Analysis and Suggestions on the Macroeconomic Situation in 2014

Advantageous conditions, environmental improvement and vitality enhancement

China's economic fundamentals are still good, the external environment tends to improve, market expectations are constantly improving, and institutional reforms are expected to stimulate economic growth.

In 2014, China's economic development has favorable conditions such as good fundamentals, improved external environment, and improved market expectations.

China's economic fundamentals are still good. Generally speaking, China is still in the stage of industrialization, urbanization, upgrading of consumption structure and rapid growth of income, and some new growth driving factors are taking shape, and the economic fundamentals are still good. On the one hand, there is still ample room for growth in domestic demand. From the perspective of consumption, the demand for services such as culture, education, medical care, pension and tourism has grown rapidly. Smartphones, tablet PCs, and information appliances have formed new consumption hotspots, and consumption of housing vehicles continues to grow. The development of emerging formats such as online shopping has strongly promoted the release of consumer potential. From the perspective of investment, China has extremely urgent needs in urban rail transit, environmental governance, urban drainage, affordable housing (including shantytown renovation) and rural infrastructure. On the other hand, the quality of factor supply has increased significantly. From the perspective of human capital accumulation, in 2013, the number of college graduates in China reached more than 6.99 million, and the overall quality of the workforce continued to improve. From the perspective of R&D investment, China's R&D investment has grown rapidly in recent years, maintaining around 20%. In 2012, R&D investment accounted for 1.98% of GDP, and the absolute amount was the second in the world. From the perspective of the quality of capital stock, in recent years China has built a large number of major equipment and important infrastructure with world-class level, laying a solid foundation for long-term development. According to the factor supply calculation, the potential growth rate of China in 2014 was basically the same as or even slightly higher in 2013, which provided a good foundation for economic growth in 2014.

The external environment tends to improve. Since the beginning of this year, the global economic recovery has gradually strengthened in volatility, and the recovery trend of major developed economies such as the United States and Japan has been further confirmed, and developed economies have once again become the main driving force for world economic growth. Driven by factors such as reduced fiscal tightening, favorable monetary conditions and increased private sector activity, US economic growth is likely to reach 2.5% in 2014. The improvement of the US economy will have a greater impact on other developed countries and the global economy. effect. The European economy's recent performance exceeded expectations. As policy measures gradually eliminated tail risks and fiscal drag, the European economy is expected to grow at around 1% in 2014, changing the situation of continued recession for several years. Affected by fiscal consolidation measures such as the increase in consumption tax, Japan’s economic growth is expected to decline in 2014, but it can still maintain positive growth. In 2014, the global inflation situation is expected to remain stable as economic growth in developed countries is still below potential levels and economic growth in emerging market countries is decelerating.

The market is expected to turn better. Since the beginning of this year, China's inflationary pressures have continued to ease, and the overall price level (CPI) is within 3.5% of the regulatory target, which provides favorable conditions for China to continue to implement a proactive fiscal policy and a prudent monetary policy. Since the second quarter, the central government has further clarified the upper limit, lower limit and bottom line of economic growth, and issued a series of support policies, which have played a positive role in stabilizing market expectations and promoted the recovery of market participants' investment willingness. This trend is expected to continue and help Continue to improve market expectations. According to the survey, the current entrepreneurial confidence has generally rebounded, the willingness to invest has increased, and procurement activities have accelerated.

The reform of the institutional mechanism is expected to stimulate the vitality of economic growth. Since the beginning of this year, a number of reform measures such as the simplification and decentralization of administrative examination and approval power have been introduced. The convening of the Third Plenary Session of the 18th CPC Central Committee will accelerate the reform of the system and mechanism, which will help to further transform government functions, promote the development of the non-public economy, and improve the efficiency of resource allocation. In the survey, it is learned that entrepreneurs have high hopes for reforms. Many enterprises are willing to adopt reforms to try and test policies, innovate corporate investment and management methods, and tap their own growth potential, which will play an important role in promoting economic growth and structural adjustment. On the other hand, domestic favorable conditions have increased. Financial well-being is conducive to promoting the development of trade. The cross-border financial transactions and capital flow controls explored by Shenzhen Qianhai and Shanghai Free Trade Zone not only simplify the cross-border RMB business process in terms of cross-border capital, but also accelerate the flow of trade-related funds, especially the Shanghai Free Trade Zone. In order to promote the facilitation of foreign exchange settlement and sales of trade enterprises, relax foreign exchange control, and build a financial center in the financial center through trade flows, it will improve China's foreign trade.

