How to strengthen the policy of stabilizing growth in the next stage? The People's Bank of China, Ministry of Finance, etc. speak out
In the face of difficulties and challenges such as insufficient global economic recovery momentum and the interweaving of domestic cyclical structural contradictions, various relevant parties have systematically put in a set of policy "combination punches" in recent times, effectively stabilizing growth, boosting confidence, and preventing risks, and continuously consolidating the momentum of China's economic recovery.
The latest data released by the National Bureau of Statistics shows that the economic data in August saw a comprehensive improvement, better than market expectations. The growth rate of industry and consumption in August has recovered, the decline in imports and exports has narrowed, consumer prices have turned from decline to increase, corporate profits have continued to narrow, the national urban survey unemployment rate has slightly declined, the manufacturing PMI has continued to rise, and positive factors in economic operation are accumulating and highlights are increasing. Social expectations have improved.
Is this seemingly stable economy sustainable? What is the space for the next stage of stabilizing growth policies to be strengthened? How to coordinate fiscal and monetary policies? On September 20th, at the regular policy briefing of the State Council, relevant officials from the Central Bank, Ministry of Finance, National Development and Reform Commission, and Ministry of Industry and Information Technology responded to the current hot topics of high concern in the market, such as deflation, exchange rate, local bonds, and real estate market.
Cong Liang, Deputy Director of the National Development and Reform Commission, stated that after three years of the epidemic, the operation of China's economy will still be affected by various internal and external factors, and economic recovery will inevitably be a process of wave like development and tortuous progress. With the combined efforts of stock policies and incremental policies, policy effects continue to accumulate and positive factors continue to increase. We have every reason to believe that China's economy will rebound and improve in the long term.
There is still ample room for monetary policy
After the reserve requirement reduction in March, at a critical moment in the economic recovery relay, the central bank announced another 0.25 percentage point reduction on September 14th, while maintaining the continuation of medium-term lending facilities and excess lending, guiding financial institutions to stabilize credit supply. In mid September, the open market operation provided timely cross season funds, maintaining reasonable and sufficient liquidity in the banking system, and continuously creating a suitable monetary and financial environment.
The initial effectiveness of monetary and credit policies is evident, with loans achieving a year-on-year increase on a high base in August. M2 and social financing scale maintain a rapid growth of about 10%, and the supply of financial resources continues to show effectiveness. At the end of August, inclusive small and micro loans and manufacturing medium and long-term loans increased by 24.4% and 39.5% year-on-year, significantly faster than the growth rate of all loans, and financial services improved quality and efficiency.
"There is still sufficient policy space for monetary policy to respond to unexpected challenges and changes." Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, stated at a press conference that the People's Bank of China will continue to implement a prudent monetary policy accurately and effectively, strengthen countercyclical adjustment and policy reserves, and use high-quality financial services to support high-quality development. Utilize multiple policy tools comprehensively to maintain reasonable and sufficient liquidity; Give full play to the pillar role of state-owned banks and enhance the stability of credit growth. Efforts will be made to implement the "16 Financial Measures" and increase financial support for urban village renovation, construction of dual-use infrastructure for both urban and rural areas, and construction of affordable housing.
Zou Lan introduced that we will continue to implement existing structural tools and further ensure the continuation and extension of maturity tools. Guide the real economy to steadily reduce financing costs and encourage banks to actively adjust interest rates on existing housing loans. Make good use of various regulatory reserve tools to regulate the supply and demand of the foreign exchange market, and resolutely prevent the risk of exchange rate overshoot. Guide financial institutions to actively and prudently support the resolution of local debt risks, and establish a normalized financing platform financial debt monitoring mechanism.
Regarding the issue of exchange rates, Zou Lan stated that the exchange rate of the Chinese yuan against the US dollar is very important, but it is not the entire exchange rate of the Chinese yuan. We should also take a comprehensive view and pay more attention to the changes in the exchange rate of the Chinese yuan against a basket of currencies. In the next stage, the People's Bank of China and the State Administration of Foreign Exchange will aim to maintain the basic stability of the RMB exchange rate at a reasonable and balanced level, based on long-term, current, comprehensive policies, correction of deviations, and stable expectations. They will resolutely correct unilateral and pro cyclical behavior, dispose of behavior that disrupts market order, and resolutely prevent the risk of exchange rate overshoot.
In order to better adapt to the new situation in the real estate market, on August 31st, the People's Bank of China and the State Administration of Financial Regulation explicitly allowed commercial banks to lower the interest rate of eligible first-time housing loans starting from September 25th. Commercial banks can choose to issue new housing loans for replacement, or negotiate to change the interest rate level agreed upon in the contract.
