China Will Have More Confidence In The Supply Side Reform.

The capital market will take an important mission in the supply side reform.

In the future, with the gradual adjustment of A shares and the end of bubbles, the capital market reform will usher in important opportunities and time windows.

We will accelerate the formation of a stock market with complete financing functions, solid foundation system, effective market supervision and full protection of investors' rights and interests, so as to promote economic pformation and upgrading.

We should vigorously promote asset securitization and defuse financial risks.

Developing an open and inclusive multi-level capital market and reducing the financing cost of enterprises.

The Party Central Committee and the State Council attach great importance to giving play to the important role and mission of multi-level capital markets in promoting the economic pformation in the supply side reform.

In 2015, the central economic work conference put forward "focus on strengthening the structural reform of supply side", and discussed the important role of multi-level capital market in "capacity production, inventory elimination, deleveraging, cost reduction and compensation".

In December 23, 2015, the executive session of the State Council, "determined measures to further improve the proportion of direct financing, and enhance the efficiency of financial services in the real economy".

Economy is divided into supply and demand. Demand mainly refers to consumption, investment, export and stock. Supply mainly refers to capital, labor, technology and system.

Economic problems can be divided into demand and supply. If the economic downturn is mainly the demand side, we should adopt fiscal and monetary demand management tools to stimulate aggregate demand; if the economic downturn is mainly the supply side structure, we should reform the old and establish new ones.

Corresponding to the "supply side structural reform" is "aggregate demand side stimulus".

1, China's economic downturn is mainly structural and institutional rather than external and cyclical.

In recent years, the reasons for this economic downturn and its policy response have been widely discussed in the field of macroeconomic research, broadly divided into two kinds of understanding: the first view is that the downward trend of the economy is external and cyclical, and the way out is stimulation; the second view is that economic downlinks are structural and institutional deceleration, and the way out lies in reform.

The first view is that the main reason for this downturn is the global recession since the financial crisis and the cyclical adjustment in China.

If the global economy recovers and the domestic cyclical clearing is over, the Chinese economy will recover periodically and return to the 8%-10% high growth track.

Externalities and cyclists argue that the platform and power structure of China's economic growth has not changed at present. Only because of the rapid growth of 2002-2007 years, a large number of inefficient production capacity and the global economic crisis have led to overcapacity and excessive financial leverage, and subsequent productivity and deleveraging have led to an economic slowdown.

However, since 2013, the world economy has been recovering slowly, and the United States has entered a solid recovery track and raised interest rates for the first time in December 2015.

Growth continued to slow down.

The second view is that the main reason for this downturn is the change in the power structure that supports the original high growth, resulting in a decline in the potential growth rate of the economy.

Net reduction, labor costs continue to rise sharply, multinational companies pfer low-end production base, processing trade bid farewell to the era of high growth, the low end processing manufacturing industry in the field of overcapacity, the peak age of the low-end processing and manufacturing industry reached the peak and began to decrease, the urban household rate reached 54.77%, the real estate long cycle inflection point appeared, the three or four line cities were facing the pressure of de stocking, the growth rate of real estate development investment slipped from 19.3% at the beginning of 2014 to 1.3% in 2015 of 1-11 months, residents from housing consumption to service consumption upgrading, heavy chemical industry overcapacity intensified, domestic overcapacity superimposed, international commodity prices down, prices showing signs of deflation, some industries simple technology to introduce and digest space began to decrease, and faced with original technological innovation. 2003, Lewis's first, second turning points appeared in 2008, and the 15-59 year old working age population began to appear in 2012.

Whether from macro, meso or micro, it can be widely observed that China's economic slowdown is mainly structural and institutional.

More importantly, the market is supposed to be structured, but it is difficult to realize because of institutional obstacles. There are more stimulus and less reform.

To form the three major black holes (namely the iron triangle of the old growth mode: real estate, local financing platforms and overcapacity heavy industries), and create financial risks and hidden unemployment.

2, policy response should be mainly on supply side structural reform rather than demand side aggregate stimulus.

If the economic slowdown is externality and cyclical, the growth platform and dynamic structure remain unchanged. Anti cyclical easing policy should be adopted to stimulate the economy to return to growth center.

