Article/Jia Kang, Director of the Institute of Financial Science, Ministry of Finance
The government is following the concept that the market plays a decisive role in allocation. As long as it is not necessary, the government will not do much to stimulate, but rely on the market itself to survive the fittest, squeeze out backward production capacity, and build an upgraded version of China's economy. If the government acts, what will the government do? From observation, I think that at this stage, the government should still focus on investment.
China's economy still depends on government investment. Before the data of the first quarter came out, there were some rather pessimistic emotions and views in the market. The decision-making department also acknowledged that there is obvious downward pressure on our economic growth. Now we can take it easy. After the data of the first quarter came out, we saw 7.4%.
There is an annual growth target for annual regulation. In fact, it is more accurate to say that the expected value of annual economic growth given by the management department is about 7.5%. 7.5% has lasted for two years. This year, it will continue to be "7.5%", but the word "about" will be added, which clearly indicates that the government's understanding of the internal logic of the annual leading indicators will be upgraded in the process of market development.
How to escort the second high growth stage
"7.5% or so", according to the Chinese expression, is "one left and one right, one low and one high", naturally forming a range, which implies that Premier Li Keqiang has repeatedly mentioned that the regulation should have a range concept from last year to this year. Down the "left" side, we mainly look at two very important indicators. One is the traditional indicator GDP, but the key is to look at the other most substantive indicator associated with it: employment level. In terms of upper limit, price is an indicator closely related to the acceptability of economic operation, but now the main pressure is at the lower limit.
Many people say that after the potential growth rate of China's economy has reached a lower level, it can be adjusted in the operating range of 7% to 8%. This operating range is more suitable for a new round of potential growth rate reduction that is inevitable after China's rapid development for more than 30 years. Now, through our own efforts, we should hedge various downward factors with upward factors to maintain a relatively good stage of secondary growth.
I don't think there is much problem for GDP growth to reach about 7.5% this year. The decision-making management department hopes to make this year's actual operating growth rate better through micro stimulation. In fact, this micro stimulation method has been shown. When the policy framework remains unchanged, the regulatory authorities can make a dynamic grasp of discretion. Our current micro stimulus and weak stimulus are under the framework of discretion and belong to the control of the middle strength of normal regulation. The policy framework of regulation still continues the combination of positive fiscal policy and prudent monetary policy in the past.
The representative indicator of proactive fiscal policy is the deficit of 150 billion more than last year, totaling 1350 billion, which is a representative indicator of proactive expansion. Under the current system, there has already been a deficit remedy, which must rely on debt. By borrowing money, there will be no inflationary pressure due to fiscal reasons.
The deficit level of 1350 billion reflected by the proactive fiscal policy is a new historical record in China in absolute terms, but it continues to be about the same as the annual GDP of 2.1% in relative terms, which can be called proactive and prudent. While monetary policy is described as "prudent", it does not rule out making some necessary adjustments in monetary policy under balance.
As for the micro stimulus under the big framework, before the first quarter data came out and the market confidence was impacted, the National Development and Reform Commission did not give information in a high profile or low profile, approved more than 400 billion yuan of investment in China's high-speed railway projects, and then appropriately adjusted to more than 800 billion yuan, which can be called one of the micro stimulus. In the whole year's fixed asset investment, the increase of the government's high-speed rail investment by more than 100 billion yuan is not a big move, but the signal significance is obvious.
Let's take a look at monetary policy. In terms of RRR reduction, there have been several operations in accordance with the targeted easing. At the beginning, it was emphasized to face "agriculture, rural areas and farmers", and later it was emphasized to face small and micro enterprises.
Our deposit reserve ratio is now at a relatively high overall level, and there is still much room for monetary policy adjustment options to further promote monetary easing in the economic boom. At least the current investment and monetary trends can be called weak stimulus, micro stimulus, and its signal significance is very obvious.
Relatively speaking, in terms of fiscal policy, it only emphasizes to further promote some budget management reforms established annually, and promote the tax system reform represented by replacing business tax with value-added tax. As the highlight of the new round of reform, the supporting reform of finance and taxation has formed a plan and officially kicked off. Of course, this should form a reasonable interaction relationship with future regulation.
Under such circumstances, it is necessary to make a rough prediction. Under the micro stimulus, we have seen that some leading indicators are relatively effective, such as PMI, which has stabilized and improved for several consecutive months. Together, we should also look at other so-called leading indicators. For example, when Premier Li Keqiang talked with foreign friends, he was particularly interested in three indicators. One is the change of power generation, the second is the change of freight, and the third is the change of loan range. These three data are all positive in recent months.
In addition, we have successively seen the industrial added value announced monthly, and the financial indicators of state-owned enterprises gradually disclosed in the first half of the year are not particularly problematic. If the GDP in the second quarter stands at 7.4% and the level in the first half of the year continues to rise, these weak and micro stimulations will show up after a substantial period. The situation in the second half of the year is likely to continue the track of "low in the first half and high in the second half of the year". If it reaches 7.6% in the second half of the year, it should reach 7.5% in the whole year, which is a high probability event. Generally speaking, the second half of the year contributed a little more to economic growth than the first half.
Build a modern national governance system to hedge economic downward pressure
At present, it seems that the government is complying with the concept that the market plays a decisive role in allocation. As long as it is not necessary, the government will not do much to stimulate, but rely on the market itself to survive the fittest, squeeze out backward production capacity, and build an upgraded version of China's economy. If the government acts, what will the government do? From observation, I think that at this stage, the government should still focus on investment.
We have a lot of work to do in the construction of public transport system and upgrading of infrastructure, which can release steel products , cement, etc. The water conservancy work conference a few years ago clearly pointed out that 4 trillion yuan should be invested in water conservancy construction within ten years. If necessary, investment in some rural water conservancy facilities should be accelerated, and these investments have no side effects. In addition, in the face of the complex international environment, the Maritime Silk Road and the Land Silk Road Economic Belt must be built in the process of peaceful development, which are both in the planning process. During this period, infrastructure investment is inevitable.
The Decision of the Third Plenary Session of the 18th CPC Central Committee gave several key words. The first is modern national governance, which represents the modernization of the national governance system and governance capacity. It is obviously different from the top-down management and regulation framework in the past. It focuses on the arrangement of systems and mechanisms for the operation of the entire social organization, and maximizes the potential and vitality of organization and self-organization, regulation and self-regulation, management and self-management, so as to liberate the productive forces.
The second key word is that the market plays a decisive role. After many difficulties, the market has finally played a decisive role in resource allocation. The third key word is the property rights system. It is necessary to make a major breakthrough in the practice of mixed ownership, which is an important form of realizing the basic economic system of the socialist market economy with Chinese characteristics. In the future, mixed ownership will be the main focus. It can be fully mixed within an independent market subject, and the property rights structure can seek maximum inclusiveness, Achieve maximum win-win and multi win.
After tamping the property right cornerstone of modern national governance, modern market system and modern market system, we can hedge the downward pressure and maintain long-term growth between 7% and 8% as far as possible, so as to ensure the realization of the Chinese Dream on schedule.
(This article was originally published in Shanghai Securities News)
(The author of this article introduces: Director of the Institute of Financial Science, Ministry of Finance, researcher, doctoral supervisor.)
(The "2014 Sina Jinqilin Forum" hosted by Sina Finance is scheduled to be held at JW Marriott Hotel in Beijing on November 22, 2014. The theme of this forum is reform and decision-making. It focuses on the transformation and challenges of China's economy in the deep reform period. Entrance to Registration 2015, the next step of decision-making, waiting for you!)
