Don't Call It Stimulus: "Fine-Tuning" Coming in 2H

Various ministries have come out singing a similar tune in recent days. The watchwords are stability and fine tuning.
iFeng: 多部委释放下半年经济政策明确信号:微调预调开始部署
Experts pointed out that China's macroeconomic policy fine-tuning and pre-adjustment has begun to be deployed, and the focus of policy promotion in the second half of the year has begun to surface. Under the overall tone of steady progress, monetary policy, fiscal policy, and industrial policies will be comprehensively exerted. Stabilizing employment, stabilizing finance, stabilizing foreign trade, stabilizing foreign investment, stabilizing investment, and stabilizing expectations will advance in multiple ways.

The People's Bank of China held a video conference for the second half of 2018 on August 1 to study and deploy key tasks for the second half of the year. The meeting released a clear signal: the second half of the year will implement a prudent monetary policy, supply the good money to the general gate, strengthen the pre-adjustment and fine-tuning, and maintain a reasonable and sufficient liquidity. In addition, actively and steadily prevent and defuse financial risks, better combine the prevention and mitigation of financial risks and the service of the real economy; continue to improve the financial services of small and micro enterprises; further expand financial openness, etc. are also included in the key work in the second half of the year.

"To give full play to the role of the financial function, and resolutely support the three major battles." Liu Kun, Minister of Finance, wrote in the article "Seeking Truth". Among them, in the prevention and resolution of major risks, we must strictly control the local government debt risk within the statutory limits and focus on preventing and controlling local government implicit debt risks.

"We must strengthen the 'bottom line thinking' and take concrete measures to fully cope with the uncertainties facing China's economic development." The National Development and Reform Commission's National Development and Reform System video conference held on August 1st proposed to take hard measures and speed up Break through the bottlenecks of reform and the obstacles that constrain innovation and development. We must make great efforts to promote breakthroughs in key areas and key links. We will work hard to deepen economic system reform and deepen supply-side structural reforms.

The 2018 mid-year party group expansion meeting held by the Ministry of Commerce from August 1st to 2nd proposes that every effort should be made to stabilize foreign trade and stabilize foreign investment and ensure the completion of the main objectives of the year-round business work. The meeting also made arrangements for deepening the reform and innovation of the Pilot Free Trade Zone, exploring the construction of a free trade port, and properly handling Sino-US economic and trade frictions.

The State Administration of Foreign Exchange held a video conference on foreign exchange management in the second half of 2018 on August 2, and continued to deepen the reform of foreign exchange management and expand the opening of the foreign exchange market; comprehensively implement policies and lay a good role in preventing and resolving major risks in the foreign exchange field.

"The fine-tuning pre-adjustment of China's macro-policy in the second half of the year has begun to be deployed, and specific arrangements will be given in many aspects such as fiscal policy, monetary policy, and industrial policy." Zhu Jianfang, chief economist of CITIC Securities, pointed out that in macroeconomic policy Under the “fine-tuning and pre-adjustment”, there are several aspects that may bring significant changes: First, the current growth rate of full -scale infrastructure investment is only about 3%, and the growth rate of infrastructure investment in the future is expected to stabilize or even rise, which is negative for fixed asset investment. The impact margin is weakened. Second, with the support of central bank policies, credit growth is expected to rebound, effectively supplementing the decline in off-balance sheet financing, supporting the bottoming out of credit expansion; third, gradually allowing mining, manufacturing and other cyclical industries to proceed. Capital expenditure expansion, manufacturing investment growth is expected to remain above 6%, supporting the growth of fixed asset investment.

The Politburo meeting held recently held that we must adhere to the general tone of steady progress, maintain economic operations in a reasonable range, strengthen overall coordination, form policy synergies, and implement precise and meticulous work: first, to maintain stable and healthy economic development; The short-board is regarded as the key task of deepening the structural reform of the supply side; the third is to better combine the prevention and mitigation of financial risks and the service of the real economy; the fourth is to promote reform and opening up; the fifth is to solidly solve the problem of the real estate market; Good people's livelihood security and social stability work.

The Politburo meeting also clearly stated that it must adhere to the implementation of a proactive fiscal policy and a prudent monetary policy to improve the forward-looking, flexible and effective policies.

Tang Jianwei, chief macro analyst of the Bank of Communications Financial Research Center, pointed out that the six "stable" words reflect the focus of future macroeconomic policies. At the macro-policy level, the focus of future fiscal policy is structural adjustment, while the focus of monetary policy is total adjustment. In the second half of the year, more emphasis will be placed on the synergy between fiscal and monetary policies. In addition, the real estate market regulation policy is difficult, and the long-term mechanism will be accelerated.

Yang Zhiyong, a researcher at the Institute of Finance and Economics of the Chinese Academy of Social Sciences, told the reporter of the Economic Information Daily that at present, it is necessary to closely combine the new economic situation judgment of “stable and changeable” and adopt more targeted macroeconomic policies. In his view, fiscal policy should play a more important role in the steady growth of the economy, in addition to the regular expenditure-stricken practices, but also to improve forward-looking, flexibility and effectiveness. “This requires a more precise judgment on the market and a more professional understanding of the applicability of various policy instruments.” At the same time, “positive fiscal policy and sound monetary policy need to be more closely coordinated. Liquidity is reasonably abundant. Is an important external environment for the successful implementation of a proactive fiscal policy."

Wang Zecai, a researcher at the China Academy of Fiscal Science, told the Economic Information Daily that the next step is to make fiscal policies more forward-looking, flexible, and effective, especially focusing on expanding domestic demand and structural adjustment. Specifically, the policy of compacting tax reduction and fee reduction, promoting technological innovation, optimizing and upgrading the manufacturing industry, tapping the potential of “double creation” and transforming old and new kinetic energy will become the main force for the next policy.

Wu Qi, a senior researcher at Pangu Think Tank, said that in the second half of the year, “three to one, one drop and one supplement” will continue to be promoted, but it should be based on the overall tone of the work, and focus on maintaining the overall healthy and stable economic development. Make a substantial progress in going one by one.

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