This Saturday, all eyes are on.
The Information Office of the State Council will hold a press conference at 10 a.m. on October 12, 2024 (Saturday), at which Minister of Finance Lan Foan introduced the relevant situation of "strengthening the counter-cyclical adjustment of fiscal policy and promoting high-quality economic development" and answered questions from reporters.
This heavyweight press conference, the "strength" of countercyclical adjustment of fiscal policy, the eight major institutions see it this way. We can get some of the latest information on the future direction of fiscal policy and high-quality economic development.
CICC: How else can the government exert its strength?
In the second half of the financial cycle, the contradiction of insufficient demand was prominent. At the end of September this year, the State Council Information Office issued a number of policies, and the Politburo meeting also further released positive policy signals, and the market reacted positively. In our view, there is still room for monetary policy easing, but the need for fiscal tightening has increased significantly in the context of private sector deleveraging. We believe that while strictly regulating new debts, accelerating the replacement of local existing debts and solving the problem of corporate debt arrears are conducive to reducing the burden on relevant entities and stimulating economic vitality. The Decision of the Third Plenary Session of the 20th Central Committee of the Communist Party of China (CPC) pointed out that "safeguarding and improving people's livelihood in the process of development is a major task of Chinese modernization". In our view, in the context of shrinking traditional infrastructure space, the shift in the focus of fiscal expenditure from infrastructure investment ("hard infrastructure") to people's livelihood ("soft infrastructure") will help improve fiscal quality and efficiency.
The scope of people's livelihood is relatively broad, and we mainly consider education, health, and social security. One scenario is to reference the period when other countries (such as United States and Korea) reach the time of moderately developed countries and the so-called "Wagner acceleration period." The other scenario is based on the fitting of existing data from about 30 economies, and the results of the two scenarios are somewhat different, but there is still a lot of room for "soft infrastructure" in general. The multiplier of the three major livelihood expenditures may be 0.7-0.9 in the short term, but the long-term multiplier is greater than 1. In terms of breakdown, the short-term multiplier for education is greater than 1, while the short-term multiplier for health and social security is less than 1, which may be due to the more significant rigidity of the former's expenditure.
Ping An Securities: Waiting for the financial force, 4 definite clues
4 definitive clues for the fourth quarter.
1. After the 924 policy turn, we expect the economic state to bottom out in August and September. However, due to the financial contraction in the first half of the year, the fundamentals in the fourth quarter are expected to remain at the bottom from the leading indicators, and it is difficult to get a quick boost. We expect GDP to be 4.4%-4.5% YoY in Q3 and broadly flat in Q4.
2. The steady growth policy represented by the fiscal will continue to disrupt the market. Compared with the budget at the beginning of the year, there is a shortfall of about 1.5 trillion yuan in government fund revenue. Compared with the fourth quarter of '23, if the deficit is not adjusted and special refinancing bonds continue to be issued, then the year-on-year decrease is about 2.5 trillion. Therefore, we expect that the new deficit of 1.5 trillion yuan + special refinancing bonds of 1 trillion yuan is reasonable, and the stable fiscal strength will drive the market to usher in a 1-2 month risk appetite boost.
3. Different from the period of steady growth policy in the past two years, the probability of this round of curve steepening is greater, mainly because there are fewer obstacles to monetary policy easing. However, it remains to be seen when the funds will be released definitively, and the management of the fluctuation range of the current interest rate corridor framework.
4. It is necessary to guard against negative feedback on liquidity. The main reason is that the impact of the capital diversion effect brought about by the release of extreme emotions in the stock market on financial management needs to be tested, and the observation indicators are the scale of financial management, the scale of secondary purchase of credit bonds and the scale of redemption funds, and the current financial purchase of credit bonds is still stable. Second, with reference to the redemption wave in November 22, the necessary conditions for the stabilization of credit bonds are the loosening of funds and the purchase of incremental funds. If the capital side is only stable and not loose, the pressure on the financial liability side lacks the strength to undertake.
