China Still Slowing

People's Daily: 李克强主持召开经济形势专家和企业家座谈会强调 围绕市场主体有效实施宏观政策 推进改革开放 保持经济平稳运行 韩正出席

　At the symposium, Wen Bin, He Jun and other experts and leaders of Datang Group, Wuxi Yimian Textile Group, and Shenzhen Jingfeng Medical Technology Co., Ltd. spoke about stabilizing foreign trade exports, promoting the development of small and medium-sized enterprises, and alleviating the pressure of rising raw material costs. Promote enterprise innovation and other suggestions. 　

　Li Keqiang said that since the beginning of this year, my country's development has encountered multiple challenges such as the spread of epidemics in many places, severe floods, rapid rise in commodity prices, and the once-tight supply of electricity and coal. Under the strong leadership of the Party Central Committee with Comrade Xi Jinping as the core, all parties have implemented the deployment of the Party Central Committee and the State Council, the market players have worked hard, and the overall economy has recovered steadily. This year's main goals can be achieved, and the annual task of employment can be completed ahead of schedule. The current situation at home and abroad is still complex and severe. With new downward pressure on my country's economy, we are facing many challenges in maintaining stable operation on a high base. We must adhere to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, implement the spirit of the Sixth Plenary Session of the 19th Central Committee of the Party, and continue to do so in accordance with the requirements of a new stage of development, implementation of new development concepts, construction of a new development pattern, and promotion of high-quality development. To normalize the epidemic prevention and control, strengthen the "six stability" and "six guarantees", especially the market players in ensuring employment and people's livelihood, strengthen the forward-looking pertinence of macro policies, promote reform and opening up, do a good job in cross-cyclical adjustments, and promote the economy to climb. Hurdles to maintain economic operation within a reasonable range and overall employment stability.

No specifics no the new pressure, but I surmise high prices, supply chains and rising coronavirus cases/lockdowns are responsible. The solutions are the same boilerplate Li has been saying for 10 years.

State Council Heard the Lamentations of the SMEs, Li Keqiang Call for More Cuts to Taxes, Fees

This past week there was a panic among SMEs following passage of social security reform. It was a top story in the finance section several times. I covered it twice.

Chinese SMEs Can Only Survive Through Tax Evasion, Social Security Reform Could Be Killer
Social Security Change Could Cause Layoffs and Shave 1.5pc Off GDP in 2019

The big issue was collection of unpaid social security. Many companies pay the minimum and find ways to evade taxes such as under-reporting payroll (number of employees and wages) to the social security bureau. Their employees are tax-evading co-conspirators. Under new rules, the tax bureau will take over social security collections and merge the books. If the tax bureau has records of higher employee counts and higher wages, it will come after companies and workers for more taxes. Up to 70 percent of SMEs are evading or underpaying social insurance according to reports. If companies are forced to pay those back taxes immediately, many could go bust. Higher collections might also lead to layoffs, slower hiring, no wage increases, and higher social security payments from workers.

The State Council discussed the issue in their September 6 meeting.

iFeng: 个税社保将有大动作：让个人减负、企业总体不增负

Taxes and social security will have big moves. The State Council executive meeting held on September 6th determined the implementation of the newly revised tax law supporting measures to reduce the burden on the masses; at the same time, it was proposed to study and reduce the social security rate appropriately to ensure that the overall burden of the enterprise is not increased.

In other words, personal burden reduction, the overall increase in business, will affect everyone's money bag.

Pay close attention to research and appropriately reduce the social security rate

From January 1st, 2019, various social insurance premiums such as basic old-age insurance premiums, basic medical insurance premiums, unemployment insurance premiums, work-related injury insurance premiums, and maternity insurance premiums will be collected by the tax authorities.

Since the taxation department has mastered the salary data and has a strong ability to collect and manage, many individuals and organizations that have not paid social security in accordance with the actual wages are worried that the social security burden will increase next year. Even some organizations predict that after the reform of the collection and management system, enterprises and individuals will pay a total of nearly 2 trillion yuan.

Under this circumstance, many experts and scholars have suggested further reducing the social security rate to hedge the increase in the social security contribution burden.

To this end, the meeting stressed that the current cumulative balance of pensions in the country is large, and it can be ensured to be paid in full and on time. Before the reform of social security collection agencies is in place, all localities should keep the existing collection policies unchanged, and at the same time, study and reduce the social security fees appropriately. The rate ensures that the overall burden of the business is not increased, in order to stimulate the vitality of the market and guide the society to anticipate.

This undoubtedly set companies' minds at ease.

iFeng: 李克强：要因时而动、不失时机推出更大“减税降费”举措

Li Keqiang pointed out that considering the current accumulated balance of pensions in the country, it can ensure that the social security collection rate will be maintained in full and on time. Before the reform of the social security collection mechanism is in place, all localities should keep the existing collection policy unchanged, and at the same time, study and reduce the social security rate appropriately. Make sure that the overall burden is not increased.

He stressed that under the conditions of a market economy, "tax" is one of the most important levers for regulating the economy. Adjusting the tax burden is closely related to the life of the enterprise and the people, and at the same time has a huge impact on the overall economic and social development.

"In the current complicated economic situation at home and abroad, we must take the time to move and take the opportunity to launch a larger 'tax reduction and fee reduction' initiative to send a positive signal to the society. This is an important measure to reduce the burden on enterprises and improve China's economic competitiveness. It is also the meaning of deepening the reform of the 'distribution suit' and transforming the government's functions." Li Keqiang said, "In the future, we can only further strictly control the government's 'three public' funds, and reduce taxes and profits for the masses and enterprises. I have said many times that the government will have to live a tight life to let the people live a good life.

Li has been very supportive of SMEs for years, but the burden on them (financing costs in particular) only increased.

Reuters: China vows tax reforms won't boost corporate costs

Counting safety net contributions, the World Bank reckons China’s effective corporate tax burden rate was 67.3 percent last year, much higher than in the United States.

China announced in July that the powerful tax bureau will take over social security collection from the social security bureau in 2019, a move seen enforcing greater compliance by companies as the government frets over an aging population and rising pension deficit.

However, the change has sparked concerns that many companies - especially small- and medium-sized enterprises - subject to stricter tax scrutiny will struggle to stay afloat.

Only 27 percent of Chinese companies comply with the social security requirement and pay the correct amount for their employees, according to a private report published by 51shebao in August.

China's SMEs Cannot Obtain Low Cost Credit, Can Li Keqiang Finally Save Them?