Zou Lan introduced that the reduction of interest rates on existing housing loans has been actively and effectively promoted. Small and medium-sized banks are also gradually referring to state-owned banks to formulate and issue implementation rules. More than 90% of eligible borrowers are expected to fully enjoy the policy dividend as soon as possible, and the interest rates of other borrowers' existing housing loans will also be adjusted by the end of October.
Continuously accelerating the issuance and utilization of special bonds
Since the beginning of this year, China's economy has gradually recovered from the impact of the epidemic in the past few years, and overall it has shown a positive trend of recovery. However, in some areas, the economic development momentum is insufficient, and the fiscal operation is in a tight and balanced state.
Li Xianzhong, Director of the Treasury Department of the Ministry of Finance, stated that in 2023, the central government will arrange transfer payments of 10.06 trillion yuan to local governments. As of the end of August, the central government has issued 9.55 trillion yuan for local transfer payments, and those that meet the conditions have been issued, providing strong financial support for ensuring the smooth operation of local finance.
The Ministry of Finance has established a national financial operation monitoring center, which implements a "T+1" penetration monitoring of the financial operation status in various regions, covering more than 40 monitoring indicators such as budget adjustment, fiscal revenue and expenditure, transfer payments, and treasury balances. It realizes dynamic monitoring of the entire process of fiscal funds from the source of budget arrangement to the end of use, and early detection, reporting, and disposal of emerging problems and risk hazards, firmly consolidating the bottom line of grassroots "three guarantees".
In terms of special bonds, Li Zhong stated that since the beginning of this year, the Ministry of Finance has actively guided local governments to strictly review and control special bond projects, and to do a good job in project reserves and other basic work. At the same time, the allocation of special bond quotas has been optimized, with a focus on economic provinces, especially those with concentrated manufacturing industries, and priority support given to mature and under construction projects.
Data shows that from January to August, a new special bond quota of 3.7 trillion yuan has been issued, and financial departments at all levels continue to accelerate the issuance and use of special bonds. From January to August, various regions issued 2.95 trillion yuan of special bonds for project construction and other purposes, achieving 77.5% of the annual quota for new special bonds, which is 10.8 percentage points faster than the chronological progress. The bond funds have cumulatively supported about 20000 special bond projects, mainly used for key construction areas determined by the Party Central Committee and the State Council, such as municipal construction and industrial park infrastructure, social undertakings, transportation infrastructure, affordable housing projects, agriculture, forestry, and water conservancy. They have promoted the implementation of a large number of projects that benefit people's livelihoods, fill gaps, and strengthen weak areas, effectively leveraging the leverage of government investment.
Accelerate the implementation of the work plan for stabilizing growth in the top ten key industries
Industry is the cornerstone of macroeconomics and the main battlefield for stable growth. In August, the added value of industrial enterprises above designated size in China increased by 4.5% year-on-year, an increase of 0.8 percentage points compared to the previous month. From an industry perspective, from January to August, 27 out of 41 industrial sectors saw a year-on-year increase in added value.
Positive factors for stable industrial growth are constantly accumulating. The ex factory price index of industrial producers has continued to narrow, with a further decrease of 1.4 percentage points in August compared to the previous month. The sales rate of products from industrial enterprises above designated size was 97.4%, which has been restored to a level above 97% for two consecutive months. The decline in corporate profits has further narrowed. With the decrease in upstream raw material prices, the revenue of enterprises is improving, and the cost pressure on enterprises has been alleviated.
Tao Qing, Director of the Operation Monitoring and Coordination Bureau of the Ministry of Industry and Information Technology, introduced that the next step is to promote the effective improvement of the quality and reasonable growth of the industrial economy. Firstly, we will strengthen policy coordination and implementation, accelerate the implementation of the ten key industries' stable growth work plans, and promote the implementation and effectiveness of stable growth policies; The second is to accelerate the recovery and expansion of demand. Strengthen the construction of quality brands, promote supply side innovation, and lead the creation of demand with high-quality supply. Guide enterprises to expand international markets according to local conditions and further tap into export potential; Thirdly, we will accelerate the enhancement of development momentum. Deepen the implementation of intelligent manufacturing engineering and accelerate the transformation and upgrading of traditional industries. The system promotes the development of emerging industries such as 5G, intelligent connected vehicles, and new materials, opens up new fields and tracks, cultivates a batch of new growth engines, and creates new competitive advantages.