For example, 2004-2005 years are cyclical deceleration, cheap labor cost advantage makes China's labor-intensive industrial products sell in the world, residents' rapid housing consumption upgrading leads to a large number of housing and infrastructure investment demand, so after the policy is moderately relaxed, the 2006-2007 year economy will return to cyclical prosperity.

However, if the economic slowdown is structural and institutional, the growth platform and power have undergone profound changes. Institutional factors have hindered structural clearing, solidified the original economic structure, and overcapacity enterprises have become "zombie enterprises". Only stimulating non reform is actually delaying the old growth mode of clearing and encouraging leverage. It is "Minsky moment" and leads to the rhythm of the financial crisis.

Since the international financial crisis in 2008, the economy is facing a downward trend. Our country has adopted financial instruments, such as fiscal stimulus and currency drain, but failed to effectively solve the problems of China's economy and left behind a lot of risks and sequelae. Policy orientation ultimately chose "supply side reform" as the main factor.

In 2009, China adopted 4 trillion fiscal stimulus. Although it played an urgent role in coping with the international financial crisis, it also led to the resurgence of heavy chemical industry, overcapacity and financial risk accumulation.

Since 2014, China has adopted monetary easing. Although it has played a certain role in reducing the financing cost of enterprises, it has also led to the negative effects of asset price bubbles and delaying excess capacity clearing in the stock market, such as the first tier housing market.

At present, China's economy is shifting gears on the surface. In essence, it is structural upgrading and fundamentally depends on reform and pformation.

In 2011, the team of the State Council Development Research Center, which was originally appointed by the government of the State Council, first proposed the "growth stage pformation" in China.

In 2014, when he joined the Guotai Junan Securities Company, he tried to set up a "macro pformation" framework to explain and predict the future of China's economy and capital market. He put forward the "new 5% ratio of the old 8% good" (July 19, 2014), and the 5% new growth platform built in the future will be better than the old 7%-8% growth platform which was barely stimulated by the past. The economy will change from factor driven to innovation driven, and the growth mode will be upgraded from speed efficiency to quality and efficiency. The industry will be upgraded from heavy industry to high-end manufacturing and modern service industries. The profits of enterprises will rise, the lives of residents will be improved, the government's prestige will be improved, and the government's prestige will rise to a new normal for prosperity, sustainable development and healthy development.

Two, capital market will take an important mission in the supply side reform.

The way out for China's economy is to promote excess production capacity in the heavy chemical industry through the reform of the supply side structure, and to free up high-end manufacturing and modern service industries.

The capital market will take an important mission in the supply side reform of "going to capacity, stocktaking, deleveraging, reducing costs and short supply".

1. The Party Central Committee and the State Council attach great importance to giving play to the important role and mission of multi-level capital markets in promoting the economic pformation in the supply side reform.

On the 18-21 day of December 2015, the central economic work conference put forward "focus on strengthening the structural reform of supply side", and repeatedly discussed the important role of multi-level capital market in "going to capacity, eliminating inventory, deleveraging, reducing costs and making up short boards".

It is pointed out that we should accelerate the reform of the financial system and form a stock market as soon as possible, with a complete financing function, a solid foundation system, effective market supervision, and full protection of investors' legitimate rights and interests. We should promptly study and put forward the reform plan of financial supervision system, "expand the proportion of direct financing", "capital market should cooperate with the merger and reorganization of enterprises", support enterprise technological pformation and equipment renewal, reduce the debt burden of enterprises, innovate the way of financial support, and improve the investment ability of enterprises in technological pformation.

"To strengthen all-round supervision, standardize all kinds of financing activities, carry out special rectification of financial risks, resolutely curb the spread of illegal fund-raising, strengthen risk monitoring and early warning, properly handle risk cases, and firmly defend the bottom line of systematic and regional risks.

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In December 23, 2015, the executive session of the State Council, "determined measures to further improve the proportion of direct financing, and enhance the efficiency of financial services in the real economy".

It is put forward that strengthening financial system reform, optimizing financial structure, and actively developing direct financing will help broaden investment and financing channels, reduce social financing costs and leverage ratio, push forward the reform of supply side structure, support public entrepreneurship and innovation, and promote stable operation of the economy.