Improving financing for SMEs was a reform goal during Xi's first term. High financing costs squeeze small- and medium-sized firms. Private finance fills the gap, but this is often black and gray market financing. When combined with speculative bubbles in real estate, steel trading or the asset du jour, the result was a collapse in the local economy. One example from 2014: Handan Residents Afraid to Buy Homes; Market Frozen With Developers on the Brink

Li Keqiang was out front pushing this issue in prior years. He didn't have much success. From 2014: Li Keqiang Losing War on Financing Costs; 70% of SMEs Have Seen Financing Costs Rise in 2015

On effect in terms of policy, lowering interest rates played a role in real accurate. People's Bank of China data show that as of the end of June 2015, the weighted average interest rate of the new loans was 5.97 percent, over the previous year fell 64 basis points, down 101 basis points over the previous year; the central bank on the real economy through loans, bonds, stocks and other Comprehensive assessment of all types of financial instruments and financing costs showed overall financing cost of 6.32 percent, over the previous year fell 68 basis points, down 85 basis points over the previous year.

However, Zhang Chenghui's research shows that although the central bank cut interest rates and RRR several times, 70% of the loan interest rates went up, only about 10% of the loan interest rate declined, and the remaining 20% ​​of the loan use the benchmark interest rate.

"I figure a bit based on the Wind database, since the end of September 2013 to the end of May 2015, average loans from financial institutions dropped from 6.65% to 6.56%, P2P net loans fell 12.75%, Wenzhou's private lending interest rates fell 1.69 percentage points. Figures show non-formal financial institutions outside the system of financial institutions, the central bank lowering quasi reflect much faster than formal financial institutions, formal financial institutions interest rates fell an average of only 0.1 percent." Zhang Chenghui said.

While banks generally believe that easing monetary policy can reduce financing costs, it's not a permanent solution. Minsheng Bank Shenzhen Branch President Wu Xinjun said its SME lending rate fell from 7.8% at the beginning of the current year to 6.8% presently, if there is further easing of monetary policy, SME lending rates could fall further, but based on cost factors, the room to fall is limited.

How bad is it for SMEs in China? From 2014: SMEs Wonder Not How to Live, But How To Die As Borrowing Costs Spike

Credit remains tight for SMEs. One borrower says their interest costs will climb from 6.6% to 8%, enough to cut 1% off their 10% profit margin. Owners describe it as plucking the feathers from the goose as banks raise interest rates and fees in a search for profit.

One SME says the bank told him if he wants to borrow ￥8 million, he needs to first deposit ￥8 million into a savings account. He says in order to borrow ￥1, SMEs have to pay ￥0.16 in costs.

Another SME will borrow ￥150 million at 12%, or ￥18 million in annual interest costs. However, with fees to trust intermediaries, costs rise to ￥33 million annually, or 22%.

Banks aren't making loans with no collateral, so borrowers using credit guarantee firms see their costs rise 2% to 5%. So probably not good that Credit Guarantee Firms Go Down Like Dominoes.

Clearly there's a very good reason to move SME financing into official channels and out of the gray and black markets. There appears to be some success in this area simply for the fact that we're focused on bond market and trust defaults in 2018, not credit guarantee firms and private lending networks as was the case in 2014 and 2015. Back then investors were buying copper for collateral to borrow from banks at low interest and lend to developers at high interest who then ran out of cash before finishing construction. Some of them rehypothecated the copper and that blew up at Qingdao Port.

SMEs aren't benefiting yet though. Once again, the government's reform and credit tightening efforts are choking off their credit channels. Hence the expansion of MLF in June and increasing focus on SMEs.

Times of India: China eyes reserve cuts, other policy measures to aid small firms

China will use targeted cuts in banks’ reserve requirement ratios (RRR) and other policy tools to boost credit support for small firms and keep economic growth steady, state radio on Wednesday quoted a cabinet meeting as saying.

...“We will use targeted RRR cuts and other monetary policy tools to enhance the ability to provide credit for small and micro firms,” state radio quoted the cabinet as saying.

The cabinet pledged measures, such as raising rediscount quotas and cutting relending rates, to channel more loans to small firms and reduce their funding costs, it added.

From September 1 until the end of 2020, interest income from credit up to 5 million yuan ($772,546.78) for eligible small firms and households will be exempt from value-added tax, it said.

iFeng: 国务院常务会：部署缓解小微企业融资难、融资贵

Li Keqiang presides over the executive meeting of the State Council

Li is still fighting the good fight.

Premier Li Keqiang of the State Council presided over the State Council Executive Meeting on June 20 to deploy further mitigation of financing difficulties for small and micro enterprises and continue to promote the cost reduction of the real economy; to speed up the examination and approval of new drugs listed overseas, to implement price cuts for anti-cancer drugs, and to strengthen shortage drugs Supply protection; adoption of the Regulations for the Prevention and Handling of Medical Disputes (Draft).

The meeting identified measures to further ease the financing difficulties of small and micro enterprises financing: First, increase support for small and micro enterprises and "three rural" refinancing, rediscounting the amount of credit, and lowering the interest rate of small and medium-sized loans. The assessment mechanism was perfected, and the year-on-year growth rate of loans for small and micro enterprises with a total credit amount of RMB 10 million or less per single household was higher than that of all loans. The number of households with outstanding loans was higher than the level of the same period of last year.

Since shadow and informal lending is being squeezed, it's not clear how much of this is lending moving on-balance sheet and how much is growth.

Second, from September 1st to the end of 2020 this year, the interest income from loans for eligible small and micro enterprises and individual industrial and commercial households will be exempted from the VAT single line credit limit, which will increase from 1 million yuan to 5 million yuan. The total amount of guarantees supported by the National Financing Guarantee Fund for financing of small and micro enterprises is not less than 80%, of which the amount of guarantees for small and micro enterprise loans and individual industrial and commercial households that support single-family credits of 5 million yuan or less, and small and micro-enterprise owners’ operating loans Not less than 50%.

Third, financial institutions are prohibited from charging commitment fees and fund management fees for loans to small and micro enterprises and reducing the additional financing expenses.

The fourth is to support banks in their efforts to explore the market of small and micro enterprises, and to use such monetary policy tools as directional RRR cut to enhance the ability to provide small and micro credit, and accelerate the landing of signed debt-to-equity conversion projects. Banks that have not established the Financial Inclusion Department are encouraged to establish additional communities and small micro branches.

The fifth is to include small and micro enterprise loans with a credit grant of 5 million yuan and below into the medium-term borrowing facility to facilitate qualified collateral.

Beyond government support, the market is stepping in with increased supply-chain financing.

SCMP: Supply chain finance tipped to become US$2.27tr market for Chinese internet firms by 2020

China’s supply chain finance sector is now being tipped to be worth a whopping 15 trillion yuan (US$2.27 trillion) by 2020, and the mainland’s booming internet-based businesses are lining up to grab their own share of it.

