Maintaining investment: The Ministry of Finance (MOF) will release the second batch of Public-Private-Partnership (PPP) demonstration projects and accelerate the issuance of bonds with 1 trillion yuan for special construction and etc. The investment targets will include the construction of transportation and other infrastructure as well as new energy vehicles, broadband network and other emerging industries.
Promoting consumption: The contents of the policies may involve policies on speeding up in opening duty-free stores at ports and encouraging consumption of new energy vehicles.
Maintaining foreign trade: The cross-border e-commerce pilot is expected to expand by the end of the year.
Regional revitalization: The Certain Opinions on Fully Revitalizing the Northeastern China and Other Old Industrial Bases is expected to be introduced after October.
The Caixin General China Manufacturing Purchasing Managers’ Index (PMI) in September hit a new low in six years and a half. The growth in profits of industrial enterprises above the designated size plunged to -8.8 percent in August. The latest economic indicators released show that the economy is under heavy downward pressures and still has much pressure on achieving the annual economic growth of 7 percent.
Under such background, more policies on maintaining economic growth are needed. What are the arms in the arsenal for maintaining economic growth in the fourth quarter?
The journalist from SSN found that main policies on maintaining economic growth focus on investments. Policies involved include the second batch of PPP demonstration projects to be released by the MOF and the acceleration in the issuing of bonds with 1 trillion yuan for special construction. The investment targets will include the construction of transportation and other infrastructure as well as new energy vehicles, broadband network and other emerging industries.
Besides, policies on promoting consumption are also expected to be released, which may involve speeding up in opening duty-free stores at ports and encouraging new energy vehicles consumption. In terms of maintaining foreign trade, the cross-border e-commerce pilot is expected to expand by the end of the year.
Regional revitalization policies are also expected to be drivers behind maintaining economic growth. It is reported that the Certain Opinions on Fully Revitalizing the Northeastern China and Other Old Industrial Bases is expected to be introduced after October.
There are pressures on achieving 7 percent growth
The National Bureau of Statistics (NBS) will release the economic statistics in the third quarter on Oct. 19. The focus will be whether the GDP can maintain a growth of 7 percent or not. More and more signs show that it is very likely to fall below 7 percent.
The latest evidence is the significant decline in the profit growth of industrial enterprises. Based on the data released by the NBS yesterday (Sept. 28), the profit of industrial enterprises above the designated size saw a year-on-year decline of 1.9 percent from January to August, representing 0.9 percentage points higher than that of January to July.
The profit of industrial enterprises above the designated size saw a year-on-year decline of 8.8 percent in August, which is 5.9 percentage points higher than that of July.
Zhang Jun, an analyst at Morgan Stanley Huaxin Securities, told SSN that “the higher decrease in the profit of industrial enterprises shows that the current real economy is sluggish and the demand cannot be improved significantly in short term. Enterprises are still under heavy pressure of de-stocking.”
Based on the above, the macro-economic center of Minsheng Securities believes that the economic growth in the second half is almost certain to fall below 7 percent. More policies on maintaining growth will be introduced to achieve the target set at the beginning of the year.
More policies on maintaining growth to support bottom
Maintaining investment growth has been the first choice in the arsenal for maintaining economic growth. The MOF and the National Development and Reform Commission (NDRC) have released policies and opinions on maintaining economic growth, disclosing that three major measures on maintaining investment will be released soon.
Firstly, it will arrange capital in promoting the implementation of significant construction projects. It will establish a restriction and incentive mechanism on revitalizing capitals, urge various departments and local authorities to digest recycled stock capitals for key programs with priority in development.
Secondly, the MOF will establish a PPP guidance fund of 150 billion yuan and unveil the second batch of PPP demonstration projects recently. It is learnt that compared with the first batch of demonstration projects launched last year, totaling 30 projects and 180 billion yuan, the second batch will be larger in terms of either project number or investment scale.
Thirdly, the input of special construction fund will be quickened. The NDRC discloses that the first batch of special construction fund has been put in place, while the second batch is expected to be input by end-Sept.
Li Huiyong, chief macro analyst of Shenwan Hongyuan Group Co., Ltd. (000166.SZ), indicated during the interview by SSN journalist that the special construction bond reaches 1 trillion yuan and relevant funds scale might reach 4 to 5 trillion yuan.
It can be seen from the declarations by ministries and commissions that the financial investment will be increased in the fourth quarter with investment mainly going to infrastructure construction area including transport and emerging industries including new energy vehicle and broadband network.
Latest data released by the Ministry of Transport yesterday (Sept. 28) shows that the completed investment in railway nationwide reaches 378.6 billion yuan during Jan.-Aug. period. According to government work report this year, the investment in railway this year targets at 800 billion yuan and only half is completed by now. Hence, the investment in railway will be quickened in the fourth quarter.
“Urban charging infrastructure” might be covered in the four new engineering packages to be released by the NDRC. The Guidance on Quickening the Construction of Charging Infrastructure for Electric Vehicles, targeting at preliminarily building an intelligent and highly-efficient charging infrastructure system and meeting the charging demand of over 5 million electric vehicles by 2020, will also soon be released and implemented. Institutions predict that the market size will reach 1 trillion yuan.
In addition, the Ministry of Industry and Information Technology (MIIT) declared several times that it will continue to quicken the construction of broadband network and the input of relevant investment later. According to the Guidance on Accelerating Construction of High-Speed Broadband Network and Promoting Cheaper and Faster Internet Connection released earlier, the total investment in constructing high-speed broadband network will be no less than 1.1 trillion yuan in next three years.
Policies on promoting consumption also might be launched in the fourth quarter. The MOF mentioned in the opinions on maintaining economic growth that more tax-free stores should be opened at the ports to expand domestic consumption. The NDRC is mulling policy measures on supporting new energy vehicles.
In terms of maintaining foreign trade, the Ministry of Commerce discloses that the scheme on further expanding the piloting scope of cross-border e-commerce and promoting new-type commercial mode of foreign trade will be proposed before the end of this year and be implemented at the beginning of 2016.
Regional revitalization policies might be listed as the maintaining economic growth policies in the fourth quarter. Relevant responsible person in the NDRC recently declares that the Certain Opinions on Fully Revitalizing the Northeastern China and Other Old Industrial Bases will be rolled out after the fifth plenary session of the 18th Communist Party of China Central Committee which will be convened in October. It indicates that new policies concerning the revitalization of the northeastern China might be released after October.
It is noteworthy that though the People’s Bank of China (PBOC) has cut the interest rates and the reserve requirement ratio (RRR) for four times since this year, it is widely believed by the market that there is still room for further easing monetary policies. Lian Ping, chief economist of Bank of Communications Co., Ltd. (601328.SH; 03328.HK), indicated during the interview by SSN that “the monetary policy allows further easing adjustment, such as lowering RRR.”
Translated by Jennifer Lu and Star Zhang
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