The meeting confirmed that one is to improve the multi-level capital market such as stocks and bonds.

We should establish a new strategic board for Shanghai stock exchange to support innovation and venture capital financing.

We should improve relevant laws and regulations to promote the listing of special equity structured venture enterprises in China.

We need to increase the number of listed company in China's small and medium enterprises share pfer system.

Standardize the development of regional equity market.

The two is to enrich direct financing tools.

We should actively develop bond products such as income bonds, convertible bonds and sustainable bills, and promote the pilot projects of asset securitization of infrastructure, and standardize the development of Internet lending.

Simplifying the approval of overseas financing for domestic enterprises.

Three, we should strengthen the supervision of credit rating agencies and intermediaries such as accounting and law firms, study cross licensing of securities, funds and futures institutions, and steadily push forward eligible financial institutions to apply for securities business licenses on the basis of risk isolation.

The four is to promote balanced development of investment and financing.

We should gradually expand the investment of insurance protection funds in the capital market, standardize the investment and financing functions such as developing trust and bank financing, and develop private investment funds such as venture capital and angel investment.

Five, we should strengthen supervision and risk prevention, strengthen relevant system construction, and resolutely crack down on financial fraud, illegal fund-raising and other acts in accordance with the law, and effectively protect the legitimate rights and interests of investors.

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2, in the future, with the gradual adjustment of A shares and the end of the bubble to the end, the capital market reform will usher in important opportunities and time windows.

Fast bull fast bear is not conducive to the promotion of capital market reform, the risk is rising, the opportunity is falling out.

With the gradual adjustment of A shares and the end of the bubble to the end, the market is gradually entering the normal state, the valuation tends to be reasonable, and the investors tend to be rational. This will usher in important opportunities and time windows for the reform of the capital market.

In the process of promoting capital market reform, we should pay attention to the combination of theory and practice, department coordination, policy cooperation, symmetric innovation, etc.

Due to the fact that the structure of investors in China's A shares is dominated by individual investors and the rule of law needs to be improved, the game atmosphere is strong. The concept of value investment needs to be spread. It has typical emerging market characteristics. Therefore, under the premise of marketization, registration system and other major reforms should take into account the reality of China.

Facing the increasingly mixed financial development trend and cross infection of financial risks in various fields, we should prevent fragmentation of regulatory functions and promote the establishment of a unified and coordinated regulatory mechanism.

The policy of finance, currency and exchange rate will have an important impact on the capital market. Various departments and policies should cooperate well. For example, after the first A interest rate cut in November 21, 2014, the share price of the shares rose sharply, and the registration system reform and stock supply increase should be speeded up. After January 4, 2015, the depreciation of the RMB exchange rate caused the pressure of capital outflow. A shares can make clear in advance that the major shareholders' lifting of the new rules in January 8th and the release of positive effects will be related to hedging.

At present, under the gambling environment of A share capital stock, the promotion of registration system reform and strategic emerging board will raise the concern of stock supply increase, and we can consider the simultaneous promotion of capital demand for pension market and so on.

3, accelerate the formation of a stock market with complete financing functions, solid foundation system, effective market supervision, and full protection of investors' rights and interests, so as to promote economic pformation and upgrading.

In the future, we must vigorously develop high-end manufacturing, modern service industries and private SMEs. These enterprises have the characteristics of high knowledge, high technology, high risk, light assets and lack of collateral. This is not compatible with the traditional banking led financial system, and the backward financial structure constitutes a constraint on the upgrading of economic structure.

In the future, we should vigorously develop multi-level capital markets and support the development and growth of new industries.

We should promote the registration system reform as a promising project for developing multi-level capital markets, so as to achieve market pricing, pre regulation, post supervision and open and pparent rule of law.

The one-step and thorough registration reform requires higher requirements for the rule of law environment, post event supervision, delisting system and so on. Under the condition of imperfect rule of law protection, the implementation of the American registration system will make the capital market become a more serious money game, which is entirely foreseen.

