On September 20, the State Council Information Office held a regular policy briefing to interpret the economic situation and policies. The National Development and Reform Commission stated that since August, various departments have systematically implemented a set of policy "combination punches" to effectively stabilize growth, boost confidence, and prevent risks, continuously consolidating the positive momentum of China's economic recovery. How effective has this policy "combination punch" been? What are the results? Let's take a closer look—
What does the policy "combination punch" entail?
First, intensify the implementation of macro policies. By the end of August, central budget investment had been largely allocated, with newly issued local government special bonds accounting for about 80% of the annual quota; The increase in base money supply, continued expansion of credit, and lower market interest rates on deposits and loans have effectively maintained reasonably ample liquidity, promoting sustained recovery on both the supply and demand sides. Second, extend and optimize a set of phased policies. On July 31, the executive meeting of the State Council clarified follow-up arrangements for phased policies expiring this year and next. Since August, various departments have accelerated implementation, extending and optimizing policies such as tax incentives for small and micro businesses and self-employed individuals, as well as the loan support plan for ensuring property project delivery. Thirdly, we are studying and introducing a set of targeted new measures. We have focused on addressing key and challenging issues in economic operations, rolling out a series of pragmatic and effective new policies and measures. For example: In supporting the development of the real economy, policies such as implementing additional VAT deductions for advanced manufacturing enterprises, raising the proportion of R&D expense deductions for certain companies, and financing support for technology-based firms have been introduced. To support the growth of the private economy, we are accelerating the implementation of 31 policies aimed at strengthening and expanding the private sector, along with 28 recent measures. Efforts include promoting projects and improving channels for feedback to further stimulate private investment. Adapt to the new situation where significant changes have occurred in the supply-demand relationship of China's real estate market, promote the implementation of policies such as "recognizing houses but not loans," optimizing differentiated housing credit policies, and lowering interest rates on existing first-home loans, to better meet residents' rigid and improved housing demands. Fourth, we will plan and introduce a batch of reserve policies. In response to economic changes, conduct regular policy pre-research and reserve measures, and promote the timely introduction and implementation of reserve policies. Currently, multiple reserve policies aimed at driving sustained economic recovery and improvement have been introduced, including raising the standard for special additional deductions in personal income tax and minimum wage standards in some regions, promoting bulk consumption such as automobiles, and orderly expanding the scale of real estate investment trust fund issuance in infrastructure sectors. How effective is the policy "combination punch"?
As the effects of the policy combination punch continue to emerge, data shows that economic performance in August has been steadily recovering, with most indicators showing marginal improvements and an accumulation of positive factors. In August, the growth rates of industrial value-added above the designated size and total retail sales of consumer goods have rebounded, the decline in imports and exports has narrowed, consumer prices have shifted from a decline to an increase, the decline in producer prices and corporate profits has continued to narrow, the national urban surveyed unemployment rate has slightly decreased, the manufacturing PMI has continued to rise, positive factors in economic performance are accumulating, highlights are increasing, and social expectations have improved. First, domestic demand continues to recover.The growth rate of total retail sales of consumer goods accelerated by 2.1 percentage points compared to the previous month, investment scale continues to expand, and the real estate market in many regions has shown signs of recovery with the implementation of policies such as "recognizing houses but not loans." Second, production and supply are stable with an upward trend.The growth rates of industrial added value above designated size and the services production index increased by 0.8 and 1.1 percentage points respectively compared to July, manufacturing growth has significantly accelerated, and service industries such as tourism and cultural entertainment are performing well, especially in tourism where high-speed rail tickets are now in high demand. Third, structural adjustment has been steadily advanced. %% In the first eight months, the growth rates of investment in manufacturing and infrastructure were respectively 2.7 and 3.2 percentage points higher than the overall level. Notably, investment in high-tech industries exceeded the overall level by 8.1 percentage points, playing a key role in optimizing the supply structure. High-end manufacturing and high-tech service industries maintained rapid growth, while green transformation and the digital economy are injecting new momentum and vitality into industrial upgrading.In the first eight months, investment growth in manufacturing and infrastructure outpaced the overall level by 2.7 and 3.2 percentage points, respectively. Notably, investment in high-tech industries exceeded the overall level by 8.1 percentage points, playing a key role in optimizing the supply structure. High-end manufacturing and high-tech services maintained rapid growth, while green transformation and the digital economy injected new momentum and vitality into industrial upgrading. Fourth, the resilience of major economic provinces has become evident.In August, Guangdong's foreign trade import and export growth rate, calculated in RMB, rose to 10.2%, reaching double digits. Zhejiang saw a 12.5% increase in newly established business entities in the first eight months, also a double-digit figure. Jiangsu, Shandong, Henan, and Anhui reported strong growth in physical volume indicators. These major economic provinces have "shouldered the heavy responsibility," playing a crucial role in driving economic recovery. Fifth, social expectations have improved to some extent.The Manufacturing Purchasing Managers' Index (PMI) has continued to rise. The manufacturing production index, new orders index, service sector business activity index, and business expectation index all remain within the expansion zone. It can be said that the new highlights and changes in economic performance in August have laid a solid foundation for sustained economic recovery in the next steps. It must be noted that, after three years of COVID-19, China’s economic performance will continue to be affected by multiple internal and external factors, and the recovery of the Chinese economy will surely be a process of wave-like development and zigzag progress . There are indeed quite a few difficulties and challenges in China’s economic operation at present. But when assessing China’s economic performance, one should take into account not only the present, but also the past and the future, and look at the general trend and trajectory. Looking back, China not only stood firm in the face of the Asian financial crisis in 1998 and the global financial tsunami in 2008, but also grew stronger and scaled new heights in the course of meeting those challenges. One may say that the more difficulties China faces, the more evident its economic resilience becomes. Looking ahead, as existing and new policies take effect together and their outcomes keep accumulating and positive factors continue to grow, we have every reason to believe that the Chinese economy will rebound and maintain a good growth momentum in the long run. At present, there are quite some naysayers who spread the fallacies of China’s economic collapse at home and abroad. Such fallacies have never come true in the past, and will never come true in the present or in the future.
