Boosting Policies to Solve Insufficient Effective Demand

Insufficient domestic effective demand is currently the main contradiction constraining economic development. The recent Central Political Bureau meeting pointed out the need to view the current economic situation comprehensively, objectively, and calmly, to face difficulties, to strengthen confidence, and to effectively enhance the sense of responsibility and urgency in doing economic work.

Recently, a series of incremental policies have been introduced one after another, focusing more on benefiting people's livelihoods and promoting consumption in expanding domestic demand. These policies will actively play an effective role in driving investment.

Focusing on Key Points and Taking Initiatives

The Central Political Bureau meeting called for focusing on key points and taking initiatives, effectively implementing existing policies, and intensifying the introduction of incremental policies. It emphasized the need to further improve the targeted and effective nature of policy measures and strive to complete the annual economic and social development goals and tasks. At a recent press conference held by the State Council Information Office, the National Development and Reform Commission introduced the systematic implementation of a package of incremental policies from five aspects: increasing counter-cyclical macro policy adjustments, expanding domestic effective demand, increasing support for enterprises, promoting the stabilization of the real estate market, and boosting the capital market. This has sent a positive signal that policies are intensifying to promote a sustained and upward trend in the economy.

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Wen Bin, Chief Economist of China Minsheng Bank, believes that in recent times, the intensity of macro policies has noticeably increased, and the pace has noticeably accelerated. First, relevant departments have played an active role in boosting confidence and reversing expectations through measures such as reducing reserve requirements, interest rates, existing mortgage loan rates and down payment ratios, and supporting the capital market. Subsequently, macro policies have been deployed in a holistic manner, aiming to promote an upward structural optimization and a sustained positive development trend, further consolidating the economic fundamentals, and reinforcing the confidence and expectations of business entities, ultimately forming a virtuous cycle of growth.

"We not only pay attention to solving the current difficulties and problems but also pay more attention to solving the major issues in the medium and long-term development of the economy, strengthening the foundation, benefiting the long term, being sustainable, and making steady progress, to promote high-quality development," said Zheng Shanjie, Director of the National Development and Reform Commission. The package of incremental policies focuses more on improving the quality of economic development, supporting the healthy development of the real economy and business entities, and coordinating high-quality development with high-level security.

Wei Qijia, Director of the Industrial Economic Research Office of the National Information Center, introduced that in response to some issues reflected in the economic operation of the third quarter, the central government has introduced a package of incremental policies. On the one hand, through policy coordination and cooperation, efforts are made to achieve this year's economic growth target. On the other hand, by planning related projects in advance and other measures, efforts are made to promote the front-loading of policies next year, to promote the completion of the "14th Five-Year Plan" goals, and to take into account a good start for the "15th Five-Year Plan."

In terms of expanding domestic effective demand, Wei Qijia believes that the relevant policies are highly targeted and conducive to unblocking the current economic cycle and improving the speed of circulation. At the same time, it is beneficial to further consolidate the basic capabilities for high-quality development. In particular, policies such as "two new" and "two heavy" are of positive significance for enterprises to expand reproduction, release potential consumer demand, and better play the guiding and leading role of government investment.

Combining Consumption Promotion with People's Livelihood

The Central Political Bureau meeting proposed to combine consumption promotion with people's livelihood, to promote the increase of income for middle and low-income groups, and to improve the consumption structure.In the incremental policies to promote consumption, the first step is to increase support for specific groups. According to reports, relevant departments have issued one-time living subsidies to people in difficulty such as those in extreme poverty and orphans. The standards for student financial aid will be raised and the policy coverage will be expanded. Additionally, the national student loans for undergraduate and graduate students will be increased, and efforts will be made to reduce loan interest rates.

Wei Qijia believes that the key to stimulating consumption lies in implementing the policy of trading in old consumer goods for new ones and unleashing the potential of new growth points in consumption such as elderly care and childcare.

On one hand, combining the "two new" initiatives to promote the continuous expansion of bulk commodity consumption. Large-scale equipment updates and the trade-in of old consumer goods for new ones not only help to release demand potential but also facilitate energy saving, carbon reduction, and promote a comprehensive green transformation. Currently, the supporting implementation details for the trade-in of old consumer goods have been fully released, funds have been fully allocated, and policies have been fully activated. As the trade-in policies for consumer goods are successively implemented in various places, the sales volume of key consumer goods has increased significantly. In August, the national retail volume of passenger cars was 1.905 million units, a month-on-month increase of 10.8%, of which the retail volume of new energy vehicles was 1.027 million units, a month-on-month increase of 17%.