Here's a more in-depth article from JRJ: 供应链金融 链在风控

SMEs still report troubles though. Here three firms discuss their financing difficulties: 三个小微企业的融资样本：利率上浮、资产抵押已成拦路虎

Floating 20%-30% has become the norm

Pan Zicong believes that his company can always “find good fortune,” and is not unrelated to the history of the company’s continued existence and the industry it is engaged in. Pan Zicong is the "second generation of enterprises," and his father has started from scratch and built this company. Now the company has been established for more than 20 years.

“We mainly make electrical appliances for home appliance companies. Some large home appliance companies in Shunde are our customers. The overall development is relatively stable. But even so, the problems of financing difficulties and financing are still there.” Pan Zicon told 21st Century Business Herald reporter, “Bank financing is the most favorable price in all channels, but for small and micro enterprises, it is almost impossible to get the benchmark lending rate. As far as I know, it is generally 20% to 30% above benchmark. This is only superficial cost. If we count some hidden costs, this is not the limit.For example, on-lending is the so-called bridging loan. There will normally be more than ten days between the old and new loans. If you need cash flow, the cost will be very high. The cost of coming to heaven may reach 10%, some even 20% [above benchmark]."

Earlier this year, Pan Zicong's company was fortunate to receive 3.4 million credits through Guangdong ABC's “micro-loans”. "Equivalent to an enterprise's credit card, the biggest advantage is that it can be used to pay back and improve the efficiency of use. In the past if our business had a loan of 3 million, but in the short term it will only use 2 million, and the other 1 million will also have interest. This is small In the case of micro-enterprise, it increases the cost; how much borrowing is needed now will not result in the idleness and waste of funds, said Pan Zicong.

However, compared with Pan's fortunes, more small and micro enterprises still faced no money, especially small and micro enterprises engaged in low-end processing. “I have been driving toy factories in Dongguan for 16 years. I have never borrowed a penny from a bank in Dongguan. First, banks will never lend us; second, even if borrowed, interest will rise significantly, and we will be able to The interest rates borrowed are comparable,” Zhang Yongqiang, general manager of Dongguan Leqiang Plastic Toys Factory, told a 21st Century Business Herald reporter.

Zhang Yongqiang stated that he has been brushing news every day and felt that the state’s support for small and micro enterprises has been increasing year by year. However, these policies seem to be far away from themselves. “The policy is good, but the total amount of small and micro enterprises is too large. So far, I have not benefited my head. Take the loan, for example, I have ran across the bank in the past few years when the business was good, but I did not borrow money from a bank. The terms of the loan are all very harsh and need to be mortgaged, but effective. Collateral is what SMEs lack."

Zhang Yongqiang told the 21st Century Business Herald reporter that his funds were borrowed from friends or upstream and downstream companies. “Our factory in Dongguan, Dongguan, also has more than ten years of time, and credit has always been relatively good, so basically it can be obtained. Many financial institutions feel that small and micro enterprises have high business risks and bad reputation, so they are reluctant to lend us money. Actually, I really want to appeal to you. Our small and micro enterprises are truly trustworthy companies. For example, I am borrowing money from my upstream and downstream friends or making payments. Once I lose my credit, I may not be able to borrow any more money. Therefore, we especially cherish our own reputation. The reasons for borrowing money, deadlines, and interest rates will all be indicated. Once it is due, it may even be paid in advance."

Effective collateral secures small and micro business loans

The problems encountered by Zhang Yongqiang, in fact, are very common among small and micro enterprises in Dongguan. Chen Dong, who works as a furniture manufacturer in Dongguan, talks about the survival status of small and micro enterprises. “Especially in the past two years, it can be said that several heads were blocked. First, the shift in demand from upstream customers caused the lack of orders; secondly, the cost increased year by year, making people breathless. I was impulsive to the factory several times last year. It's off, but it's pulled back by inertia every time you really want to make a decision."

Chen Dong said the cost includes land costs, labor costs and financing costs. “Compared to five years ago, the rent for the venue has risen from 8 yuan/square meter to 15 to 16 yuan/square meter; labor costs have more than doubled. If all kinds of insurance are counted, the actual expenditure of the factory In fact, it is around 5500 yuan, but in the past it was 2200 yuan; credit costs is rather stable, has remained high, about 10 percent." Chen Dong told the 21st Century Business Herald reporter.

Even at 10 points, Chen Dong has few opportunities to get loans. "The amount of money that can be borrowed by credit loans is very limited. One or two hundred thousand yuan is of little significance to our company. If we want to increase the loan, we need collateral."

Real estate still plays a role in financing:

Chen Dong told reporters in the 21st Century Business Herald that he was fortunate in Dongguan in the past few years that he had bought two houses in the early years. Now these two houses have played a key role in the loan. "A house is used to live and a house is used for mortgage. In recent years, in order to make a loan, the house has been repeatedly mortgaged many times. In the past when buying a house, the price was only 45,000/m2, and now it has risen to 20,000+. Appreciation has reached more than 3 million, relying on this house, the factory has spent time and time again financing difficulties."

Mortgage is not without risk. Chen Dong nearly lost the house last year. At the end of last year, Chen Dong received a single business of nearly 200,000 U.S. dollars. Because in the furniture industry in Dongguan, regular customers did not have any deposits to place orders. In order to purchase raw materials, Chen Dong mortgaged his house and loaned nearly 2 million yuan. Cash. However, there were unexpected circumstances. When Chen Dong delivered the goods, the customer suddenly declared bankruptcy, and 200,000 U.S. dollars were suddenly turned into nonsense. “At the time of the New Year approaching, the workers in the factory were still waiting to pay wages for the Chinese New Year. The funds on the account were bleak. If the operation was not careful, not only would the factory be closed, but the mortgaged property in the bank would also be subject to change.”

Fortunately, the Dongguan Municipal Government subsidized a 150,000 insured amount of insurance for the local SMEs. In the end, China Credit Guarantee paid Chen Dong 127,000. Together with the funds recovered from the bankruptcy company after liquidation, the single business was basically absent. loss. Chen Dong was also surprised to redeem the mortgage in the bank's real estate.

JRJ: 解决小微企业融资难还需“几家抬”

Guided by a series of policies, traditional financial institutions are increasing their support for small and micro enterprises. At the same time, however, there are still a large number of small and micro enterprises that are difficult to obtain loans, or the actual annual interest rate for obtaining loans is high, and the financing difficulties and financing problems of small and micro enterprises still exist.

