Editor's note: The National Two Sessions will conclude in the next couple of days. This year's government work report sets the GDP growth target at 5% and the fiscal deficit-to-GDP ratio at 4%. During the sessions, popular topics such as "anti-involutionary competition" and "AI+" have also become focal points. What key directives emerged from the Two Sessions?
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. The National Two Sessions will conclude in the next couple of days. This year's government work report sets the GDP growth target at 5% and the fiscal deficit-to-GDP ratio at 4%. During the sessions, popular topics such as "anti-involutionary competition" and "AI+" have also become focal points. What key directives emerged from the Two Sessions? In today's program, we have invited He Zhihuan, Vice President of the Bank of China Research Institute, and Yang Delong, Chief Economist of First Seafront Fund, for a video link-up to provide analysis and interpretation.
【Anchor】The government work report mentions that the fiscal deficit ratio is planned to be around 4%. This figure marks an increase from last year's 3%. Mr. He, what are your thoughts on this?
I believe two key messages are conveyed. The first point is that the intensity of fiscal spending will significantly increase in 2025. This indicates that our proactive fiscal policies will play a more important role in economic growth, reflecting a notable advantage in our macroeconomic policies' space. The continuous strengthening of macroeconomic regulation and support for economic growth in 2025 will better manage cyclical fluctuations and provide more favorable conditions to withstand external negative shocks. At the end of last year's Central Economic Work Conference(CEWC), it was proposed to implement more proactive macro policies, particularly to significantly enhance the fiscal policies' support for the economy. Thus, it is said that the central government's increased leverage will become an important tool for a more proactive fiscal policy. This is the first point.
The second point, numerically speaking, is that our calculations show that if the deficit ratio is at 4%, the deficit scale will reach 5 trillion yuan, an increase of 1 trillion yuan from last year. The report also outlines plans to channel fiscal policies towards consumption and livelihood improvement. It will optimize fiscal expenditure related to public welfare and promote consumption, thereby improving the efficiency of the utilization of fiscal funds. This will help consolidate and enhance the quality and effectiveness of China's economic development.
【Anchor】Regarding the highly anticipated consumption aspect, what new characteristics do you think the support policies for consumption mentioned in this year's government work report have?
Data indicates that overall consumption growth remains sluggish, which highlights the current shortfall in effective demand. This is the first characteristic: treating consumption as a very important component of domestic demand to focus on enhancing its role. The second point is that the report also proposes specific arrangements to expand and boost consumption, suggesting the launch of special actions to stimulate consumption. This reflects a comprehensive approach to expanding domestic demand. We see a comprehensive assessment from different angles of consumers' ability, willingness, and courage to spend.
The term 'ability to consume' primarily focuses on boosting purchasing power among the general population. This means increasing income and addressing the issue of insufficient income to genuinely improve consumers' income levels. It also involves tackling employment issues and alleviating pressures faced in the job market. The willingness and courage to consume relate to improving the supply side, optimizing the consumer market environment, and enhancing consumer rights protection. We observe that there is significant demand for consumption in areas such as elderly care, education, and healthcare, but the quality of supply is not high and needs continuous improvement to satisfy consumers. Additionally, new consumption patterns are emerging. In recent years, digital consumption and new service-oriented consumption models have increased in proportion, and this segment holds considerable potential.
【Anchor】OK.This year's government work report also mentions the need to comprehensively address "involution" competition. In your opinion, what areas or industries can combat this "involution"?
Addressing the issue of "involution" competition is aimed at breaking the institutional and mechanistic barriers that hinder economic development. The intention is to create a fairer and more vibrant business and market environment. The comprehensive rectification of involutionary competition involves a macro perspective on how to further break local protectionism and market segmentation, as well as address some requirements and bottlenecks in market access and resource allocation. From a national level, achieving a truly unified national market is essential for enhancing the overall business environment, optimizing industry development, and introducing more fair competition and regulatory guidance in key sectors.
One example mentioned in the report is the acceleration of building a unified and open transportation system, with a focus on reducing overall logistics costs in society. I believe that advancing the construction of a unified national market and improving the foundational institutional framework is a key aspect of resolving involutionary competition at a macro level. Additionally, on the enterprise level, there are prominent manifestations of involutionary competition. Some companies are considering resource allocation on a larger scale to address competitive pressures, effectively utilizing both domestic and international markets and resources to enhance operational capabilities.
