After the successful conclusion of the Third Plenary Session of the CPC Central Committee, the "Decision of the CPC Central Committee on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization" was deliberated and adopted. The "Decision" has made strategic arrangements for the mainland's economic development in the next five to 10 years or even longer, and has set clear goals. The overall goal of further comprehensively deepening reform is to continue to improve and develop the socialist system with Chinese characteristics and promote the modernization of the national governance system and governance capacity. By 2035, we will build a high-level socialist market economy in an all-round way, further improve the socialist system with Chinese characteristics, basically modernize the national governance system and governance capacity, and basically realize socialist modernization, so as to lay a solid foundation for building China into a great modern socialist country in all respects by the middle of this century. The "Decision" stresses that to further deepen reform in an all-round way, it is necessary to sum up and apply the valuable experience of comprehensively deepening reform since the reform and opening up, especially in the new era, adhere to the people-centered, adhere to integrity and innovation, and comprehensively govern the country according to law. The communiqué once again emphasized the position of economic structural reform in the reform, and made systematic arrangements for further deepening the reform in an all-round way.
Emphasizing the construction of a high-level socialist market economy system and allowing the market to play a decisive role in the allocation of resources, this is conducive to stimulating the vitality of market players, optimizing the efficiency of resource allocation and maximizing benefits, so as to achieve both "live" and "manageable", better maintain market order, make up for market failures, smooth the national economic cycle, and stimulate the endogenous power and innovation vitality of the whole society. In the "Decision," it is once again emphasized that it is necessary to unswervingly consolidate and develop the public sector of the economy and unswervingly encourage, support, and guide the development of the non-public sector of the economy. We will ensure that all forms of ownership of the economy use the factors of production on an equal footing in accordance with the law, fairly participate in market competition, and receive equal legal protection, so as to promote the complementary advantages and common development of the economies of all forms of ownership. It is necessary to build a unified national market and improve the basic system of the market economy. The plenum proposed to intensify scientific and technological innovation, and education, science and technology, and talents are the basic and strategic support for Chinese-style modernization. We must thoroughly implement the strategy of rejuvenating the country through science and education, the strategy of strengthening the country with qualified personnel, and the strategy of innovation-driven development. For economic development, it is proposed to promote economic transformation and develop new quality productive forces, so as to stimulate more economic vitality. The plenum called for the coordination of development and security, and the implementation of various measures to prevent and resolve risks in key areas such as real estate, local government debt, and small and medium-sized financial institutions. By effectively mitigating risks in these areas, we can drive further economic recovery.
According to data released by the Bureau of Statistics, economic growth slowed down in the second quarter compared with the first quarter, falling from 5.3% in the first quarter to 4.7%. Although the GDP target of 5.0% set at the beginning of the year was achieved in the first half of the year, in order to achieve the economic development target for the whole year in the second half of the year, it is necessary to further introduce more powerful policies to stabilize economic growth. By stabilizing the property market, boosting the stock market, supporting the development of the private economy, and increasing the employment rate and income level of residents, it can boost the performance of consumption, promote the further recovery of the mainland economy, and lay a solid foundation for the sustainable development of the mainland economy. Recently, relevant departments have also said that large-scale equipment updates and trade-in of consumer goods will be launched to boost domestic demand. At present, the growth of foreign trade is relatively stable, while domestic demand has been stagnant, especially the growth of consumption is relatively slow, and the growth rate of investment has declined. Therefore, it is important to find ways to boost investment growth and stabilize consumption growth. By promoting large-scale equipment renewal and trade-in of consumer goods, this can boost domestic demand to a certain extent. Real estate is the pillar industry of the national economy, and the growth rate of real estate investment has declined for several consecutive years. Stabilizing real estate is of great significance for stimulating domestic demand, because there are 60 industries in the upstream and downstream of real estate, and by increasing financial support for real estate enterprises, the real estate market will stabilize and rebound, which can effectively stimulate upstream demand. At the same time, 70% of China's household assets are allocated to houses, and if housing prices can stabilize and rebound, household balance sheets will end their contraction and enter the expansion range, which will effectively boost investors' investment confidence and consumers' consumption confidence.