The reason for this is that Dong Xilu, a senior researcher at the Chungyang Finance Research Institute of Renmin University of China, believes that it is mainly because some small and micro enterprises have difficulty in providing qualified pledges and collaterals, and they have a low degree of credit and investment risks. At the same time, the ability of small and micro enterprises to resist risks is generally weak, the life cycle is short, and the bad rate is high. According to the data, the average life expectancy of SMEs in China is about 3 years, and about one-third of the normal operations of small and micro enterprises after three years of establishment, and by the end of March 2018, the NPL ratio of small and micro enterprises was 2.75%. The company is 1.7 percentage points higher.

Therefore, financial institutions are more cautious when lending to small and micro enterprises. At present, the proportion of financing for small and micro enterprises in China from the formal financial institutions and private financing is roughly 40% and 60%. Compared with countries and regions where financial markets are more developed, the proportion of formal financial institutions still has much room for improvement. At the same time, private financing costs are also relatively high. Specifically, in recent years, the interest rates for small and micro enterprises in China's financial institutions averaged about 6%, the Internet lending rate was about 13%, Wenzhou's private lending registration rate was more than 15%, and microfinance companies and other financial institutions had interest rates of 15%. 20%.

Li Keqiang Calls for Tax Cuts 3 Times in 2 Weeks

Maybe year 5 will produce results?

iFeng: 李克强半月三次谈减轻企业税负 这次透露了根本原因

"Why do we need to intensify efforts to small and micro enterprises tax cuts? Why should continue to promote the commercial system reform? These are to encourage entrepreneurship!" In the January 18 State Council executive meeting, Li Keqiang answered why he has been Concerned about tax cuts.

...January 13, Li Keqiang chaired a forum to listen to experts and scholars and business people on the "Government Work Report (Draft)" comments and suggestions. Li Keqiang said that this year to adhere to the government tighten the day to continue to compress general expenses for corporate tax cuts to make room for less this year to reduce fees and other non-tax burden on the market to have personal experience, the State Council to develop check.

Li Keqiang Says Big Tax Cuts Coming

CNBC: Chinese Premier Li Keqiang tells WEF digital is key to China's industrial revolution

Addressing the World Economic Forum (WEF) in Tianjin, also known as the "Summer Davos," Li focused the bulk of his speech on promoting entrepreneurship and highlighting policies catering to the sharing economy.
"We are embracing a new round of industrial revolution," he said. "We need to implement innovation-driven development."

The measures Li touted included pushing ahead with the Internet Plus initiative, a Chinese program aimed at boosting its mobile internet, e-commerce and cloud computing sectors in the international market. China would also ensure that the Internet of Things (ioT), cloud computing and other information technologies were applied to everyday life, Li said.

Chinese media focused on his tax comments.

iFeng: 李克强2016夏季达沃斯演讲全文

At the same time, we will further advance the massive tax cuts for enterprises, promote financial reform, to support the real economy; promote the reform of state-owned enterprises to fitness and health; relax market access for private enterprises, and further development of private enterprises to eliminate all the species barrier.

Li Keqiang Warns of Butterfly Effect

iFeng: 李克强：地区不稳定“蝴蝶效应”冲击金融市场稳定

Li pointed out that in today's highly interdependent world economy, no country can manage alone. A country, a region of unstable and uncertain factors increased, may have a "butterfly effect" on the world economic recovery and financial market stability or impact shock, which requires parties to strengthen coordination and work together to deal with the difficult challenges and maintain peace stability and promoting reform and innovation, insist on open and inclusive, better realization of the world economy is strong, sustainable and balanced growth.

Yuan devaluation? Brexit? EU dissolution? UK breakup? The butterflies are hatching.

Li Keqiang Visits PBoC, Calls for Better Communication on RMB

WSJ: Stimulating: Chinese Premier’s Bank Visit Stirs Talk of Easing

Is China on the verge of a new round of monetary easing? To some, a recent visit by Chinese Premier Li Keqiang to the country’s central bank and a big state-lender seemed to signal so.

Speculation that the central bank will reduce a required reserve level for banks amped up after Mr. Li turned up at the People’s Bank of China and China Construction Bank Corp. on Monday and called for for state financial institutions to support the real economy. He also told central bank officials to “keep reasonable liquidity” in the market and “to create a good financial environment” for economic growth.

U.S. jobless claims are putting the Fed back under pressure: US weekly jobless claims total 259,000 vs 270,000 estimate

Chinese coverage of Li's visit at iFeng: 李克强：央行应改善沟通 对汇率改革表示满意. Regarding the yuan:

"Practice in the past year, the RMB exchange rate reform has proved that our reform in terms of the purpose and results, is the renminbi exchange rate at a reasonable and balanced level basically stable, rather than letting the yuan devalue and boosting exports. More importantly, the reform of the renminbi exchange rate changes rules should be more transparent, which can better communicate with the market."

A week ago: Odds of RRR Cut Decline

Li Keqiang Still Pushing Equity Financing

One bubble later: 李克强：推动股权融资 探索多层次资本市场转板机制

Li came to China Construction Bank to learn more about the bank to support the real economy, the implementation of the camp changed to increase services and public circumstances entrepreneurship and innovation. He said the finance is the lifeblood of the national economy, in the full implementation of the camp changed to increase the pilot process must ensure that the financial sector only reduced without increasing the overall tax burden. Commercial banks should also focus on market demand, and constantly improve the ability to serve the real economy, especially small and micro enterprises and the like.

...Multi-channel financing to promote equity, to explore the establishment of a multi-level capital market transfer mechanism, regional equity market development services to SMEs, and promote the healthy development of the bond market, improve the proportion of direct financing.

Commodities Are Cheap, Might As Will Build 1 Million KM of New Roads

Tencent: 李克强：实施百万公里农村公路建设工程

First, a one million kilometers of rural road construction project, to achieve towns and villages formed hardened road, bus pass, the road dangerous bridge reconstruction, poverty-stricken areas to improve the development of the tourism industry and other traffic conditions. The second is the implementation of highways, railways, airports and other one hundred key channel project, to achieve secondary and higher highway basically covered all the counties, railroads and highways substantially cover the city (prefecture) administrative center. Promoting blank border highway road construction. Increase policy support taxation, land use, construction and maintenance of both a sound investment and management mechanism. "Double Hundred", can effectively stimulate investment and expand employment, poverty alleviation traffic amplification effect for the benefit of hundreds of millions of the masses.

Li Keqiang Speech at Boao Forum

Straits Times: China premier Li Keqiang says govt will cut taxes and red tape, keep yuan stable

Li repeated previous statements that the country hopes to cut taxes by 500 billion yuan (S$105 billion) in 2016 and promote reforms to the value-added-tax (VAT) system.

He also reiterated that China would not devalue the yuan exchange rate to boost exports as it would not help Chinese firms become more competitive, adding that the government would continue to reduce overcapacity in steel, coal and other sectors while helping develop smaller private enterprises.

