Editor's note: On July 30, the Political Bureau of the Central Committee of the Communist Party of China held a meeting. The meeting analyzed the current economic situation and outlined the economic work for the second half of the year. This meeting is seen by the market as an important guide for the successful conclusion of the "14th Five-Year Plan" and the initiation of the "15th Five-Year Plan." After the meeting, some foreign media and analysts noted that the content released did not exceed expectations and predicted that policies would "adapt to changing circumstances."
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. The Political Bureau of the Central Committee of the Communist Party of China held a meeting last Wednesday to analyze the current economic situation and deploy economic work for the second half of the year. Analysts suggest that this meeting made detailed arrangements for the successful conclusion of the "14th Five-Year Plan" and the initiation of a new phase for the "15th Five-Year Plan," indicating important directions. What are the key signals to this meeting?
Today, we have invited renowned economist Song Qinghui and senior political and economic scholar Ma Jiangbo to provide analysis and interpretation. Welcome, everyone!
Firstly, I would like to ask Mr. Song. We noticed that after the meeting, some foreign media and analysts commented that the contents announced were "not particularly beyond expectations," and they believe policies will "change with the times." What is your view on this?
【Song】I think this analysis is relatively objective and aligns with the actual situation in China. The reason there are no particularly unexpected developments mainly involves four aspects.
Firstly, the meeting clearly stated the need to maintain policy continuity and stability. This means that the overall framework and direction of China's current economic policy are clear and will not undergo major shifts. After a series of macroeconomic adjustments and structural reforms, policymakers are more inclined to optimize and adjust within the established framework rather than pursue disruptive changes.
Secondly, the meeting's assessment of the economic situation this year is that it is stable with progress, and high-quality development has achieved new results. The main economic indicators are performing well, new quality productive forces are developing actively, reforms and openings continue deepen, risks in key areas are being effectively guarded against and mitigated, and social welfare guarantees are further strengthened. This relatively positive assessment indicates that there is no need for overly aggressive or unexpected stimulus policies.
Thirdly, the meeting emphasized the need to promote both qualitative and effective improvements and reasonable quantitative growth in the economy. This shows that the focus of policies has shifted from merely pursuing GDP growth rates to placing greater importance on the quality and efficiency of development. The diminishing marginal effects of short-term stimulus measures highlight the greater significance of long-term structural reforms.
Lastly, in the context of economic challenges, policymakers emphasized a heightened sense of risk awareness and ensuring that we stay clear of our bottom lines. While stabilizing growth, preventing and mitigating major risks is placed in an important position, making policy operations more cautious and avoiding the new risks that excessive stimulus might bring.
Adaptability indicates that policies are not static but are dynamically adjusted based on changes in the internal and external environment. For example, regarding the intensity and pace of macroeconomic policies, if the second half of the year sees unexpected downward pressure on economic growth, further contraction in external demand, a weaker-than-expected recovery in domestic consumption, the spread of real estate risks, or significant changes in inflation levels, the strength and timing of fiscal and monetary policies may be adjusted. This could include increasing the issuance of government bonds, further interest rate and reserve requirement ratio cuts, or the introduction of more structural monetary policy tools.
【Anchor】Yes. What does Mr. Ma believe is the reason for the "lack of particularly unexpected developments"?
【Ma】Firstly, the GDP growth rate in the first half of the year reached 5.3%, and the pressure for economic growth in the second half is not significant, so there is no need for major stimulus policies. Secondly, this year is the concluding year of the "14th Five-Year Plan," and next year marks the beginning of the "15th Five-Year Plan." Therefore, this year's development needs to leave some space for next year's start. Thirdly, in an environment where the global monetary cycle remains unclear, China should also maintain policy flexibility to respond to potential impacts from the Federal Reserve's monetary policy. Additionally, during the transition period between old and new growth drivers, it is necessary to observe the effectiveness of structural reforms, so we need to avoid prematurely exhausting policy tools.
【Anchor】What policy flexibility is there for the second half of the year that could adapt to changing circumstances?
【Ma】I believe that policies in the second half of this year may emphasize flexibility, adaptability, and foresight. For example, this meeting did not specifically mention a timely reduction in reserve requirements or interest rates, but if the Federal Reserve further cuts rates in the second half and the pressure for renminbi depreciation are not significant, then policies may still be adjusted accordingly when necessary. Additionally, in the real estate sector, the main focus currently is on urban renewal. The Ministry of Housing and Urban-Rural Development indicated last year that 1 million new urban village renovations would be added this year, with cash compensation. However, this policy saw limited implementation in the first half of the year, but if the housing market remains sluggish in the second half, it is possible that this policy will be revived to provide support.
