<img src='https://news.cgtn.com/news/2024-10-11/Building-confidence-in-China-s-incremental-policies-1xADWAr5yQo/img/7f5c5d5f2cb54780b2bce5de1f6739c2/7f5c5d5f2cb54780b2bce5de1f6739c2.png' alt='A sunrise view featuring the Oriental Pearl Tower at the Lujiazui central business district in Shanghai, China, September 26, 2024. /CFP'
Editor’s note: Dong Yu is the executive deputy director at the China Institute for Development Planning at Tsinghua University. The article reflects the author’s opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.
The Chinese economy is now at a critical juncture. There are various interpretations of the recent “comprehensive package of incremental policies”, many of which are superficial and misleading.
It is crucial to clarify these misinterpretations and guide all parties to understand correctly the principles of China’s economic work.
Systematic macro-level policies
First, the “comprehensive package of incremental policies” is a systematic deployment at the macro level.
The National Development and Reform Commission held a press conference on October 8 to interpret the core content of the State Council executive meeting on September 29. A comprehensive plan was presented to all parties after revisions made during the National Day holiday period based on the meeting’s guiding principles.
As a move to implement the directives of the meeting of the Political Bureau of the Communist Party of China Central Committee on September 26, it proposed a comprehensive policy framework to deal with the current economic landscape.
It should not be regarded merely as an introduction to the specific work of an individual department. The combined efforts planned for five key areas are inherently linked.
Counter-cyclical macroeconomic regulation is the general requirement; expanding effective domestic demand is where most efforts are needed; increasing support for enterprises is meant to foster a favorable environment; stabilizing the real estate market is a method for mitigating the greatest risk and boosting the capital market is key to managing expectations.
Some policies first set the direction, to be followed by detailed measures from respective responsible departments.
Therefore, interpreting the press conference on October 8 purely from a technical policy perspective would lead to serious misreading.
Beyond fiscal and monetary policies
Second, macroeconomic regulation is more than just fiscal and monetary policies.
China adopts a “1+2+6” framework for its macroeconomic governance: with national development planning as the strategic orientation, fiscal and monetary policies as the main tools, and policies on employment, industry, investment, consumption, environmental protection and regional development being closely coordinated.
Following the introduction of policies for the financial sector, it is important to expedite the introduction of policies for other fields.
When observing macroeconomic regulation, the market always pays attention to analysis reports from financial institutions, which often have their own voice. Since most analysts have never directly engaged in macroeconomic regulation, they tend to provide views limited to the financial sector’s perspective.
However, macro-level issues are often far more complicated, requiring greater attention.
<img src='https://news.cgtn.com/news/2024-10-11/Building-confidence-in-China-s-incremental-policies-1xADWAr5yQo/img/e64181e768d043e9ad995a914d83b2a0/e64181e768d043e9ad995a914d83b2a0.jpeg' alt='Stock market trends seen on a smartphone in Hai'an, east China's Jiangsu Province, October 8, 2024. /CFP'
Evaluating policies beyond numbers
Third, we must look beyond the numbers when evaluating policies.
While some policies are quantifiable, others are not. The phrase “x trillion” may sound vivid and impressive, and people are delighted to see and hope for ever-larger figures.
However, such policies have a specific range of applications, and it is unrealistic for every press conference to focus solely on these numbers, as economic policy is not just a game of numbers.
Some people know exactly what the public likes to hear and deliberately use figures to inflate expectations. They then claim that outcomes “fell short of expectations” at every turn, which is actually a trick often used by short-sellers to manipulate markets through emotional swings and profit from it.
It is imperative to distinguish such moves.
Of course, policymakers must also take into account market sentiment and adopt the viewpoint of “policy recipients” as much as they can when determining the intensity, timing and steps of policy implementation.
We believe that incremental policies will certainly include new investments, and the “x trillion” will materialize, though some measures may still need to go through legal procedures. We should all be patient and be careful of misleading narratives.
Strategy behind policies
Fourth, attention should be paid to key strategic moves in policies.
Some policies can directly leverage huge financial resources, while others, though not involving direct investment, continue to prove immensely valuable.
The press conference did not dodge but directly addressed issues like “illegitimate cross-regional law enforcement” and “profit-driven law enforcement”, which have been prominent concerns among entrepreneurs.
It was also proposed that “inspections will be carried out when necessary”, clearly demonstrating the central government’s stance on these issues.
Going forward, we can expect the accelerated introduction of the private economy promotion law, which is set to become a landmark event with economic significance no less than that of the “x trillion” figure.
Another example is new urbanization, a key issue that the government pays great attention to but market institutions often overlook.
While it is hard to replicate the massive growth stimulus of the past in the current stage of urbanization, the settlement of new residents in many urban areas will, in any case, provide robust support to the real estate market, investment and consumption.
This is an imperative strategic move in the economic field, yet it has received limited professional analysis.
More upcoming policies
Fifth, more incremental policies are on the way.
The press conference for the financial sector on September 24 marked the beginning of this round of regulation; the Politburo meeting on September 26 issued a decree of general mobilization; the State Council executive meeting on September 29 laid out a systematic plan and the press conference by the National Development and Reform Commission on October 8 introduced a comprehensive package of policies.
When examining these meetings, we must view them as interconnected rather than isolated events. It is safe to say that this is just the beginning, a signal from the central government regarding its economic work.
Subsequently, we will undoubtedly see various government departments introduce policies within their respective areas of responsibility that will contribute to economic recovery and improvement.
Likewise, local governments will quickly follow suit, translating the central government’s decisions and deployments into conscious actions at the local level, with their foremost goals still centered on advancing sustained economic recovery and improvement.
Meanwhile, local concerns, such as risks associated with local debts, will surely be addressed through strong measures over time. Therefore, we can expect robust and continued policy support in the future.
Based on the economic performance in the fourth quarter, the Central Economic Work Conference in December will lay out plans for next year’s economic work, which is also worth looking forward to.
It is particularly worth noting that next year is the year for drafting the 15th Five-Year Plan.
A series of major projects, initiatives, and policies will be launched in line with China’s development needs for the medium and long term.
The close integration of short-term with medium- and long-term planning is a defining feature of the Chinese economy, and the incremental policies stemming from the 15th Five-Year Plan will provide crucial support for the steady and positive progress of the Chinese economy in the future.
When evaluating the economic work, it is essential to consider these key timelines to analyze and understand the trends.
(A Chinese version of this article was first published by “Sanlihe” Studio, China News Service.)