Full text in Chinese: 李克强博鳌亚洲论坛演讲：中国经济怎么看，怎么干

Some snips:

Second, jointly promote economic growth. Emerging economies and developing countries, 40% of the world's total economic output, the contribution of the past was once two-thirds of economic increment, in response to the 2008 financial crisis played a role in the backbone, but two have greater difficulty some of the country's economic growth fell sharply even negative growth. As Asia's emerging economies, most concentrated areas, the overall maintained a growth momentum. Last year, economic growth in developing countries in Asia, only reached 6.5%, the contribution to world economic growth rate of 44%. Therefore reasonable to boost confidence in Asia, but the need to stimulate vitality, power is formed, which can not only for himself in Asia, but also for the world economic recovery play a greater role. We also hope that the countries in the world to deepen cooperation and solidarity, to strengthen macroeconomic policy coordination, to jointly oppose trade protectionism in all its forms, especially the developed countries should adopt more growth-friendly policies, policy changes in some countries to avoid spillover benefits. China's positive initiatives to build the Asian financial [0.00%] Cooperative Association, is willing to improve cooperation with the parties to the construction of the Asian financial markets, to avoid large-scale joint regional financial turmoil again.

...I think, look at China Economy:

First, look at the whole. China last year although the growth rate slowed down, but on a 10 trillion dollar economy, it can achieve 6.9% growth rate, growth on a high base. And it is in the process of transformation and upgrading implemented. This year, the Chinese economy overall smooth start, but there is some positive changes. We launched a series of steady growth, adjusting structure, promoting reform measures, policy effects are emerging results are constantly accumulate.

Second, look at the trend. According to statistics, last year more than 1300 cities and towns million new jobs, and income growth exceeded GDP growth this year from January to February employment situation remains stable, 31 major cities around the survey unemployment rate remained at 5.1%, and last year the basic flat. In this process, accelerate the pace of industrial upgrading, services, equipment manufacturing and high-tech industry to maintain rapid growth. Continue to expand domestic demand, consumption is still double-digit growth. Consumption and services have become the main force driving China's economic growth. Meanwhile, the energy intensity and discharge of major pollutants continued to decline, which marks the quality of economic growth is improving.

The third is to look at the long term. Although China has become the world's second largest economy, but the per capita income is still in the world, the gap itself is also potential, especially the West there is a huge space and room for maneuver in China. China is still in the overall advance of industrialization and urbanization process, the domestic space, the development of toughness, there are innovative means. So, the long-term fundamentals are bullish on the Chinese economy has not changed.

...At the same time, we need to promote the financial and monetary system. For example, we are going to fully open the VAT sales tax reform, which is an important measure of structural reforms, this move is not only meant to give corporate tax cuts, preliminary estimates from the country this year to give businesses by 5000 billion yuan of tax, and policy orientation support services, especially in the development of the service industry. For them, the burden will be lighter. At the same time, this reform will also help unify the tax system, so that the financial and tax system more open and transparent, easy to social supervision. SMEs will derive more benefits. In the process, probably because experience problems, there will be some twists and turns, but in general, I am in the government work report has been talked about, all the industry is not only reduced the tax burden increase. While also reducing costs. Government to do so, is Fangshuiyangyu. In the revenue decline, we are still willing to use short-term revenue "minus" in exchange for the sustainable development of the potential of "increasing." This in itself shows that we are determined to create a dynamic invigorating, but also that we have a certain amount of fiscal space.

In the financial sector, we will also promote the full range of regulatory reform, is more conducive to multi-level capital market development, we are still exploring how to use market-based approach to debt, and gradually reduce leverage. Reform is open, we will focus on promoting the outside world, including the expansion of the orderly liberalization of services, finance and other fields, to further fight the Chinese broader, better environment, the best destination for foreign investment. I remember years ago I announced here before, in a timely fashion, "Shanghai-Hong Kong Stock Connect." This year I announced here this year to choose the launch, "Shenzhen-Hong Kong through." All these indicate that China's capital markets are constantly opening up.

RMB will remain at a reasonable and balanced level stable, China is a responsible big country, China's development of the fundamentals have not decided the yuan, there will not be a long-term possibility of devaluation. China will promote self-initiated, gradual and controllable principle of the exchange rate market, but will not use devaluation to stimulate exports, so it is not to stimulate high-quality products, not to infuse courage to competition, the courage vigor creation. We would like to launch the world's escalating, high-end products.

Li Keqiang on the Govt Rescue of A-Shares and Renminbi

Li Keqiang made comments on the economy on Tuesday.

China Daily: Market-stabilizing policies right call, says Premier Li

Those market-stabilizing measures, consisting with international practice, defused some "bombs" over a period of time and warded off systematic financial risk, said Premier Li at an executive meeting of the State Council, according to Xinhua.

However, authorities in charge should also draw lessons from the experience, address internal management issues and implement initiatives and take both timely and effective approach, added the Premier.

The recent sharp decline in the international equity market has brought new challenges and uncertainties to China's economy, but it is also a test of tenacity, he said. "China's economy has proved stronger and stronger in the time of challenges."

iFeng: 李克强总理讲话释放重磅信号 今天走势才是关键

Li Keqiang Slams Drug Approval Process

Li Keqiang slammed the practice of approving "new drugs," which is simply a way for drug companies to raise prices on the public. In a speech he also said drugs are for the "benefit of the people" before making a comment about the "steady growth" of the industry.

State Council executive meeting focused on the pharmaceutical industry for the current steady growth of the leading role, is the most natural thing. However, a detail worth noting is that the Prime Minister Li Keqiang in his speech, deliberately swapped conventional sort, said development of the pharmaceutical industry is the first "benefit people's livelihood", followed by the "steady growth."

Chinese medicine is the basic needs of the people, it belongs to the basic livelihood of the people. Industry can certainly stimulate economic growth, but it must first and foremost in order to meet the health needs of the people, at the same time, it is related to the psychological needs of the entire community stability. Prime Minister expression, not just a simple tandem problem, but the most direct and simple reflects the emotional foundation and the logical order of governance - the so-called "Road, people-oriented."

...Meeting for approval of the reform of the medical field is also requested. The fundamental purpose of decentralization is for the ordinary people. Prime Minister stressed, do not allow under the name of "approval" a myriad of so-called "new drug": just to raise prices!?

iFeng: 李克强又怒了 严斥某些新药审批：还不是为了涨价?!

Li Keqiang: If We Have to Intervene, We'll Intervene

Reuters: Chinese premier says economy faces great challenges, new uncertainties

China's economy faces great challenges and new uncertainties brought about by the global economic environment and various countries' ailing stock markets, Premier Li Keqiang said on Monday.