【Anchor】Returning to the expressions mentioned in this meeting, which part of the topics discussed in the meeting do you think is particularly important, Mr. Song?
【Song】There are two aspects that are particularly worth paying attention to.
Firstly, the meeting emphasized the need to lead the development of new productive forces through technological innovation, accelerate the cultivation of emerging pillar industries with international competitiveness, and promote the deep integration of technological and industrial innovation. I believe this indicates that technological innovation and industrial upgrading are the core driving forces for promoting high-quality development and will be a key focus of China's economic work in the second half of the year. The meeting also stressed the importance of coordinating development and security, specifically mentioning the continued prevention and mitigation of risks in key areas, including real estate risks, local government debt risks, and enhancing the attractiveness of domestic capital markets. This reflects China's high regard for risk prevention and national security while pursuing economic development.
【Anchor】The meeting emphasized "governing corporate disorderly competition in accordance with the law," which is seen as a clear signal against "involution." Regarding the issue of "involution," how do you expect it to develop in the second half of the year? How will it expand to more industries and sectors, Mr. Song?
【Song】In the second half of the year, it is expected that governance in relevant areas will continue to deepen. For example, more specific laws, regulations, and industry standards may be introduced to clarify the definition of disorderly competition and increase the costs of violations. At the same time, the concept of governing corporate disorderly competition in accordance with the law will gradually expand to more industries, especially in emerging sectors and the digital economy. In these areas, with the continuous emergence of new business formats and models, relevant state departments are expected to implement more detailed regulations on competitive behaviors related to data elements, algorithm recommendations, and platform rules.
【Anchor】Yes. What is your view on this, Mr. Ma?
【Ma】I believe that in the second half of the year, we can deepen efforts through three aspects.
First, at the regulatory level, it is important to improve the supporting details of the new amendments to the Anti-Unfair Competition Law, clarifying the definitions and standards for behaviors such as predatory pricing and excessive competition, to form a stable and moderate regulatory framework.
Second, at the industry level, it is necessary to establish a mechanism for self-discipline and regulatory coordination. For example, industry associations can conduct dynamic monitoring and early warnings to constrain individual impulses of enterprises through self-regulation.
Finally, at the execution level, there may be a strengthening of cost investigations and price monitoring, enhancing supervision and inspection of product production consistency, and urging key enterprises to fulfill their payment commitments, thereby creating a long-term mechanism to counter "involution."
【Anchor】Additionally, this meeting also mentioned the need to "expand high-level opening up and stabilize the basic foundation of foreign trade and foreign investment." We also saw that last week there were new developments in U.S.-China tariff negotiations. Given the ongoing context of U.S.-China trade talks, how do you think the work of expanding foreign opening up and supporting foreign trade enterprises should be carried out, Mr. Ma?
【Ma】In the context of U.S.-China trade friction, I believe we need to adopt a differentiated strategy. Firstly, we should strengthen cooperation with emerging markets such as ASEAN, the Middle East, South America, Africa, and Central Asia, deepening regional industrial chain integration through the development of these markets. Secondly, we should provide targeted support for foreign trade enterprises, such as improving the efficiency of export tax rebates, enhancing cross-border financing support, and implementing trade relief for companies facing difficulties. Thirdly, we should create a model of free trade experimental zones, granting greater autonomy for conducting policy stress tests to regions like Shanghai, Shenzhen, and Hainan, to further promote the depth and breadth of institutional opening. Additionally, we can leverage Hong Kong's status as an international arbitration center to provide foreign legal support for enterprises, reducing the risk of trade disputes.
【Anchor】Regarding foreign opening up, the National Two Sessions this year also mentioned that Hong Kong should "deepen international cooperation." In this regard, what specific work do you think Hong Kong can undertake in the second half of the year, Mr. Song?
【Song】Firstly, Hong Kong should leverage its free flow of capital, sound legal system, and international talent advantages to attract more international asset management institutions to establish branches in Hong Kong and even manage global and mainland assets. Secondly, Hong Kong should seize the global emphasis on ESG (Environmental, Social, and Governance) investments, vigorously develop green bonds, green funds, and other products, with the goal of becoming a regional leader in green finance. Thirdly, Hong Kong should promote financial technology innovation, including the application of virtual assets and blockchain technology in the financial sector, to further enhance the digitalization and competitiveness of its financial industry.
【Anchor】Additionally, there has been significant attention on the capital markets this year. In the first half of the year, both the Hong Kong and A-share markets performed exceptionally well. This meeting mentioned that "in the second half, we need to consolidate the momentum of stability and improvement in the capital markets." What specific measures do you think can be taken to achieve this, and what policy expectations do you have, Mr. Ma?