Data from the Ministry of Commerce shows that since the implementation of the home appliance trade-in policy, more than 8.238 million consumers have purchased 11.7798 million units of eight categories of home appliances, driving sales of more than 55.793 billion yuan. As of 24:00 on October 7, the Ministry of Commerce's car trade-in platform has received more than 1.27 million subsidy applications, driving new car sales of more than 160 billion yuan, of which the proportion of subsidy applications for new energy vehicles exceeds 60%.

"As policies continue to be implemented in detail, consumption is expected to continue to improve," said Wei Qijia. According to the National Development and Reform Commission, in the future, the implementation of related policies will be further strengthened to promote a continuous increase in commodity consumption.

On the other hand, expand service consumption such as elderly care and childcare. In terms of specific measures, support and standardize the development of the elderly care and childcare industries by social forces, urgently improve the fertility support policy system, and improve the level of basic fertility and children's medical public services. At the same time, cultivate new types of consumer formats such as digital consumption and green consumption, and enhance the adaptability of the supply side to mid-to-high-end demand.

Play the effective driving role of investment

To expand domestic demand, it is necessary to enhance the fundamental role of consumption in economic development and the key role of investment in optimizing the supply structure.

It is reported that nearly 6 trillion yuan of government investment this year has been basically allocated to specific projects, and efforts are being made to form more physical work volume. In terms of private investment, this year, the National Development and Reform Commission has introduced 1,635 major projects to private capital, attracting private capital participation in 441 projects with a total investment of 344.8 billion yuan. Private capital participation in major infrastructure projects such as nuclear power and railways has made new progress. Next, efforts will be made to accelerate the improvement of the long-term mechanism for private enterprises to participate in national major construction projects, continue to do a good job in promoting high-quality projects, promote more private capital to participate in major infrastructure projects such as railways, energy, and water conservancy, and accelerate the selection and formation of a new batch of national key private investment project lists. At the same time, the new mechanism of government and social capital cooperation will be standardized and implemented, supporting more eligible private investment projects to issue infrastructure REITs, and deepening the pilot cooperation of investment and loan linkage.

"After sorting out, there is a large demand for incremental funds in areas such as the construction of infrastructure, urbanization of agricultural transfer population, construction of high-standard farmland, construction of underground pipelines, and urban renewal," said Zheng Shanjie. Next year, it is necessary to continue to issue long-term special national bonds and optimize the direction of investment to support the construction of "two heavy" projects. The National Development and Reform Commission will advance the issuance of a 100 billion yuan central budget investment plan and a 100 billion yuan "two heavy" construction project list for next year within this year, to support localities to accelerate the start of preliminary work and start construction in advance.Deputy Director of the National Development and Reform Commission (NDRC), Liu Sushe, introduced that the NDRC is working with relevant departments and localities to plan and reserve a batch of major projects for "two focuses" construction from top to bottom, and at the same time, it is accelerating the "soft construction" such as policy, planning, and system mechanism innovation. The central budget investment continues to support foundational, public welfare, and long-term projects, and accelerates the improvement of China's modernization construction's shortcomings and weak links.

Taking urban renewal as an example, it is estimated that in the next five years, the total length of various types of pipelines such as urban gas, water supply and drainage, and heating that need to be renovated will be nearly 600,000 kilometers, with a total investment demand of about 4 trillion yuan. Liu Sushe introduced that in the two "100 billion" project lists and investment plans, urban renewal occupies a certain proportion, mainly arranging the construction of urban gas, water supply and drainage, and heating pipelines, highlighting key cities and central urban areas with large population scale and high density. At the same time, it continues to coordinate and increase the support of central budget investment for urban renewal projects such as the renovation of old urban communities, urban villages, and dilapidated housing. It is also studying to include urban renewal projects with certain returns, such as the renovation of old streets (old factory areas), into the scope of local government special bonds.

The promotion of the 102 major projects in the "14th Five-Year Plan" will be intensified. It is reported that among the 5,100 specific projects involved in the 102 major projects, 92% of the projects have currently started construction or have been completed. Next, the NDRC will increase the coordination and increase financial support and resource protection to promote the 409 projects that have not yet started construction to start construction as soon as possible, ensuring that by the end of next year, the 102 major projects in the "14th Five-Year Plan" will be successfully completed.

New urbanization is a "multiplier" for expanding consumption and an "accelerator" for driving investment. Deputy Director of the NDRC, Zheng Bei, said that focusing on removing the blockages and key points in the process of urbanization of more than 170 million migrant workers and their accompanying family members, and addressing the difficult issue of household registration in large cities, the focus will be on accelerating the relaxation of household registration conditions in cities with a permanent population of more than 3 million in the urban area, fully establishing public household registration in street communities, and improving the rental housing registration policy; in response to the most concerned issues of agricultural transfer population such as education and medical care, it will increase the support of long-term special treasury bonds for projects such as the construction of ordinary high schools and the renovation of hospital wards in cities with concentrated population inflow.