From the perspective of the older generation, it is suggested that we should adopt a gradual registration system reform and move forward half a step. We should first reduce the profit threshold of listed companies, appropriately expand the capacity, but still have rhythm control, and the audit subjects should be put on the exchanges and exchanges to examine the comprehensibility and consistency of the registration documents, and we will gradually establish a major safeguard system, such as afterwards supervision, class action system, fraud heavy penalties, delisting system, and so on.

4, vigorously promote asset securitization and defuse financial risks.

Resolving financial risks is a key point in the reform of supply side structure.

Vigorously promoting asset securitization is conducive to revitalizing the assets of enterprises, to defuse debt risk and liquidity risk.

For example, ABS (credit asset securitization) is conducive to revitalizing credit assets, improving bank asset turnover and resolving bank risks. REITs (real estate trust investment fund) is conducive to revitalizing real estate assets and resolving the risks of real estate enterprises.

Bank and real estate related risks constitute an important aspect of China's financial risks.

5, develop an open and inclusive multi-level capital market to reduce the financing cost of enterprises.

Improving the multi-level capital market, vigorously developing direct financing, reducing the threshold of equity financing, and innovating bond financing tools are of great significance for broadening the financing channels of enterprises, especially small and medium-sized enterprises, and effectively reducing the financing costs of SMEs.

6, encourage the optimization and reorganization of capital market and resolve backward production capacity.

We should give full play to the role of the capital market in the process of optimizing and restructuring the enterprises, strengthen the pricing and trading functions of the capital market, broaden the financing channels for mergers and acquisitions, and enrich the payment methods of mergers and acquisitions.

We must respect enterprises' independent decision making, encourage all kinds of capital to participate in M & a fairly, break down market barriers and industry segmentation, and achieve the smooth pfer of company property rights and control rights across regions and across ownership.

Building effective stock market exit mechanism, bond default mechanism and breaking the rigid exchange mechanism, reducing support for backward enterprises, will help backward enterprises withdraw from the market.

7, rely on the capital market, relax access, introduce new investors, and accelerate the reform of administrative monopoly industries.

In areas where administrative monopoly is prominent, such as oil and gas, electricity, telecommunications, railways, health care, education, culture, sports and other fields, relying on capital markets, introducing new investors and encouraging competition will help reduce costs and improve efficiency.

8, implement structural tax cuts and encourage innovation.

During the recession, fish farming should be done by reducing taxes and water supply, especially for enterprises to increase investment in technological innovation, accelerate depreciation and VCPE.

Protect property rights, stabilize entrepreneurial expectations, promote the flow of innovation elements, cultivate human capital, and build a financial system that encourages innovation.

9, promote the reform of state-owned enterprises and raise the rate of asset securitization.

The capital market will be an important force to support the reform of state-owned enterprises.

We should promote the classified supervision of state-owned enterprises, set up state-owned capital operation companies, pilot equity incentive and employee stock ownership, and realize the deep chimerism of asset securitization and mixed ownership of state-owned enterprises.

10, while promoting the reform of the supply side, we should build a "complete network" of the society and seize the bottom line of social stability.

The supply side reform will have an impact on bad banks, P2P, employment and so on. The solution lies in the separation of debt restructuring, the vigorous development of service industry, the improvement of social security system and the improvement of unemployment relief.

Three, with the icebreaking of supply side reform, all sectors will have more confidence in China's economic prospects.

With the supply side reform breaking the ice, all circles will be more confident of the future of China's economic pformation. China will not fall into the Middle Income Trap in Latin America. China has a large solid economic base, abundant human capital dividends, and an entrepreneurial team with innovative and entrepreneurial vitality. This is fundamentally different from the resource dominated Latin American countries, and is more similar to Japan and Korea, which have successfully made shift and structural adjustment.

We are in a period of great pformation in the past 30 years. In a great era of change, a series of changes from top to bottom and from bottom to top are being launched on 9 million 600 thousand square kilometers of land. This provides a broad stage for public entrepreneurship and innovation.

We firmly believe that the concept of market economy has taken root in this country. The new central collective leadership has demonstrated the courage and determination to push forward reform.

Reform is the biggest dividend, and reform is the only way out.

Although the road is tortuous and the process is accompanied by labor pains, the prospects for China's economy will be brighter after the reform and pformation.