The Central Political Bureau sets the tone for economic work in the second half of the year: transmitting three major signals! Work | Conference | Economy

The Political Bureau of the Central Committee of the Communist Party of China held a meeting on July 24th to analyze and study the current economic situation and deploy economic work for the second half of the year. The context of how the Chinese economy will proceed in the second half is basically clear.

Long term positive fundamentals remain unchanged

In the first half of this year, China's gross domestic product grew by 5.5% year-on-year, significantly faster than the economic growth rate of 3% for the whole of last year and 4.5% for the first quarter.

Based on the analysis of the situation in the first half of the year, while setting the tone for "sustained recovery of the national economy and overall improvement," the meeting also did not shy away from new difficulties and challenges such as "insufficient domestic demand, operational difficulties for some enterprises, high risks and hidden dangers in key areas, and complex and severe external environment." It also reminded us that "economic recovery is a process of wave like development and tortuous progress.".

Swiss Re Group's Chief Economist, An Renli, told China News Agency that there were fluctuations in China's monthly economic data in the first half of the year because the recovery process of various economies from the impact of the epidemic is "non-linear", and there are differences in speed and pace at different time points. However, overall in the second quarter, whether compared vertically to the previous quarter or horizontally to other economies, China's economic growth momentum remains strong.

Looking ahead to the future, the meeting emphasized that the Chinese economy has tremendous development resilience and potential, and the long-term positive fundamentals have not changed. For a period of time, multiple international organizations and institutions have raised their expectations for China's economic growth for the whole year, reflecting the optimism of all parties regarding China's development prospects.

"Rather than being optimistic, it is more realistic to say that this expectation is very realistic," An Renli said. Although there is still room for domestic demand to recover and the slowdown in global growth has also had a certain impact on China's exports, China's domestic market is strong enough to maintain a certain degree of independence and be immune to external shocks.

Increase macroeconomic policy regulation efforts

For the economic work in the second half of the year, the meeting reiterated the overall tone of "pursuing progress while maintaining stability" and called for "increasing macroeconomic policy regulation, focusing on expanding domestic demand, boosting confidence, and preventing risks", demonstrating rationality and pragmatism.

Pang Ming, Chief Economist and Research Director of JLL Greater China, noted that the meeting also proposed statements such as "making good use of policy space, finding the right direction for development, and solidly promoting high-quality economic development" and "implementing precise and effective macroeconomic regulation, strengthening countercyclical regulation and policy reserves". From this perspective, increasing macroeconomic policy regulation in the second half of the year will be based on fully estimating the uncertainty and challenges that economic growth may face in the third and fourth quarters, further enhancing the synergy, combination, targeting, and effectiveness of macroeconomic policies.

In terms of policy direction, actively expanding domestic demand remains a key focus. Although the contribution rate of China's final consumer spending to economic growth in the first half of the year was significantly higher than last year, the low rise in the consumer price index and the pressure on private investment growth all reflect that demand is still weak.

The "2023 Second Quarter CF40 Macro Policy Report" released by the China Finance 40 Forum on the 24th pointed out that the most prominent contradiction in China's macroeconomy is the insufficient total demand. Fiscal and monetary policies are both powerful macro policies to regulate total demand, and using both policy tools can overcome this situation.

In addition, the meeting also made detailed arrangements such as "expanding consumption by increasing resident income", "accelerating the issuance and use of local government special bonds", and "formulating and introducing policy measures to promote private investment", which are also believed to help unleash consumer vitality and stimulate investment enthusiasm.

Stable micro subject expectations

In addition to deploying policies at the macro level, this meeting also entered into a micro perspective and repeatedly mentioned "enterprises". The meeting emphasized the need to continuously deepen reform and opening up, adhere to the "two unwavering principles", effectively improve the core competitiveness of state-owned enterprises, and optimize the development environment for private enterprises.

We must resolutely crack down on arbitrary fees, fines, and assessments, and solve the problem of government arrears of corporate accounts. We must establish and improve a regular communication and exchange mechanism with enterprises, encourage them to dare to venture, invest, and take risks, and actively create a market. These long-term core concerns of enterprises have also been clearly addressed at the meeting.

"As a key market entity, enterprises are crucial for achieving the expected development goals in the second half of the year." Su Jian, director of the National Economic Research Center at Peking University, pointed out to China News Service that only by stabilizing enterprise expectations can investment demand expand and drive sustained and stable economic growth in China.

The recent release of the "Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Development and Growth of the Private Economy" and related supporting policies by the Chinese government is seen as a heavyweight measure for enterprises to stabilize expectations and strengthen confidence.

Li Zhaoqian, President of the China Association for the Study of Private Economy and former Vice Chairman of the All China Federation of Industry and Commerce, stated that China has issued a strong signal that promoting the development and growth of private economy is not a temporary measure, but a long-term strategy that will neither change nor change. A series of targeted measures will greatly stabilize market expectations, expand policy implementation coverage, and enhance the sense of gain for enterprises.