As the market increased its bets on stronger economic stimulus measures, at 10:30 on December 6, Chinese assets began to rise strongly, reaching 3,400 points.
On the same day, the 2024T-EDGE Innovation Conference and TMTpost Finance Annual Conference kicked off in Daxing District, Beijing. Three famous economists: Qiu Xiaohua, former director of the National Bureau of Statistics and chief economist of Sunshine Insurance Group; famous economist, National Taxation Xu Shanda, former deputy director of the General Administration; Wu Xiaoqiuwei, dean of the National Financial Research Institute of Renmin University of China, dean of the China Capital Market Research Institute, and national first-class professor Focusing on the current problems facing the Chinese economy, they analyzed the underlying logic behind it. They believed that after the central bank, National Development and Reform Commission and other departments introduced policies to stabilize the stock market, stabilize the property market, promote investment, and promote consumption, the macro data is improving, but they are facing unprecedented conditions in a century. In order to stabilize the growth rate of China’s economy, we can expect bolder fiscal policies in an environment of constant geopolitical conflicts and trade frictions.
“We have to climb uphill and overcome obstacles, but challenges still remain.”
At the beginning of the speech, Wu Xiaoqiu said that China’s economy is currently facing great difficulties and problems, and may face greater external uncertainty in the future for a relatively long period of time. This uncertainty also includes hot issues in some parts of the world. , how to return these problems to normal? How to deal with this uncertainty? The first thing to test is our concentration and wisdom.
Internally, consumer demand is still insufficient and consumption willingness is still declining. With external demand being seriously challenged, investment willingness also continues to decline. Wu Xiaoqiu mentioned that the monetary structure has been very clear: the ratio of M1 to M2 is constantly declining, M2 is expanding, increasing by 7.3% from January to September, and M1 is shrinking, falling by 6.3%, indicating that investment desire continues to decline, and people The consumption tendency, consumption desire and consumption demand have no motivation to expand.
Wu Xiaoqiu gave a speech at the 2024 T-EDGE Innovation Conference, photo by TMTpost APP
Qiu Xiaohua pointed out that China’s economy has entered a critical period of transformation and upgrading. This stage is not without difficulty, and is affected by three forces. The world has entered a century of changes, geopolitical competition has intensified, conflicts between China and the United States have emerged frequently, and China’s transformation from a bystander in the scientific and technological revolution to a runner or even a front-runner has brought about challenges such as technological competition. The sudden onset of the COVID-19 epidemic has hampered business operations, and the scars left by the epidemic have not yet been completely eliminated. In addition, adjustments to national economic policies will inevitably lead to fluctuations in the social adaptation period, and misunderstandings often occur.
“The scientific division of financial rights is our next most difficult reform. It may be as difficult as the internationalization of RMB ownership.” Wu Xiaoqiu even suggested that the confidence of China’s economy has been tested and is being tested. It is expected to be It’s getting weaker. The source of confidence is a sound legal system, and the formation of expectations is a system that matches the principles of market economy, that is, a stable system.
At the institutional level, both he and Xu Shanda emphasized that medical security and social security issues have become very important institutional factors affecting China’s economic development, and farmers’ issues are also important challenges facing the internal environment of China’s economy. “In the current fiscal and tax reform, we feel that there are many contradictions in the tax sharing system of central and local governments. Everyone knows the figures. Central revenue and local revenue are about half, but local expenditure accounts for 85%, which is too high,” Xu Shanda believes.
Externally, the greater uncertainty lies in “Trump 2.0”. His new policy covers five key dimensions: domestic tax cuts, external tariffs, strengthening American manufacturing, tightening immigration, and relaxing artificial intelligence and financial regulations. The impact of the New Deal on China focuses on four points: strictly controlling the export of advanced technologies; adjusting trade relations, which does not rule out the cancellation of China’s permanent normal trade relations status; imposing additional tariffs to raise the threshold for Chinese goods to enter the United States; and promoting the decoupling of the Sino-US economy.
Qiu Xiaohua mentioned that the 60% tariff claimed by Trump is a declaration. It remains to be seen whether it will be implemented next year. The US government cannot do it in one step. Judging from the current situation, the biggest impact of Trump’s new policy on China’s economy comes from external demand. How to resolve the uncertainty of stable external demand has become an important policy option for China to cope with changes next year.
Qiu Xiaohua believes that solving these problems is definitely not a free lunch, but must be a stage of climbing uphill and overcoming obstacles. Therefore, at this stage, it would be incorrect to say that China’s economy does not have difficulties. On the contrary, it would be correct to say that China’s economy has many difficulties at this stage.