Industrial Research: Incremental fiscal policy has become the focus of market attention
Policy expectations: incremental fiscal is about to come out. Since late September, incremental monetary policy and real estate policy have been released intensively. As the key to countercyclical expansion of aggregate demand, incremental fiscal policy has become the focus of market attention. In the first eight months, the cumulative fiscal revenue and expenditure at the local level was less than 0.5% year-on-year, and if the scale of national debt is increased, it can be used to transfer payments to local governments or support people's livelihood and social security expenditures, etc., to alleviate the pressure on local fiscal balance. Assuming that the budget implementation rate of general budget revenue is 96%, if the expenditure side is to reach the budget level at the beginning of the year, another supplementary funds of about 828.6 billion yuan are required; Assuming that the budget implementation rate of government fund revenue is about 80%, if the expenditure reaches the budget level at the beginning of the year, about 1.4 trillion yuan of supplementary funds will be required, and the scale of funds required will be higher if the fiscal expenditure level is to reach the pre-epidemic level. The scale and direction of incremental finance will be the key to influencing market expectations in October.
Haitong Securities: Ensure the necessary financial expenditure and accelerate the progress of expenditure
Efforts should be made to improve the efficiency of the implementation of macroeconomic policies. Strengthen the overall coordination and system integration of macroeconomic policies such as fiscal taxation, monetary and financial, investment and consumption, and income distribution; Ensure the necessary financial expenditure, speed up the progress of expenditure, and increase the positive role of economic development; Recently, policies such as RRR and interest rate cuts have been introduced, and other financial policies are also being actively promoted. Accelerate the implementation of major reform measures: The Third Plenary Session of the 20th Central Committee of the Communist Party of China (CPC) has identified more than 300 key reform measures, and various tasks are currently being implemented in an orderly manner. Accelerate the introduction of a number of reform measures that are ripe and accessible, and conducive to the realization of sustained and healthy economic development, such as formulating guidelines for the construction of a unified national market, issuing a new version of the negative list for market access, establishing a mechanism for the growth of future industrial investment, and improving the system for promoting the deep integration of the real economy and the digital economy.
Huatai Securities: Finance may face three levels of considerations
The policy combination has been launched successively, and the strength of fiscal policy is the topic that investors are most concerned about in the next step. Recently, the policy "combination fist" has been introduced, the stock market has risen sharply, and the tail risk of the economy has been significantly reduced. However, there is still inertia in the operation of fundamentals, and it is difficult to solve the problem of insufficient demand and upward momentum of the economy by monetary policy alone, after all, the monetary policy transmission mechanism is not as smooth as before, and there are still many blockages from easy money to easy credit, which objectively needs to be followed up by fiscal policy. In particular, if there is a gap in local finance, it is easy to indirectly lead to a passive increase in non-tax revenue, affecting the local business environment and business confidence, thus producing an unexpected contractionary effect at the macro level. Of course, a series of policies such as the recent RRR and interest rate cuts have positively improved better financial conditions for the fiscal sector.
What exactly is the problem that the government is trying to solve? Problem-oriented, finances may face three levels of consideration:
1. Only supplement the general expenditure fiscal gap of local governments this year, and superimpose bank capital injection, new quality productivity and other purposes;
2. Fill the gap in the mismatch between local government powers and financial powers in the past five years;
3. Launch local debt restructuring plans and long-term mechanisms. So how big is it? First of all, the fiscal gap is the amount of revenue from the two accounts that has been completed for the whole year compared with the budget target at the beginning of the year, and then the difference between the carry-over from last year and the transfer of supplementary funds from the budget stabilization fund is taken into account to estimate the fiscal gap of about 1.65 trillion yuan in the two accounts. Second, the fiscal gap accumulated in the past few years is mainly concentrated in 2022 and 2023, and is roughly estimated to be at least 3 trillion yuan. In terms of fiscal instruments, increasing the fiscal deficit (general debt) is the most effective way to solve the problem of the general public budget gap. Speeding up the issuance of local government bonds and broadening their use are already in the process of implementation. Special treasury bonds are more suitable for injecting bank capital and boosting new productivity. There is still a great deal of uncertainty as to whether policy finance will be introduced. Sustained efforts are still needed to improve the long-term fiscal mechanism. However, compared with monetary policy, we should remind that the difficulty and uncertainty of fiscal policy are obviously greater, and it is still necessary to pay attention to the "expectation gap".