Unfavorable factors, contradictions and uncertainties coexist

The uncertainty of the external environment still exists, and there are many contradictions and hidden dangers in the financial and financial fields.

The uncertainty of the external environment still exists. The IMF's latest World Economic Outlook report believes that the global economic development still faces some uncertainties, and the downside risks of the world economy continue to exist. These factors may also drag down China's economic development. First, the recent growth rate of emerging economies has slowed significantly. In the second quarter of this year, the economic growth of Brazil, India and South Africa in the BRICS countries were 1.5%, 5.5% and 3% respectively, both of which were lows in recent years. As the proportion of emerging economies in China's foreign trade has risen significantly, the impact of its economic slowdown on China is also higher than in the past. Second, the uncertainty brought about by policy adjustments in developed countries. The probability of the Fed withdrawing from the quantitative easing policy in 2014 is likely to have a large impact on the asset markets, exchange rates and trade of emerging economies. Third, the risks of international geopolitical policies still exist. The Middle East continues to be unstable, and the security environment in the surrounding areas has become more severe. It has caused some interference in my normal economic and trade relations.

There are many contradictions and hidden dangers in the financial and financial fields. Since the beginning of this year, China's financial and financial situation has changed a lot, and there are many hidden concerns in the financial and financial fields. On the financial front, first, the financing capacity and solvency of local financing platforms tend to decline. Although there are various estimates of local debt at present, the government debt is high, and the proportion of debt to fiscal revenue continues to rise by a few percent. The survey found that in some third- and fourth-tier cities, due to the decrease in land transfer income, the risk of default on local financing platforms has appeared, and banks have increased their cautiousness in lending. The financing situation of some platform companies is not optimistic. At the same time, high debt will also affect the financial situation of local governments. Second, the contradiction between fiscal revenue and expenditure in some areas may be intensified. Due to the further expansion of the pilot reform and increase in taxation, the increase in tax reductions, and the increase in real estate-related tax revenues may fall sharply next year, and the cancellation of some administrative fees, it will become more and more difficult for some local governments to increase their income. We will promote steady economic growth, adjust the economic structure, and ensure the improvement of people's livelihood. Financial input will continue to increase, and fiscal expenditure pressure will increase accordingly. In the financial sector, financial risks caused by problems such as overcapacity and local government debt are accumulating, and the non-performing loan ratio of bank credit is increasing. Financial institutions evade supervision, and high-risk businesses are expanding too fast, and there are certain systemic risks.

The difficulty of production and operation of enterprises is difficult to be alleviated in the short term. In recent years, the difficulty of production and operation of enterprises has become more serious, and it may still be difficult to effectively alleviate next year. First, labor costs continue to rise. At present, the wages of workers are basically rising at an average annual rate of 20% to 30%. The high labor costs, plus the ratio of social security expenditures to wages attached to wages, have reached 0.5 to 1, and the burden on enterprises has increased. Second, the level of tax burden is relatively high. Some enterprises report that the taxes and fees paid by enterprises currently account for more than 50% of the total profits of enterprises, and even account for more than 20% of operating income. Third, problems such as financing difficulties and expensive financing have become increasingly prominent. At present, SMEs still face problems such as long approval period and small loan scale. In addition to normal interest, banks also charge other fees in the name of consulting fees and consultant fees, resulting in high financing costs and current formal channels. In addition, the annual cost of various costs is about 9% to 10%, and the financing costs of other channels are higher. Fourth, the current overcapacity conflict is still serious, spreading from traditional industries to emerging industries, and also spreading to upstream resource-based enterprises, which will continue to affect the overall economic benefits of enterprises.

Uncertainty in the operation of the real estate market has increased. Real estate prices continue to rise, triggering social contradictions, and squeezing the space for development of other industries, and adversely affecting the stability of the overall price level through various channels. With the expansion of property tax, the rise of mortgage interest rate, the withdrawal of US quantitative easing policy and the oversupply of some third- and fourth-tier cities, there is also some adjustment pressure in the real estate market.

Forecasting and suggesting reforms need to go through all areas

Under the circumstances that there is no major change in the basic policy orientation, it is expected that the domestic economy as a whole will continue to stabilize and rebound next year, and it is expected to achieve growth of around 7.8% throughout the year.