As well as maintaining stable levels of employment, China must be highly vigilant and maintain financial market stability, Li said.

iFeng: 李克强：一旦经济滑出合理区间 该出手时会果断出手

"China's economy still has great potential: We have such a high savings rate, so much room for maneuvering, in case the economy really shows reasonable range of signs of slowdown, when its time to act we'll act decisively." Li said firmly. "This year the global economic situation is very complex, so we have to be more active as, 'picked up a golden cudgel' the challenge!"

Listen to Xi, Li and the PBoC

Here's me commenting on leadership comments in May 30, 2014: One More Time: No Stimulus

The Chinese leadership has been extremely consistent in saying there will be no stimulus. I can understand if investors think there will be a stimulus once there are obviously problems in the economy, but the leadership has said it will not repeat 2008.

If there is a crisis in 2014 or 2015, it will be worse than 2008 because by nearly every measure (except the stock market) is at an elevated level: more debt, more real estate supply, higher home prices, greater inventory, etc. If the government is saying it won't repeat 2008, then I take them at their word and assume they will not launch a massive stimulus program to save the economy until it is too late, and even then, they may decide it is too late and decide instead to see a real recession through to the end.

In the People's Daily Overseas Edition, the point about no stimulus was driven home yet again and it specifically addresses the investment banks that are saying China will cut the reserve requirement ratio (RRR) or make other adjustments to aid the economy. Short of banging them on the head with the latest 5-year plan, I'm not sure what else it will take for people to get the message.

I went on:

They go on to say that the slowdown is structural, not cyclical. In other words, the slowdown is a result of the rebalancing. China's leaders clearly do not want to screw up their reform efforts by hitting reset and reinflating up the sectors that need to shrink relative to the overall economy. They would like to avoid a full blown recession in which these sectors decline rapidly, but if their goal is ultimately reform, I don't expect they will do much of any rescue effort directed at sectors such as steel, cement or real estate, if any type of rescue at all even arrives in time. Most likely, the economy will tip into a major slowdown, with a full blown recession still a possibility.

The only thing to change in there is that the reforms didn't really take hold. We're at the start of 2016 and only now is the real effort to rebalance about to begin because now there is no way out. Now the market is going to force a major adjustment if the government doesn't.

Here's a post on Li Keqiang from September 2015: NNo Large Scale Stimulus or Money Printing? No Need To Rush Into Housing
One week ago, I did a longer post touching on the topic: Li Keqiang: No Stimulus Coming.

A Chinese blogger explains the PBoC's message (iFeng): 别等降准了！央行说得很清楚了 (Do not wait for RRR cut! The PBoC has spoken clearly!)

First, the exchange rate issue. Some time ago yuan swings, and a certain degree of devaluation, under the central bank to turn the tide began to gradually stabilize. If you choose this time to cut interest rates or RRR, the exchange rate will depreciate again. The central bank wants to give everyone a forecast, in the near term no devaluation, it wants stablility.

Second, structural adjustment problems. Although economic growth is falling, but that does not need to take the old road of stimulus. Proposed supply-side structural reforms will be implemented, of course, also need stimulation. Late last year, some analysts said, this year's protagonist is not monetary but fiscal [government policy], the central bank will slow down the pace of interest rate and RRR cuts, to slowly adjust.

No more kicking of the can. We'll know very soon if the reforms begin in earnest or not, if actions match the talk, but the message from the leadership couldn't be clearer.

Li Keqiang Wants to Kill Zombies, Steel First, Rick Says Watch The Herd

Li Keqiang says the government will deal with zombie companies. Among the targets:

These include, do not meet the national energy, environmental protection, quality, safety and other standards and long-term loss overcapacity enterprises, shut production, transfer or strip assets reorganization, continued loss of more than three years and not in line with the restructuring of enterprises to take direction assets restructuring, equity transfer, closure and bankruptcy and other ways to be "clearing" the Disposal "zombie companies" to the end of 2017 to achieve a significant decline in operating loss-making enterprises; accelerate the exit from non-core business areas, and control of overcapacity in industry investment, and key areas of the state capital more to promote national security, national economy in key industries concentrated.

Coincidentally, a few days ago Prime Minister Li Keqiang has been raised, for more than two years time, spend a greater effort to transform the kinetic energy of the old upgrade. According to "First Financial Daily" from near the official who was informed, recently appointed by the main leaders of the research group has started for steel overcapacity research, and strive to achieve the transformation and upgrading of production capacity as soon as possible, to prevent systemic risk.

Can China shut steel production equivalent to Western European and Japanese combined output without any systematic risk? Bad debt is also an issue:

Fourth, innovation policy support to promote the implementation of commercial banks non-performing assets disposal policy, increasing efforts to write off bad debts related to industrial overcapacity.

Here is video of Li Keqiang giving orders for dealing with the zombie steel mills in 2016. The tractor trailers (government support for steel mills) are keeping the zombies locked up. As with the zombies below, China may find it is forced to deal with an out of control situation with rapidly changing variables, not to mention a few surprises.

Will China Finally Reform? Xi and Li Stress Need for Grassroots Reform

If this discussion signifies a shift in policy, China may finally begin economic reform efforts in earnest. In other words, the "top down" approach of locking up political opponents opposed to reform is complete.

iFeng: 中国改革新阶段 中央密集谈自下而上改革必要性

13, Xi Jinping hosted the Central Leading Group comprehensively deepen reforms Seventeenth Meeting. Xi stressed that the central reform program adopted by the roots, must be encouraged and allowed to differentiate the different places to explore. The more important task comprehensively deepen reforms, the more we should pay attention to the grass-roots exploration and practice. We should encourage grass-roots innovation, bold exploration focus on reform as an important method of landing, adhere to problem-oriented, efforts to solve the reform program combined with actual problems, adjust the resistance of interest issues, and promote the implementation of the responsibility to play the issue of reform, reform Quasi drop off fine implement, so that the reform needed to develop more precise docking, hope the grassroots level, people want to better benefit the masses.

The meeting stressed the grassroots to play top-level design practice guidance, planning, guidance, encouraged to explore the country from reality, according to local conditions, focusing on specific issues, detailed measures, subdivision responsibility, fine discharge time, a good grasp of policy limits the scope, scale, rhythm. Grassroots reform and innovation to be more grassroots and listen as first-line voice, as much as possible to obtain first-hand material. To sum ​​up the experience, the grass-roots innovation in the discovery problem, the solution, contains a form of rational understanding of the law in a timely manner, to promote institutional innovation surface.