【Ma】I believe that consolidating capital markets in the second half of the year requires multiple measures. Firstly, optimize the pace of IPOs and refinancing to balance supply and demand. For key supported industries such as technology and new consumption, green channels for listing should be opened. Secondly, strengthen the introduction of medium and long-term funds, encouraging social security funds, insurance capital, and others to accelerate their market entry, increase equity allocation ratios, and further implement a deepened long-term assessment system. Thirdly, enhance the regulation of listed companies, crack down on financial fraud and other violations, improve delisting mechanisms, and accelerate the exit of zombie companies, thereby forming a healthy and sustainable capital market ecosystem.
【Anchor】Alright, the positive interaction between the Hong Kong and A-share markets is expected to continue in the second half of the year. How do you think this trend can be maintained in the coming months?
【Ma】In the first half of the year, the Hong Kong and A-share markets exhibited several positive characteristics, such as the expansion of stock connectivity, active ETF trading, and optimized bond connectivity. There was a steady increase in the two-way flow of funds between the north and south. In terms of corporate financing, there was a surge in the return of Chinese concept stocks and mainland companies seeking secondary listings in Hong Kong. On the regulatory front, Hong Kong and the mainland strengthened cross-border regulatory cooperation, achieving better regulatory coordination and risk control, which enhanced the confidence of international investors.
As for how to continue this momentum in the second half, I believe that: firstly, we should further expand the connectivity mechanism by including more A-share Science and Technology Innovation Board stocks and specialized Hong Kong enterprises in the connectivity framework, thereby covering a broader range of industries. Secondly, we need to strengthen the dual-main-market model for corporate financing, encouraging companies to leverage the internationalization of Hong Kong stocks and the high valuations of A-shares for better financing opportunities. Thirdly, we should optimize the alignment of ESG disclosure standards between the two markets to attract international capital to allocate Chinese assets.
【Anchor】Finally, it was announced that the Fourth Plenary Session of the 20th Central Committee of the Communist Party of China will be held in Beijing in October, during which the "15th Five-Year Plan" will be studied and formulated. Mr. Song, what expectations do you have for the "15th Five-Year Plan"?
【Song】I have high expectations for the "15th Five-Year Plan," specifically in five areas.
First, I hope the plan will significantly elevate the core status of technological innovation in the overall national development. For example, we should increase investment in infrastructure, break through key technological bottlenecks, and cultivate more emerging pillar industries with international competitiveness, thereby leading to a modern industrial system dominated by new productive forces.
Second, I anticipate that the plan will further refine the pathways for constructing a new development pattern, emphasizing domestic circulation as the mainstay while promoting mutual reinforcement between domestic and international circulations. In this context, I expect more long-term policies to stimulate consumption and investment, optimizing the income distribution structure, enhancing residents' consumption capacity, and invigorating private investment.
Third, I expect the plan to place development and security on an equal footing, strengthening the national security system and capacity while pursuing economic development to prevent and mitigate major risks, including real estate risks, financial risks, local debt risks, food security, and energy security.
Fourth, I look forward to the plan continuing to advance common prosperity by increasing investment in education, healthcare, elderly care, and housing, while improving a layered and categorized social assistance system to promote comprehensive human development and substantial progress towards common prosperity for all.
Fifth, I hope the plan will further clarify the strategic position of the digital economy within the national economy, promoting the deep integration of the digital economy with the real economy to build a digital China.
【Anchor】Yes. What do you think, Mr. Ma?
【Ma】Based on the signals released by this Central Political Bureau meeting, the planning will closely align with the core tasks of Chinese-style modernization, taking high-quality development as the main line. It will both consolidate existing advantages and strengthen risk response capabilities. In the economic domain, the plan will highlight the engine role of new-quality productive forces, accelerating the cultivation of strategic emerging industries such as artificial intelligence, quantum information, and biomanufacturing through the deep integration of technological innovation and industrial upgrading. This will help construct a more internationally competitive modern industrial system.
In terms of reform and opening up, it is expected that the plan will further promote institutional breakthroughs for a unified national market, dismantling local protectionism and strengthening fair competition reviews. At the same time, by upgrading free trade experimental zones and piloting service industry openness, it will deepen institutional opening.
Notably, the "15th Five-Year Plan" may systematically integrate the dual requirements of development and security for the first time, building a comprehensive security framework covering areas such as energy resource security, industrial chain resilience, and data sovereignty. These elements will run throughout the planning process and are expected to receive greater policy support.
【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, Rachel Liu | Translate: Kato Ip | Proofread: Chris Liu
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