【Anchor】Earlier, we mentioned that the government work report proposed a comprehensive approach to address "involution" competition. Some believe that one way for companies to combat involution is to go overseas. Do you think Hong Kong can play a role in this regard?
For a long time, companies looking to expand internationally have indeed considered Hong Kong as a crucial base for entering international markets. Many companies establish headquarters in Hong Kong and manage cross-border and international capital flows, as well as business expansion, through Hong Kong's financial center. In the future, Hong Kong can better support Chinese companies in going global by encouraging more large-scale enterprises to choose Hong Kong as their financial center and regional headquarters to engage in international competition.
At the same time, Hong Kong's financial institutions provide a variety of services and products for enterprises venturing abroad, ranging from acquisition loans and equity financing to structured financing and private equity. Many business opportunities are developed around the actual needs of these outbound enterprises. Moreover, Hong Kong's professional service capabilities and advantages can play a significant supportive role for companies going abroad in addressing regional risks and enhancing their capabilities in regional strategic layouts.
【Anchor】In the government work report, it also mentions supporting Hong Kong and Macau in developing their economies and improving livelihoods, deepening international exchanges and cooperation, and better integrating into the national development framework. What do you think Hong Kong can do to deepen international cooperation?
Firstly, from the perspective of optimizing trade layout, the country faces the important task of further expanding new space for foreign trade growth. In the past, European and American markets were significant pillars of foreign trade, but in recent years, challenges such as weak demand and trade friction have posed difficulties. Therefore, efforts have been made to explore new emerging markets, such as countries along the Belt and Road, ASEAN, and Africa, and Hong Kong has close collaboration with these regions. In terms of increasing the diversification of China's trade, Hong Kong can play a significant role.
Additionally, Hong Kong possesses deep-rooted traditional advantages in professional services such as law, accounting, rating, and management consulting. In the future, it can provide diversified services around the global industrial chain adjustment, assisting Chinese companies in better utilizing international markets and rules to achieve further development.
【Anchor】The government work report includes "stabilizing the real estate and stock markets" in its overall requirements for the first time. We have seen that the positive news from the Two Sessions has greatly boosted the stock market. At the press conference on economic policies, the chairman of the China Securities Regulatory Commission, Wu Qing, mentioned that the emergence of DeepSeek has led to a recent revaluation of Chinese asset values. On that day, the Hang Seng Index also broke 24,000 points, hitting a three-year high. Mr. Yang, what do you think this successful case contributes to enhancing the attractiveness of Chinese assets in the global market?
This year, the pace of foreign capital inflows into A-shares and Hong Kong stocks has accelerated. Many funds, after profiting from U.S. tech stocks, have been seeking new investment opportunities. A-shares and Hong Kong stocks are undoubtedly the two major areas where foreign capital inflow is significantly evident. Therefore, in 2025, the tech sector bull market is expected to persist throughout the year. The rise of DeepSeek and the debut of the Yushu server robot during the Spring Festival Gala have both heightened global capital's enthusiasm for investing in Chinese tech stocks, further narrowing the valuation gap between Chinese and U.S. technology stocks. This will bring better performance to tech stocks in A-shares and Hong Kong stocks.
【Anchor】The governor of the People's Bank of China, Pan Gongsheng, mentioned that moderately loose monetary policies will be implemented, with targeted reductions in reserve requirements and interest rates based on economic and financial conditions. What impact do you think this policy direction will have on the mainland's real economy?
This is positive news for the market. Since the policy shift on 24 September last year, multiple departments have introduced a package of policies to stabilize economic growth. The central bank has also implemented several rounds of monetary easing to support economic recovery. Current economic data has shown improvement, and PMI has stayed above the 50-point threshold for two consecutive months. The next step is to further lower long-term loan rates and increase the overall interest rate level through interest rate cuts and reserve requirement reductions. This is expected to promote economic expansion. At the same time, the central government has set the CPI growth target at around 2%, indicating that rising prices will spur investment, boost consumption, and drive demand growth. The central bank's interest rate cuts and reserve requirement reductions will help boost domestic demand.
【Anchor】OK, thank you. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung | Translate: Kato Ip | Proofread: Chris Liu
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