As for external pressure, Wu Xiaoqiu pointed out that we may indeed face greater confusion in the short term, but based on basic principles, we can respond calmly, minimize difficulties, and minimize losses: “If the country’s prosperity and development depends on If high tariffs as trade barriers can be achieved, many countries that have little contact with the outside world will have developed long ago.”
Wu Xiaoqiu believes that “the current knowledge of economics tells us that low tax burdens and smooth flow of capital goods and manpower are important mechanisms for global economic development.” Starting from basic principles, we can respond calmly, minimize difficulties, and Minimize losses. Tariff barriers cannot be a “win-win”, they should be a “lose-lose”, so the implementation of barriers cannot obtain all the benefits, which goes against the basic principles of modern economics.”
Call for: Need for bolder fiscal stimulus policies
In response to the numerous challenges posed by internal and external factors to China’s economy in the future, calling for bolder fiscal stimulus policies has become the consensus of the three major economists.
Wu Xiaoqiu proposed: What we can do now is, first, to stop the decline and rebound of our existing wealth, and second, to stop the decline and rebound of nearly 40% of financial assets, especially securitized financial assets.
“On the one hand, this can stabilize future expectations and lay a good foundation for future consumption expansion, especially the rebound of securitized financial assets. Because the liquidity of its assets is very good, it will contribute to the expansion of consumption. It has a direct effect, the benefits are very large, and it has a direct effect on the expansion of consumption. The stabilization of real estate also has a positive effect on the expansion of consumption,” Wu Xiaoqiu believes.
In addition, the social security system, legal system and stable institutions should be improved. “This requires a lot of action, including the reform of financial relations and the reform of the fiscal and taxation system, which are very important. It can give people confidence and eliminate people’s inner worries and insecurities.”
Xu Shanda gave a speech at the 2024 T-EDGE Innovation Conference, photographed by TMTpost APP
Similar to some of Wu Xiaoqiu’s views, Xu Shanda’s call focuses on system construction:
First, major cities should assume the responsibility of meeting residents’ basic housing needs and adopt a shared property housing system;
Second, change the pension security system from local to central responsibility;
Third, increase government support for artificial intelligence;
Fourth, establish and improve the social security system for farmers and reduce the land rent cost of agricultural production.
In terms of macro policies, Qiu Xiaohua pointed out that the biggest impact of Trump’s new policies on China’s economy comes from external demand. How to resolve the uncertainty of stable external demand has become an important policy option for China to cope with changes next year. Active fiscal policy and monetary policy will be based on the existing basis, and new policies will be further formulated and introduced. It is foreseeable that the support rate for fiscal policy will increase, the scale of debt issuance will expand, and the tax system will be optimized. In terms of supportive monetary policy, new RRR cuts and interest rate cuts should be on the way. Ensuring sufficient liquidity in the market to cope with external changes is an important option for the central bank’s policy.
Qiu Xiaohua gave a speech at the 2024 T-EDGE Innovation Conference, photo by Titanium Media APP
After September 24, the Chinese government has successively launched major adjustments in macro policies, and multiple departments have jointly taken action. With the gradual introduction of policies to rescue the stock market, stabilize the property market, promote consumption, and stabilize interests, the economy in the fourth quarter is expected to reverse the downward trend in the first two quarters and hit the 5% growth rate. “Today, the downward spiral of China’s asset prices has been broken, and market confidence is gradually recovering. Facing the arrival of the Trump 2.0 era,” Qiu Xiaohua believes that “active fiscal policy and prudent monetary policy may be based on the existing basis.” It will continue to be prepared and released.”
“The biggest issue next year is the impact of the external environment. The internal issue is how to stabilize the real estate industry as soon as possible, and how our local governments can regain their vitality in the process of debt reduction. I think as long as these policies can be implemented, China’s economy will be better in 2025.” We can continue to maintain a development trend roughly equivalent to this year,” Qiu Xiaohua mentioned.
Looking forward to the trend of China’s capital market, Wu Xiaoqiu optimistically pointed out that since the structure of the capital market has changed and provided potential liquidity expectations, I think the overall direction of the Chinese market will get better because our ecological environment has changed. Continuous improvement is a basic trend.
“Of course, it is normal to see ups and downs. We don’t have to worry about it. Don’t doubt the changes in the market after a day of decline. As long as we insist on seeking truth from facts, unswervingly promote reform and opening up, and unswervingly follow the market economy On the road of unswervingly promoting various innovations, including financial innovation, there is still great hope for China’s economy and China’s capital market,” Wu Xiaoqiu believes.
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