After The Reform And Pformation, China'S Economic Prospects Will Be Brighter.

The idea of market economy has taken root in this country. The new central collective leadership has shown the courage and determination to push ahead with reform.

Although the road is tortuous and the process is accompanied by labor pains, with the supply side reform breaking the ice, all walks of life will have more confidence in China's economic prospects.

After the reform and pformation, China's economy will have a brighter future.

I. problems, discussions and policy responses faced by China's economy in recent years

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, the way out is stimulation; the second view is that the downward trend of the economy is 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. The European and Japanese economies have also improved, but China's economic growth has 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% in 2015 of 1-12 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 achieve structural obstacles because it is hard to achieve, stimulate more, reform less, and refuse to withdraw from the old growth mode. The inflow of hidden guarantees leads to mismatch of funds, thus forming the three major black holes (i.e., the iron triangle of the old growth mode: real estate, local financing platforms and overcapacity heavy industries), brewing financial risks and recessive 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.

In January 18th, the leading cadres at the provincial and ministerial levels studied and carried out the spirit seminar in the fifth Plenary Session of the 18th CPC Central Committee to open classes in the Central Party school. Xi Jinping, general secretary of the CPC Central Committee, chairman of the CPC Central Committee and chairman of the Central Military Commission, delivered an important speech on the opening ceremony.

General secretary Xi Jinping's important speech from the perspective of the overall development of the party and the state, from the perspective of combining theory with practice, history and reality, profoundly expounded the major issues such as the new normal development of the economic development, the new development concept, and the structural reform of the supply side, and put forward clear requirements for the implementation of the new development concept.

Xi Jinping stressed that the structural reform of the supply side should focus on emancipating and developing social productive forces, promoting structural adjustment by means of reform, reducing inefficient and low-end supply, expanding effective and high-end supply, enhancing the adaptability and flexibility of supply structure to demand changes, and improving total factor productivity.

It is necessary to solve the problems of China's economic supply side through a series of policy initiatives, especially policies and measures to promote technological innovation, develop the real economy, safeguard and improve people's living standards.

Our structural reform of supply side emphasizes not only the supply and the demand, but also the development of social productive forces and the improvement of productive relations. It not only gives play to the decisive role of the market in the allocation of resources, but also plays a better role in the government.

Starting from the end of production, the key is to promote effective overcapacity, promote industrial optimization and reorganization, reduce enterprise costs, develop strategic emerging industries and modern service industries, increase public goods and services supply, and increase the adaptability and flexibility of supply structure to demand changes.

In from December 18 to 21, 2015, the central economic work conference pointed out that in 2016, the task of economic and social development, especially structural reform, was very arduous. Strategically, we should stick to steady progress and grasp the rhythm and strength. We must grasp the key points in tactics, mainly focusing on five major tasks: capacity production, storage, deleveraging, cost reduction and compensation.

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.

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

The CPC Central Committee and the State Council attach great importance to giving full play to the important role and mission of multi-level capital markets in promoting the economic pformation in the supply side reform, and the capital market will take an important mission in the supply side reform of "going to capacity, stocktaking, deleveraging, reducing costs and making up short boards".

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 discussed the important role of multi-level capital market in "capacity production, inventory elimination, deleveraging, cost reduction and compensation".

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 financial support methods, and improve the investment ability of enterprises in technological pformation."

"We must 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 systemic and regional risks."

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 is to strengthen supervision and risk prevention, strengthen the relevant system construction, 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.

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.

Push forward

In the process of reform, we should pay attention to the combination of theory and practice, department coordination, policy coordination, symmetry innovation and so on.

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.

1, supply side reform will become the capital market opportunity in 2016.

Opportunity to capacity: M & A opportunities increased, industry concentration increased, corporate profits increased.

Iron and steel, "opinions on solving the problem of excess capacity in the iron and steel industry to alleviate the difficulties" pointed out that encouraging iron steel enterprises to implement cross industry, cross regional and cross ownership reduction and merger and reorganization, focusing on promoting the production of steel loud enterprises to implement merger and reorganization and exiting part of the excess capacity; coal, the NDRC proposed to promote the development of mixed ownership economy, encourage large coal enterprises to merge and restructure small and medium-sized enterprises, and use 3 years to strive to achieve a single coal enterprise production scale of 3 million tons / year; cement and 2016 policies to promote large enterprises to "integrate", accounting for 40% of the industry's capacity.

Opportunities: improving real estate sales and leasing market activity to improve the real estate industry and related services, and the second tier cities with reasonable inventory and benefit from policy support deserve our attention.

The acceleration of the citizenization of migrant workers will bring investment opportunities in medical education and other related fields.

Going inventory will help reduce the risk of Housing enterprises, and real estate corporate bonds may benefit.

The possibility of stabilizing investment in real estate increases, which is conducive to the marginal improvement of the real estate chain.

Opportunities for deleveraging: according to the international experience of supply side reform and the trend of China's current situation, investment opportunities mainly come from emerging industries in the field of equity financing, among which the leading industries are high-end equipment manufacturing, TMT, Internet, medical and health care, new materials, leisure services and other fields.

The traditional cyclical industries, which rely on debt financing, have potential investment opportunities after the improvement of production capacity, supply and demand and balance sheet improvement.

The opportunity to reduce costs: reduce tax costs, reduce taxes, reduce inefficient fiscal expenditure, reduce financing costs, reduce interest rates, develop direct financing, reduce paction costs, decentralization, reduce expected costs, protect intellectual property rights, reduce labor costs, reduce rent costs, control real estate price bubbles, reduce price costs, maintain quantitative neutral monetary policy, and promote factor market price reform.

The opportunity of short board: with the development of economy and the increase of per capita income, the consumption demand of consumers will be upgraded along the path of "clothing, food, shelter, housing and services", and the growth rate of service consumption is far more than that of material consumption.

Optimistic about health and health care, pension, education, film and television media and other related investment opportunities.

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

China has a large solid economic base, abundant human capital dividend and innovative entrepreneurial vitality, which is fundamentally different from the resource based Latin American countries. It is more similar to Japan and South Korea, which have successfully realized the speed shift and structural adjustment.

This round of economic downturn in China is mainly structural and institutional, not externality and periodicity.

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

In December 2015, the central economic work conference put forward "focus on strengthening the structural reform of supply side", and stressed the five tasks of "going to capacity, going to inventory, deleveraging, reducing costs and making up for short boards".

The tasks of the supply side reform will be arranged before and after the "two sessions" in March this year.

With the supply side reform breaking the ice, all sectors will have more confidence in China's economic prospects.

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.

The idea of market economy has taken root in this country. The new central collective leadership has shown the courage and determination to push ahead with reform.

Although the road is tortuous and the process is accompanied by labor pains, with the supply side reform breaking the ice, all walks of life will have more confidence in China's economic prospects.

After the reform and pformation, China's economy will have a brighter future.