This year, the central bank launched the "four arrows" to support the real estate market. Various localities have also gradually relaxed restrictions on the purchase of real estate. At present, the main first-tier cities are more stringent purchase restrictions, and other second- and third-tier cities have basically been fully liberalized, and the effect is not particularly obvious at present, because the oversupply of real estate in second- and third-tier cities is more prominent, even if the purchase restrictions are relaxed, outsiders are unlikely to go to the second and third-tier cities to buy houses, so the first-tier cities to release purchase restrictions are of greater significance to the release of rigid demand, and the effect may be more obvious.
In terms of resolving local debt risks, the central government has also introduced a number of measures. The issuance of ultra-long-term treasury bonds for major infrastructure construction can also create more jobs and create more GDP, thereby stabilizing economic growth. In terms of boosting consumption, it is necessary to find ways to increase residents' income, so that consumption can really rise, because consumption is not stimulated by documents, but by actually increasing residents' income. There are two main sources of income for residents, one is wage income and the other is property income, and the former needs to create more employment opportunities and raise the wage level of residents. The latter is to increase residents' property income by raising housing prices and improving the performance of the stock market, so that investment and consumption will effectively stimulate domestic demand and stabilize the rate of economic growth.
On July 29, the Shanghai Composite Income Index was officially released, and compared with the Shanghai Composite Index, the Shanghai Composite Income Index not only includes the rise in stock prices, but also includes the rebound brought by the reinvestment of cash dividends of constituent stocks, so the Shanghai Composite Income Index more objectively and truly reflects the return of investors' holdings. The SSE Income Index will be higher than the SSE Index because it includes dividend income. At present, the market as a whole is still in a period of adjustment, so the Shanghai Composite Data Index opened at 3198 points, and then there was a trend of shock and decline. However, in the long run, the valuation of the rising income index is at a relatively low level, and the cash dividends of listed companies also play a good guiding role, guiding investors to allocate good companies with higher dividend rates and stable long-term performance growth. It is necessary to adhere to the concept of value investment and long-term investment, so as to obtain good returns in the long run. Chasing up and down, frequent trading, speculation on themes, and speculation on concepts can be said to be the root cause of many investors' losses. Therefore, the release of the SSE Income Index has a good guiding role in the medium and long-term development of the capital market, and it is also an important index that investors can refer to. Of course, since most investors have been accustomed to watching the Shanghai Composite Index for a long time, the role of the Shanghai Composite Index is difficult to replace. Therefore, the rising income index is more of a value guide for investors, and at the same time, it can more truly reflect the comprehensive return of the stock price brought by the reinvestment of the dividend income of the constituent stocks.
Recently, the consumer sector represented by liquor and food and beverage has seen a continuous correction, which also reflects the impact of the slowdown in consumption growth on the valuation of consumer stocks after the decline in household income expectations. In fact, the long-term performance growth of these consumer stocks is relatively stable, but it is affected by the short-term environment, and the performance growth rate has slowed down, and the valuation is the main reason for the decline. Weakening expectations for future consumption growth will reduce the valuation level of these consumer stocks, which in turn will affect the performance of stock prices. To improve residents' confidence in consumption, the focus is to raise the income level of residents, and only by fundamentally solving problems can we truly stimulate the potential of consumption. The mainland's annual consumer market size is as high as 40 trillion yuan, which is the world's largest consumer market, and the mainland has the world's largest population, so the potential for consumption is very great.
In fact, from a long-term point of view, most of the long-term bull stocks that can really get out of the economic cycle and cross the bull and bear cycle are in the consumer industry, and the reason why Buffett can become a stock god is related to his long-term unswerving allocation of high-quality consumer stocks. Even Apple, the technology stock he now contributes the most profits, has actually become a consumer stock, and people buy iPhones as a consumer behavior. Therefore, consumer white horse stocks are worth long-term allocation, and they are also expected to bring long-term returns to shareholders. The decline in short-term consumption growth has led to a pullback in the share prices of consumer stocks, which provides investors with an opportunity to take advantage of the dip. Once the economy picks up and residents' income expectations rise, the valuations of these consumer white horse stocks will return, resulting in excess returns for investors. Like brand liquor, it has brand value and social functions. From the perspective of profitability, it is also the relatively strong profitability in the consumer sector. Whether it is gross profit margin, net profit margin and return on net assets, branded liquor companies have relatively large advantages. Therefore, it may have more long-term allocation value after the current stock price decline. Short-term stock price fluctuations will not change the long-term investment value of enterprises, it is recommended that investors pay attention to the fundamentals of enterprises and the intrinsic value of long-term investment of enterprises, do not pay too much attention to short-term stock price fluctuations, short-term stock price decline instead provides an opportunity for low-price layout.
