Many moves in pipeline to shore up H2 growth

The meeting of the Political Bureau of the Communist Party of China Central Committee on July 28 analyzed the current economic situation and arranged economic work for the second half of the year, sending a clear signal on the next-stage policy navigation strategy.

The nation will stabilize growth while striving to achieve the best possible results. It will maintain strategic resolve without introducing excessive stimulus measures, speed up the implementation of existing policies and make full use of them.

Infrastructure construction will remain a policy focus in the second half, and new loans from policy banks as well as their funding for infrastructure projects will provide support for infrastructure construction. At the same time, there will be further room for city-specific policies in the real estate sector.

The nation will also create more driving forces by enhancing the new energy supply and consumption system.

It is pointed out at the meeting that since the beginning of the year, China has been confronted with a complex and challenging international situation, as well as demanding tasks of advancing reform, promoting development and maintaining stability at home.

The nation has effectively coordinated COVID-19 responses with economic and social development, attaining positive results in contagion prevention and control and making new headway in economic and social development. The whole country has made strenuous efforts and scored commendable achievements.

Yet there are prominent issues to address in pursuing economic development, and the nation should maintain strategic resolve and continue to manage its own affairs well, it was stated.

That is to say, “maintaining strategic resolve” was a key phrase during the meeting. We think policies will still be prudent, and there will not be excessive stimulus measures for the achievement of short-term goals.

It was stressed at the meeting that in the second half, China should adhere to the general principle of pursuing progress while ensuring stability, apply the new development philosophy in full, in the right way and in all fields of endeavor, move faster to create a new pattern of development and strive to promote highquality development.

While fully satisfying requirements for effective COVID-19 prevention, economic stability, and safe development, the nation should maintain economic recovery momentum, ensure stable employment and commodity prices and keep major economic indicators within an appropriate range while striving to achieve the best possible results, it was noted at the meeting.

We think the expression “keep major economic indicators within an appropriate range while striving to achieve the best possible results” highlights stabilizing growth, which means the nation will pursue as robust an economic growth as possible within the context of reasonable measures, to ease fiscal and employment pressures.

The meeting also pointed out that major provincial-level regions must shoulder responsibilities, and those capable should exert efforts to fulfill their set social and economic development targets.

To effectively carry out prevention and control of COVID-19, the meeting said victory comes from perseverance, and China should effectively coordinate COVID-19 responses with economic and social development.

The relationship between both goals should be viewed in light of comprehensive, systematic and long-term influences and in particular political implications, it said.

We think China will continue to uphold its dynamic zero-COVID policy, and normalized COVID-19 prevention and control is still an important requirement comparable to economic performance.

It was also stressed at the meeting that macroeconomic policies should play a proactive role in boosting demand, and fiscal and monetary policies should be able to effectively offset deficiencies in social demand.

In our opinion, to boost aggregate demand, there are few driving forces other than investment, exports and consumption. Among them, the fixed asset investment sector has relatively more policy flexibility, and among fixed asset investments, infrastructure is most sensitive to policies.

That is why the meeting said utilization of special local government bonds should be optimized and local governments should be encouraged to make adequate and good use of special debt quotas.

The meeting also called to make good use of new loans from policy banks as well as their funding for infrastructure projects, and called for efforts to support central and western regions in improving their infrastructure and business environment.

In the meeting, it was stressed that actions should be taken to stabilize the real estate market while upholding the principle that “housing is for living in, not for speculation”.

In our opinion, the real estate investment, currently showing negative growth, may become a main force dragging down overall investment demand during the second half.

As the meeting called for making full and good use of policy toolkits by adopting cityspecific policies, and supporting people’s essential housing needs as well as their need for better housing, we think there will be room for more flexible policies in the real estate sector.

The meeting also said local governments should be held accountable for ensuring timely delivery of presale housing assets and maintaining stability of living standards. That clarifies the policy path for dealing with existing problems in the real estate market.

As for new energy, the meeting said more work should be done to boost capacity to ensure energy and resource supplies and work out a system for the supply and use of new energy.

It was the second time a meeting of the Political Bureau of the CPC Central Committee mentioned “a system for the supply and use of new energy”.

The first time was on Jan 24, when it demanded to step up the planning and construction of new energy supplies and use a system based on large wind and solar power facilities that receive support from nearby clean, efficient, advanced and energy-saving coal-fired power assets, and also use safe and reliable ultrahigh voltage transmission lines.

Obviously, the main components of the new energy supply and use systems are wind and solar power bases, coal-fired power surrounding bases and UHV transmission lines.

The meeting on July 28 also stated that to ensure rule-based, sound and sustained development of the platform economy, a special program for platforms to rectify their problems will be completed and routine supervision and regulation over the platform economy will be established.

The meeting said a number of investment cases will be given the green light to encourage orderly investment in the area.

That was in line with the highlights at a meeting of the Political Bureau of the CPC Central Committee in late April, which said specific measures will be rolled out to ensure rule-based and sound development of the platform economy.

CAI MENG / CHINA DAILY