goals.
Dong Yu pointed out that the decision by the Central Committee to act decisively during this time of economic fluctuation was unusual and clearly signals a mobilization of efforts to address current challenges.
As of September, there were evident changes and issues in the Chinese economy that necessitated this proactive policy decision. Wu Sa, Deputy Director of the Economic Research Institute at the National Development and Reform Commission, observed that while the economy maintained a recovering trend in the first half of the year, new challenges arose after mid-year. A decline in external demand has negatively impacted trade, internal demand has fluctuated, and there are ongoing pressures on investment, particularly private sector investment, alongside underwhelming consumption growth and low inflation.
Amidst weakened market confidence and growing downward pressure on the economy, a strengthening of macroeconomic regulations and the introduction of new stimulative measures are essential.
Dong Yu explained that incremental policies aim to “add” to economic efforts, grounded in a comprehensive assessment of the economic landscape. The Central Committee had already signaled the need for such policies as early as late July, indicating foresight in addressing potential economic fluctuations.
Wu Sa added that policy development is a continuous process, involving the implementation of immediate measures while simultaneously preparing further strategies.
The first batch of incremental policies, announced on September 24, focuses on supporting high-quality economic development through financial measures, including lowering reserve requirements and interest rates for existing housing loans, among other initiatives.
Dong emphasized that the financial policies are crucial for macroeconomic regulation and counter-cyclical adjustments, serving as a precursor to restoring market confidence.
Addressing core issues is vital for reversing negative expectations and rebuilding confidence. The broader set of incremental policies is inherently problem-oriented and goal-oriented. It aims to address specific economic challenges such as stock market volatility, downward economic pressures, and insufficient domestic demand, while also providing much-needed support to struggling enterprises.
A key takeaway from Dong Yu’s insights is that addressing issues squarely will help rebuild confidence in all sectors.
In essence, the incremental policy suite consists of a coordinated approach targeting multiple areas: stabilizing the real estate market, supporting businesses, and enhancing macroeconomic adjustments—all revolving around boosting domestic effective demand, which remains a critical barrier to economic growth.
Dong noted that the primary issue affecting domestic economic operations is the insufficiency of effective demand, which manifests particularly in consumption and investment—the focal points of the new policies.
Enhancing consumption leads to a thriving market and active enterprises, thereby increasing household incomes. The National Development and Reform Commission’s press briefing emphasized a strong focus on expanding domestic demand through consumer-oriented measures, including support for low- to middle-income groups and enhancing service consumption.
Dong further explained that “two heavies” relate to major national strategic implementations and essential area safety capability enhancements, aiming to stimulate investments through both substantial equipment upgrades and consumer goods replacements.
Wu Sa stated that these strategies not only directly stimulate current investment and consumption but also strengthen the economy’s foundation for long-term development.
The incremental policies feature a blend of immediate and long-term strategies, emphasizing a comprehensive and integrated approach. For instance, the business assistance policies comprise coordinated actions from multiple departments to foster a competitive market environment.
Dong clarified that each set of measures is a combination of policies from various departments rather than isolated actions.
Wu Sa pointed out that a crucial aspect of these policy combinations is maintaining consistency in macroeconomic policy direction, ensuring that both economic and non-economic policies align to support stable and rapid economic growth.
Businesses are the backbone of the economy, and ensuring their vitality is critical for economic momentum. Among the various supportive measures, the renewed loan policy—allowing loans without repayment—has garnered significant interest from enterprises. The National Financial Regulatory Bureau announced that this policy will now extend its benefits to small and medium-sized enterprises.
Wu Sa emphasized the importance of supporting medium-sized firms, which often drive expansion. By easing financial constraints on these businesses, they can more effectively scale and improve their competitiveness.
The incremental policies not only inject financial resources into the stock and real estate markets and support small-and-medium enterprises but also work to alleviate burdens on businesses and local governments. The Ministry of Finance’s announcement regarding limits on local debt swaps is expected to release more resources for economic development and bolster market confidence.
Yang Zhiyong, Director of the Center for Fiscal and Taxation Research at the Chinese Academy of Social Sciences, commented on the potential of new funding to rejuvenate the economy and address various issues through a revitalized financial cycle.
These comprehensive and significant incremental policies must effectively navigate short-term challenges while positioning themselves for long-term economic growth. Their successful implementation is essential for fulfilling the annual targets set for economic and social development.
Wu Sa expressed confidence in the approach, citing a deeper understanding of economic regulation, favorable material bases for growth, and an environment ready for impactful policies.
Ultimately, the effectiveness of these incremental policies hinges on execution. The central government aims to realize more tangible results from these policies by the end of the year, laying a strong foundation for a successful conclusion to the 14th Five-Year Plan and a promising start to the 15th. With time running short and heavy tasks ahead, there is an urgent need to streamline policy implementation, eliminating obstacles to maximize the effectiveness of these strategies.