Under the State Council meeting on September 29, Li Keqiang to ministers arranged a new task, "after the November holiday, the department heads to personally led, the Organization Department of the cadres in, without affecting the normal operation of the premise , grassroots-depth research! go to the grassroots to the line to see where their own industry fresh cases occurred, the latest grass-roots experience Ministers go on, take up new experiences. "

"Really expert in civil ah! Grassroots model of innovation after another, new experiences, new things develop with each passing day, we must be more relevant departments to go to learn about new things and new situations." The Prime Minister said, "the process of economic restructuring, some places there is a genuine the emergence of cadres 'will not do' and so on, but the grass-roots creativity give us a 'vivid lesson'. "

Summed up China's reform over the past thirty years, has always been a bottom-up or top-down, these two channels is cooperating. Xi Li at this time talk at the same time pay attention to the central importance of the grassroots reform, a long-time observer of China's economic reforms Report (Micro Signal: ifengxbg) said that this shows the central authorities have realized that the top-down reform has entered a difficult period, bottom-up reform will again play an important role.

Li Keqiang Speaks at Davos

Li Keqiang states 8 important facts at Davos.

1. The Chinese economy has been subject to downward pressure
2. Economic data will inevitably fluctuate monthly and quarterly
3. Systematic risk in the stock market has been prevented
4. The RMB exchange rate is fundamentally stable
5. Do not desire to increase exports via currency depreciation
6. China still wants foreign investment, but the policy will change
7. Self-imposed emission reduction targets add pressure
8. There are some problems with urbanization


iFeng: 李克强达沃斯说的中国经济8句实话 句句透露大量信息

Li also said local government debt wasn't a concern because 70% of it was from investment.

iFeng: 李克强：担心中国债务风险是多虑了 地方债70%有投资性回报

As for China's government debt, the risk is controllable, because the level of debt ratio is still relatively low. For example, the central government debt less than 20% GDP, local government debt over 70% of the investment, there are rewards. Moreover, we are still regulate local debt issuance, and open the main entrance, blocking the back door. Someone should say the Chinese government debt will cause big risk is much concern. Of course, I do not deny that you have just the Chinese government debt concerns questions. Chinese people is philosophical concepts of all things must be prepared, which is also true.

As for the reform of the financial system, China will continue to push forward, because this is the need for China to maintain financial stability is the need of China's opening. For example, we have recently cut interest rates fall registration process to let go of the one-year deposit interest rate ceiling above, we will relax the entry of private banks, including foreign orderly entry and China's cooperation, etc., these measures will gradually roll out. In general, the direction of reform will not change, the pace of reform will not stop. Of course, reform is a gradual step.

ATimes: Li says China doesn’t want a currency war

“If a currency war does happen, it would only hurt China,” Li said. “The continued devaluation of the yuan is definitely not conducive to the currency becoming internationalized. This is not our policy preference.”

Speaking at the World Economic Forum, the Switzerland-based corporate think-tank which runs the Davos summit of world leaders, Li tried to convince investors that the major risks China’s economy has faced over the summer have been quelled that the financial system is stable.

The risks seem higher than ever now. It seems people are way to focused on the stock market and China is reacting to this. The stock market is a sideshow to the main event.

iFeng: 李克强接受顶级商界大佬采访实录

We do not want to stimulate exports through devaluation of the renminbi, which is not in line with the direction of our restructuring, we do not want to see the "currency war" took place in the world, China and the world as a high degree of integration of the major economies, if it occurs "currency war" against China only harm less favorable. For example, after the slight pullback in the yuan exchange rate, I have asked the relevant departments and specialize in export business, they want to maintain the basic stability of the RMB exchange rate on a reasonable and balanced level. Because if there is a continued devaluation of the market's expectations, he can not get a single commander. This is how China can contribute to export it?

All true, but if the choice is deflationary collapse or inflation via currency depreciation, China will do as most nations do and let the currency fall to its natural level. Keeping the yuan stable is the intervention, letting it fall is the free market solution to a massive increase in money supply and credit.

DNA: China's economic growth in proper range, says Li Keqiang

China will continue financial reform for the sake of stability and the opening up of the sector, the premier said.

China has scrapped the interest rate ceiling for both loans and deposits, established a link between Shanghai and Hong Kong exchanges and allowed more international investment.

The government will widen access for private and foreign capital to enter the sector in the future. The reform will not change its path nor slow its pace, Li said.

"The economy is stabilising despite a slower growth pace. On the one hand it is turning for the better while stabilising; on the other hand difficulties remain," Li added.

Li Keqiang Threatens Iron Fist For Land Finance Violations

Here is the important part of Premier Li's comments at the February 11 State Council meeting, emphasis in the original Chinese report:

The meeting noted that proper management and use of land is crucial to economic and social development. Last year, the relevant departments audited land finance and protection of arable land protection, also carried out a comprehensive audit of idle land in the country. Inspectors must address the problems uncovered by the audit, use iron fist measures, serious accountability, both to investigate and deal with illegal land transfer revenue and expenditure management, all manner of disordered conduct. As the chaos, but also correct all omissions such as idle land.

iFeng: 李克强：铁腕措施严肃问责土地出让金收支情况

Li Keqiang: Use Reforms to Lower Financing Costs

Premier Li Keqiang met with PBOC head Zhou Xiaochuan and CBRC head Shang Fulin in Shanghai. They openly discussed interest rate policy.

Li Keqiang said the best way to reduce interest rates and take pressure off the PBOC would be to speed up reforms in the Shanghai free trade zone. He said to Zhou and Shang, allowing you to reduce interest rate pressure is really difficult, but you must force down rates through reform, lower the capital costs for business by letting the cross border capital flows into the country, this is the best method. The article mentions how Li has repeatedly brought up the funding costs of SMEs, such as at the July State Council meeting. (See below for the Google translation of the article.)

Rhetoric about 7.5 percent growth aside, an economic slowdown without a monetary bailout forces reform because it is the only option. The mistake some analysts are still making is they think the growth target is the top of the agenda. The reform agenda is priority one.

On the continuum of possible economic policies and outcomes, the worst are those that slow or stop the reforms. At one end is monetary stimulus, booming economy and a return to business as usual. At the other end, there may be a limit to how much pain can be inflicted before insiders reject the policies. In between, the worse the slowdown, the greater the need for reform.

李克强对周小川尚福林称：让你们把利率压下来挺困难

One More Time: No Stimulus

The Chinese leadership has been extremely consistent in saying there will be no stimulus. I can understand if investors think there will be a stimulus once there are obviously problems in the economy, but the leadership has said it will not repeat 2008.