From the perspective of economic transformation, the mainland's economy is now in a three-phase superimposed shift period, and the overall economic growth rate has slowed down, so the earnings growth of many industries has declined, but it will not change the investment value of many high-quality leading stocks, but the decline in valuation may have a certain impact on stock prices. From the perspective of economic transformation, the future growth of the industry is more sustained. One is the consumer sector just mentioned, especially some consumer white horse stocks that have been wrongly killed, the long-term investment value is more obvious, followed by the two years of price war and production capacity clearance, still have room for growth of some new energy leading enterprises, or have the potential for growth. The third is these technology white horse stocks that have gained in the fourth scientific and technological revolution, and its long-term investment value is also relatively obvious, especially now that AI has become the hottest track at present. There may be some leading companies in the AI sector and related industries, which can be paid attention to. However, it should be noted that investing in technology companies is more risky, because many technology companies mainly invest in future expectations, and there is a certain degree of uncertainty. Therefore, we can pay more attention to the leading stocks of science and technology with core technology and may have a large application space in the future.
Now that the United States economy is slowing down, and United States inflation has fallen from its high levels, there will be a shift in United States monetary policy. According to Fed officials and Fed Chairman Jerome Powell's recent statements, the probability of the first interest rate cut in United States in September is close to 100%, which can be said to be a certainty. This also marks the end of this round of interest rate hike cycle by the Fed and enters the cycle of interest rate cuts, which will release more opportunities. Because once the Fed starts to cut interest rates, the dollar will fall back from its highs, which will cause non-US currencies to recover. At the same time, once the Fed starts the interest rate cut cycle, it will bring more room for monetary policy adjustment to the People's Bank of China, and the central bank can support the economic recovery by cutting interest rates and reserve requirements, and at the same time will have an impact on global capital flows. The recent trend of rapid decline in United States technology stocks has also verified the previous prediction. Because United States technology stocks have been rising for many years, the rapid rise has accumulated a large number of profits, and it has also produced a certain valuation bubble. Therefore, I have repeatedly warned to be careful of the risk of peaking the valuation of United States technology stocks. Although it cannot be said that the bubble of United States technology stocks has burst, at least it has a large shock at a high level, releasing a signal, so investors should prevent the risk of chasing higher and take profits in time.
Once the stock markets in Europe, the United States and Japan peak and fall, global capital flows will flow out of the stock markets of Europe, the United States and Japan, looking for new valuation depressions, then now A-shares and Hong Kong stocks are undoubtedly the world's two major valuation depressions, which may become a direction of world capital inflows. In the past two years, the trend of low-valuation and high-dividend sectors has been stronger, gold has also stepped out of a strong upward trend, and the performance of some technological innovation companies has been relatively differentiated, which also reflects the low risk appetite of investors. In order to boost the performance of the capital market, it is fundamentally necessary to improve the growth rate of the economy, and at the same time increase support for scientific and technological innovation enterprises. A thriving secondary market is a market that feeds back to the real economy. At the same time, the prosperity of the secondary market can drive the recovery of the primary market, and the primary market is an important market to support scientific and technological innovation enterprises. Therefore, from an investment point of view, on the one hand, in order to obtain relatively stable returns, we may still have to deploy more of these sectors with high dividends, low valuations and high dividends. On the other hand, we should pay more attention to scientific and technological innovation enterprises, especially those that can make technological breakthroughs in the future, which will bring us opportunities.
(The author is the chief economist and fund manager of Qianhai Open Source)