Zhongtai Securities: Increasing the issuance of treasury bonds, revitalizing deposits, and optimizing the expenditure structure
Since the press conference of the three ministries and commissions on September 24, China has relaxed more than expected in the fields of monetary and finance, capital market and real estate. For the next step of policy, the market is most concerned about finance. In the case of reduced revenue, what is worth looking forward to in fiscal force?
We believe that the possible directions in the future are: first, to adjust the budget and issue additional treasury bonds, and pay attention to whether the Standing Committee of the National People's Congress, which is likely to be held in October, will deliberate and approve it; The second is to revitalize fiscal deposits, with 6.8 trillion yuan in fiscal deposits belonging to government departments at all levels in August 2024, at a historical high. In recent years, a number of local governments have issued documents to promote the revitalization of fiscal deposits, which can increase the efforts to revitalize fiscal deposits. Third, it is necessary to optimize the structure of fiscal expenditure and increase the tilt towards the consumption sector. Possible concrete measures include appropriately increasing public consumption, increasing subsidy support for consumption on the basis of trade-in of bulk consumer goods, and increasing cash payments to specific groups.
China Post Securities: The strength of incremental fiscal policy may be more than 3 trillion yuan
The effective social demand is insufficient, the role of aggregate monetary policy in stimulating the economy is relatively limited, and if the interest rate and reserve ratio are blindly cut, it may cause the liquidity of the financial system to accumulate and cause problems such as capital idling. In this context, we believe that fiscal policy has a more direct role in expanding domestic demand, and that increasing the intensity of active fiscal policy, such as the implementation of pro-investment and pro-consumption policy stimulus, combined with supportive monetary policy, can effectively drive the economy back to a benign growth path, which is of great significance for promoting high-quality economic development.
First, from the quantitative point of view, we believe that the incremental fiscal policy strength or more than 3 trillion yuan, on the one hand, to make up for this year's fiscal revenue and fund gap, to ensure the necessary fiscal expenditure, and at the same time to apply additional incremental policy stimulus, pull the economy back to a new benign growth path, the economic pull effect of more than 0.58 percentage points.
Second, from the perspective of methods, we believe that the probability of the central government increasing leverage is higher. Whether it is the use of special bonds as capital or the allocation of funds by the central government, local governments may need to increase leverage, which is inconsistent with the current requirements for preventing and resolving local government debt risks.
Third, from the perspective of capital allocation, whether the funds are used for debt or transfer payments, it will help government investment to return to growth; If the funds are used for trade-in, cash subsidies for residents, etc., to directly support consumption, the effect on the economy is more obvious.
SPDB International: Pay attention to the node in late October
In terms of fiscal policy, it is expected that the meeting of the Standing Committee of the National People's Congress in late October may announce the issuance of additional 2-3 trillion yuan of special treasury bonds to stimulate consumption and resolve local debt risks.
In terms of promoting consumption, the government may consider introducing preferential policies in terms of taxation or social security to help residents, especially low- and middle-income groups, increase their disposable income to support consumption. There is also room for further expansion of large-scale equipment renewal and trade-in policies and measures for consumer goods.
In terms of stabilizing investment, we believe that accelerating the issuance of ultra-long-term special treasury bonds and local government special bonds and expanding the scope of their use may remain one of the policy priorities. In addition, the National Development and Reform Commission (NDRC) is expected to launch more projects in the pipeline to stabilize infrastructure investment.