If there is a crisis in 2014 or 2015, it will be worse than 2008 because by nearly every measure (except the stock market) is at an elevated level: more debt, more real estate supply, higher home prices, greater inventory, etc. If the government is saying it won't repeat 2008, then I take them at their word and assume they will not launch a massive stimulus program to save the economy until it is too late, and even then, they may decide it is too late and decide instead to see a real recession through to the end.

In the People's Daily Overseas Edition, the point about no stimulus was driven home yet again and it specifically addresses the investment banks that are saying China will cut the reserve requirement ratio (RRR) or make other adjustments to aid the economy. Short of banging them on the head with the latest 5-year plan, I'm not sure what else it will take for people to get the message.

Here is a part of the piece below:

On the "RRR" cut, experts and institutions are cautious. Minsheng Securities research report said: "It is undeniable, according to traditional Keynesian macro-control mode to deal with the economic downturn, the central bank should reduce the deposit reserve ratio at this time to pull up aggregate demand. But we have repeatedly pointed out, under the new normal, the framework of the government's macro-management thinking has undergone major changes. The odds of taking the old road, of a total stimulus policy is not high. "

They go on to say that the slowdown is structural, not cyclical. In other words, the slowdown is a result of the rebalancing. China's leaders clearly do not want to screw up their reform efforts by hitting reset and reinflating up the sectors that need to shrink relative to the overall economy. They would like to avoid a full blown recession in which these sectors decline rapidly, but if their goal is ultimately reform, I don't expect they will do much of any rescue effort directed at sectors such as steel, cement or real estate, if any type of rescue at all even arrives in time. Most likely, the economy will tip into a major slowdown, with a full blown recession still a possibility.

经济不会重演“花钱买速度” (Economy Will Not Spend Money to Buy Speed Again)

The face of the economic downturn, the market calls for drainage monetary stimulus voice was underway, a number of investment banks in a timely manner to determine the central bank will lower the deposit reserve ratio. Premier Li Keqiang recently said that the face of downward pressure, we insist on maintaining stability, promising initiative, co-ordination to promote steady growth, promoting reform, structural adjustment, improve people continue to implement the proactive fiscal policy and prudent monetary policy, strengthening policy synergies, good policy reserves, appropriate and timely pre-tune fine-tuning. Experts believe that China's prudent monetary will continues, the past policy easing, "buying economic growth," the old play will not re-staged.

Agency predicts "RRR"

Economic slowdown, real estate prices fell, difficulties in financing the real economy, the risk of local debt, overcapacity, foreign trade China's current economic weakness ...... there is an urgent need to solve a lot of problems. Minsheng Securities described in the report, said China's economic growth rate is in the shift period, the throes of a critical period of structural adjustment policies and pre-digested superposition of three, from the rapid growth of high-speed economic growth to the shift is inevitable. From the supply side, the demographic dividend recession, the savings rate inflection point, the potential growth rate of decline, the loss of comparative advantage in labor. From the demand side, the internal demographic turning point leading to the real estate engine stall, outside the dividends of globalization recession, global economic imbalances to rebalance from leading external demand and foreign engine stall.

In the eyes of many, when the economy is weak, you need a more relaxed monetary policy stimulus, lower the deposit reserve ratio is a high probability event. Zhu Haibin, China economist at JP Morgan in 2014 there will be two RRR cut, by 50 basis points each, one in the third quarter, and again in the fourth quarter.

Standard Chartered Bank report said lower the deposit reserve ratio is ripe, it is necessary to relax the policy to a greater range of steady growth.

"The central bank is currently dealing with a hard landing RRR best macroeconomic policy," Chen Jianguang, chief economist at Mizuho Securities in its micro-Bo, said Prime Minister Lee visits mentioned in Chifeng City, "downward pressure on the economy can not be taken lightly, timely pre-tune fine-tuning to keep money and credit growth. " Earlier SCIO situation briefing, Zhu Baoliang, director of the Information Center forecast also considers appropriate RRR is also an option. Chen Jianguang that "RRR is not a massive stimulus, but tight monetary policy to neutral from an inevitable requirement."

Steady tone will not change

On the "RRR" cut, experts and institutions are cautious. Minsheng Securities research report said: "It is undeniable, according to traditional Keynesian macro-control mode to deal with the economic downturn, the central bank should reduce the deposit reserve ratio at this time to pull up aggregate demand. But we have repeatedly pointed out, under the new normal, the framework of the government's macro-management thinking has undergone major changes. The odds of taking the old road, of a total stimulus policy is not high. "

Executives repeatedly stressed that the implementation of prudent monetary policy, industry analysis, in this process of monetary policy on the one hand to maintain concentration, to maintain the stability of the total, on the other hand directional tuning, promote structural optimization, in order to upgrade the economic transformation services. Neither expected future monetary policy tightening will not relax.

"Monetary policy can not be significantly relaxed, because the potential growth of China's economy continued downward, is a structural trend, not a cyclical output gap, blind loose monetary easily lead to inflation, increasing the difficulty of economic restructuring; monetary policy should not be closed tight, because the process of economic restructuring, the traditional industry, there is downward pressure, but the new economic growth point has not yet formed a large-scale, policy should be highly concerned about the economy in this period of potential risks, the Chinese economy to avoid 'hard landing'. " Minsheng Securities report said.

RRR is not a panacea, the central bank has more means to promote economic growth. National Australia Bank chief economist Optek Lim believes that if you just take the number of loose monetary policy, China's economy is expected there will be risks. The Chinese government is more likely to take the package, rather than a single monetary policy to ensure stable economic growth, while avoiding the economic ups and downs.

Innovation is more important than "money"

Compared with the blind pursuit of economic growth, and tap China's economic growth endogenous motivation, stimulate innovation and vitality, improve the quality of economic growth is more important in the current. Premier Li Keqiang said that China's economy continued under good this game, to upgrade is the direction, which requires the continuous deepening of reform and inspire the whole social innovation power, creative potential, entrepreneurial vigor.

Minsheng Securities reports that address the structural problems must rely more on the future, "Kaiqu diversion" type of supply management, to create a stable monetary and financial environment for economic restructuring and transformation and upgrading, integrating reforms in macro-control among the monetary policy and deepening reform closely together. Its core is not massive stimulus through a simple, but by improving the supply of capital, labor, production, systems and technology factors of production, activation economy itself hematopoietic function, enhance the potential growth rate of the economy.

"In the past thirty years, the rapid development of China's economy mainly depends on large-scale investment in human capital and only 30% of economic growth based on innovation and productivity improvement. If you want long-term development of China's economy, we must increase innovation in economic development role. "Dean said Yasheng Huang, MIT Sloan School of Management.

Yasheng Huang suggested that the current, critical to enhance China's scientific and technological innovation, is to change the government-led model of innovation, technological innovation and encouraging private entrepreneurship.