Text: Yan Xiang and Xu RuchunOn October 12, 2024, the State Council Information Office held a press conference to introduce the relevant situation of "increasing the counter-cyclical adjustment of fiscal policy and promoting high-quality economic development", and launched a package of targeted incremental policy measures. Core conclusionThe press conference of the Ministry of Finance launched a package of incremental policies, and put forward specific, powerful and targeted measures for some key issues, including: First, strengthen support for local governments to resolve government debt risks, increase debt amounts on a larger scale, and support local governments to resolve hidden debts, which is not only conducive to ensuring the stable and healthy development of the economy, but also of great significance for promoting economic growth and boosting the confidence of market players. Second, the issuance of special treasury bonds will support large state-owned commercial banks in replenishing their core Tier 1 capital, enhance the operational soundness and risk prevention capabilities of large mainland commercial banks, and will also help the banking industry better play its important function of serving the real economy. The third is to superimpose the use of local government special bonds, special funds, tax policies and other tools to support and promote the real estate market to stop falling and stabilize, and promote the steady and healthy development of real estate. Fourth, we will increase support and guarantee for key groups, benefit people's livelihood and promote stability, enhance the consumption capacity and willingness of low- and middle-income groups, and effectively expand domestic demand and promote economic growth. In addition, there are other countercyclical adjustment policy tools being studied, such as the central government has more room for borrowing and deficit improvement. Risk warning: First, geopolitical risks exceed expectations; Second, the macro economy is less than expected; Third, there are large fluctuations in overseas markets. The main body of the report
1. Strengthen support for local governments to resolve government debt risks
We will strengthen our support for local governments to resolve government debt risks, increase debt quotas on a larger scale, and support local governments in resolving hidden debts, so that local governments can free up more energy and financial space to promote development and protect people's livelihood. The Ministry of Finance proposed that in order to alleviate the pressure on local governments to resolve debts, in addition to continuing to arrange a certain scale of bonds in the new special bond limit every year to support the resolution of existing government investment project debts, it is proposed to increase the debt limit of a larger scale to replace the stock of hidden debts of local governments, and increase efforts to support local governments to resolve debt risks. Lan Fo'an, Minister of Finance, stressed that this imminent policy is the most powerful measure to support debt in recent years, which is undoubtedly a timely policy rain, which will greatly reduce the pressure of local debt, free up more resources to develop the economy, boost the confidence of business entities, and consolidate the "three guarantees" at the grassroots level. The overall debt level of the mainland government is within a controllable range, but the local government debt is unevenly distributed in different places, and effective prevention and resolution of local debt risks is not only conducive to ensuring the stable and healthy development of the economy, but also is of great significance for promoting economic growth and boosting the confidence of market players. Compared with the world's major countries, the mainland government leverage ratio is not high. In 2023, the debt of government departments in mainland China will account for 55.9% of GDP, while among the major developed countries, the leverage ratio of United States, France, United Kingdom, and Italy government departments will exceed 100%, and the leverage ratio of Japan government departments will even be as high as 219%; The leverage ratio of the government sector in Germany and Canada is relatively low, at 63% and 95% respectively, which is still significantly higher than the debt level of the mainland government sector. However, there is a problem of uneven distribution of local government debt in mainland China, and the hidden debt pressure of local governments cannot be ignored. In terms of regions, according to the Straight Flush data, the debt ratio of Gansu and Qinghai will exceed 800% in 2023, while the debt ratio of Hainan and Shanghai will be less than 200%, taking into account the debt balance of the debt balance and the interest-bearing debt balance of the urban investment platform. Increasing the debt limit to replace the stock of implicit debts of local governments and strengthening support for local governments to resolve debt risks will not only help prevent and resolve systemic financial risks and ensure stable economic development, but also help promote local governments to devote more resources to supporting economic development. 2. Support large state-owned commercial banks to supplement core Tier 1 capital and issue special treasury bondsSupport large state-owned commercial banks to supplement core Tier 1 capital, improve the ability of these banks to resist risks and provide credit, and better serve the development of the real economy. The Ministry of Finance said that it will adhere to the principles of marketization and rule of law, and actively raise funds through the issuance of special treasury bonds and other channels in accordance with the idea of "overall planning, phased and batched, and one bank and one policy", and support large state-owned commercial banks to further increase core Tier 1 capital in a steady and orderly manner. At present, this work has been started, and the Ministry of Finance, together with the relevant financial management departments, has set up an inter-departmental working mechanism, and is currently waiting for the banks to submit specific plans for capital replenishment. Capital is the foundation of the continuous operation of commercial banks, which is crucial to the steady operation and long-term development of banks, and supporting large state-owned commercial banks to replenish core Tier 1 capital is not only conducive to preventing financial risks, but also helping to better play the important function of the banking industry in serving the real economy. The banking industry is the core component of the financial system, and large state-owned commercial banks are the main force serving the real economy and maintaining the ballast stone of financial stability. As the core part of the bank's financial structure, capital can not only support the expansion of the bank's business, but also an important guarantee for commercial banks to resist risks. Supporting large state-owned commercial banks to further replenish their core Tier 1 capital can not only enhance the operational soundness of large commercial banks in the mainland, but also be of great significance to the risk prevention of the mainland's financial system, and at the same time, it can also give full play to the leverage role of capital, enhance the ability to provide credit delivery, better support economic restructuring and industrial upgrading, and provide more powerful financial support for the development of the real economy. 3. Support and promote the real estate market to stop falling and stabilize