In the fourth quarter of this year, under the support of various reforms and the implementation of policy measures, and the external environment, especially the strengthening of developed economies, the overall recovery of the economy will continue to be consolidated, but considering the higher base in the fourth quarter of last year. The reason is that the growth rate is expected to be less than the third quarter, about 7.7%, and the annual GDP will increase by 7.7%, which is basically the same as last year.

In the absence of major changes in the basic policy orientation, it is expected that the domestic economy as a whole will continue its stabilizing recovery in the second half of 2013, and it is expected to achieve a growth rate of around 7.8% for the whole year, which is slightly higher than the previous year (2013 forecast). 0.1 percentage points. Driven by the moderate rebound in international commodity demand and the continuous growth of domestic consumption, the annual price situation has risen steadily, and the annual consumer price index is expected to rise by about 3%.

At present, China's development is still in a period of important strategic opportunities that can make a big difference, a critical period of structural adjustment, and a transition period of economic growth. We must continue to adhere to the general tone of steady progress, and implement reforms in all areas of economic and social development. We must continue to implement a proactive fiscal policy and a prudent monetary policy, give full play to the role of countercyclical adjustment and promote structural adjustment, and enhance the pertinence, flexibility, and forward-looking nature of macroeconomic policies, especially in the application of specific policy instruments and policy parameters. There must be sufficient flexibility in settings and different policy combinations. Handle the relationship between promoting reform, stabilizing growth, adjusting structure, preventing risks, and benefiting people's livelihood. Implement a proactive fiscal policy, improve the structural tax reduction policy in conjunction with the tax reform, and improve the allocation of financial power. Implement a prudent monetary policy, explore a new monetary policy framework, strengthen coordination with financial regulatory policies, enhance the flexibility of monetary policy instruments, maintain a stable financial credit environment, and strengthen and improve financial regulation.

Formulate a work plan as soon as possible and implement the policies that have been introduced. Do a good job in measuring the scale of the investment and decomposing the year, formulating a practical financing plan, so that the policy can be implemented. It is necessary to concentrate the funds to complete the project under construction, and it will be effective early in the morning, avoiding the flooding of the land and leaving the end of the building. Hidden dangers. In terms of financing, we must make good use of the private capital and state-owned capital stocks with the new thinking of reform. It is necessary to speed up the formulation of policies such as public private sector partnership (PPP), and drive more private capital into public facilities and public service provision. On the other hand, it is necessary to speed up the withdrawal of state-owned capital from the general competitive field, especially the overcapacity field, in conjunction with the strategic adjustment of the state-owned economy.

Promote structural tax cuts and increase fiscal policy support for the real economy. It is necessary to focus on structural tax reduction and support small and micro enterprises and structural upgrading. First, while accelerating the expansion of the camp, the company will support enterprise R&D, equipment investment and the development of small and micro enterprises with tax incentives, accelerated depreciation and subsidized subsidies. The second is to speed up the implementation of property tax, environmental tax and resource tax and other taxes, accelerate the reform of resource products and public utilities prices, and improve the level of local government fiscal revenue security. The third is to increase the export tax rebate support for high value-added products and reduce the loss of profits and competitiveness due to the appreciation of the renminbi. The fourth is to clean up various unreasonable charges and prevent excessive taxation due to reduced fiscal revenue.

Timely and modest fine-tuning to enhance the pertinence of monetary and financial policies. First, according to the new situation of increasing capital outflows and reducing foreign exchange holdings, timely and moderately fine-tuning, hedging the adverse impact of changes in the market on market liquidity. Second, in response to high interest rates, corporate financing costs have risen, and various unreasonable charges have to be cleared to alleviate the interest burden on the real economy. Third, in accordance with the requirements of "using good increments and revitalizing stocks", we will accelerate the work of writing off bad debts and asset securitization to free up credit space to support the development of key areas. Fourth, while innovating financial instruments, it is necessary to strengthen supervision and coordination of different financial products, prevent regulatory arbitrage and deregulation, and control the complication of financial products to avoid financial detachment from the real economy.

Implement consumption stratification and control to tap the growth potential of consumption. In view of the current situation in which the gap between the income and wealth distribution of residents in China is large, the policy of stratification of consumption can be implemented. On the one hand, reasonable guidance of high-end consumption, such as high-end luxury consumption is not a simple ban, but on the basis of strict quantitative control, the implementation of high land prices, high taxes, high utility charges and other policies, making it an important channel for redistribution. On the other hand, in accordance with the international practice, low-tax policies are applied to basic living products to support and expand the consumption of low- and middle-income people.