The superimposed use of local government special bonds, special funds, tax policies and other tools to support and promote the real estate market to stop falling and stabilize. The Ministry of Finance said that the next step will be to adhere to the work requirements of strictly controlling the increment, optimizing the stock and improving the quality, and actively study and introduce policies and measures conducive to the steady development of real estate from three aspects: First, special bonds are allowed to be used for land reserves. Considering that there is currently a relatively large amount of idle and undeveloped land in various places, local governments are supported to use special bonds to recycle eligible idle stock land, and areas that are really needed can also be used for new land reserve projects; The second is to support the acquisition of stock housing and optimize the supply of affordable housing. Considering that there are relatively many houses built for sale, while making good use of special bonds to acquire the stock of commercial housing for use as affordable housing in various places, we will continue to make good use of the subsidy funds for affordable housing projects and support local governments to raise more affordable housing resources by digesting the stock of housing; The third is to optimize and improve relevant tax policies in a timely manner. We should pay close attention to studying and clarifying the value-added tax and land value-added tax policies that are linked to the abolition of ordinary residential and non-ordinary residential standards, further study and increase support, adjust and optimize relevant tax policies, and promote the steady and healthy development of the real estate market.
The stable development of the real estate market is of great significance to the stable operation of the economy, and the repurchase of idle land with special bonds is conducive to alleviating the liquidity pressure of real estate enterprises, and the acquisition of stock to optimize the supply of affordable housing is conducive to the destocking of real estate, all of which have a positive effect on promoting the stabilization of the real estate market. As of August 2024, the area of commercial housing for sale in mainland China is 737.83 million square meters, at a historical high, with a year-on-year increase of 13.9%, and it has maintained a double-digit growth level of more than 10%. On the other hand, the sales of commercial housing continued to be sluggish, and the cumulative year-on-year growth rate of the sales area of commercial housing in August was -18%, maintaining a relatively large adjustment. The stable development of the real estate market is of great significance to the stable operation of the economy, and the relevant policies researched and introduced by the Ministry of Finance have a positive effect on promoting the real estate market to stop falling and stabilize: supporting the repurchase of idle land with special bonds can regulate the relationship between land supply and demand, and at the same time help alleviate the liquidity and debt pressure of local governments and real estate enterprises; On the one hand, supporting the acquisition of stock and optimizing the supply of affordable housing can help real estate enterprises to destock, stabilize housing prices, and accelerate the return of funds from real estate enterprises, and on the other hand, it will also help accelerate the construction and improvement of the housing security system in the mainland.
4. Increase the support and guarantee for key groupsIncrease the support and guarantee for key groups, increase the number of students in need, and improve the overall consumption capacity. The Ministry of Finance said that the next step will be to work with relevant departments to adjust and improve the financial aid policy for college students in two steps. The first is to double the number of national scholarship awards in 2024, increase the scholarship award standards for undergraduate students, improve the national scholarship funding standards for undergraduate students, and increase the support of national student loans, and other policy measures, and the second is to increase the scholarship award standards for graduate students in 2025. At the same time, it will also raise the standard of state grants for ordinary high schools, and raise the standards for state grants for secondary vocational schools and expand the scope of funding. Increasing support and protection for key groups and raising the income level of low-income groups can not only achieve the goal of benefiting people's livelihood, promote social equity and enhance social stability, but also enhance the consumption ability and willingness of low- and middle-income groups, effectively expand domestic demand and promote economic growth. The increase of residents' income can effectively enhance residents' consumption capacity and consumer confidence, especially in the case of decreasing marginal consumption tendency, low- and middle-income groups often have higher consumption tendencies, and improving the consumption ability and willingness of low- and middle-income groups can effectively drive the increase of consumption demand. The Ministry of Finance's efforts to increase the number of students and the one-time living allowance issued to the needy before the National Day can directly increase the disposable income of the corresponding groups, which is of positive significance for improving residents' expectations, stimulating consumption potential, and expanding effective demand.
5. Risk warning
First, geopolitical risks exceed expectations; Second, the macro economy is less than expected; Third, there are large fluctuations in overseas markets.
This article is from the report "A Package of Incremental Measures with a Wide Range and Strong Intensity - Interpretation of the Press Conference on Increasing the Countercyclical Adjustment of Fiscal Policy" released by Huafu Securities Research Institute on October 12, 2024.
Analyst:
燕翔， S0210523050003
许茹纯， S0210523060005
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