China's "two sessions" sent a positive policy signal
China's government work report for 2021 was released last week. From the expression of the annual economic work target, the macro policy in 2021 is somewhat tighter than that in 2020, but it is still looser than that in 2017-2019. The deficit ratio, the size of special local government debt, the central government's budgetary investment and monetary policies all reflect the decision-makers' preference for protecting economic recovery. This is positive for stabilizing financial market expectations.
Chart 1 Comparison of targets in government work reports over the years Source：The State Council 、GF Securities
Important points of China's 14th Five-Year Plan
① The binding development targets cover three major areas
Most of the major indicators of economic and social development mentioned in the 14th Five-Year Plan are expected targets, and the binding targets are mainly related to environmental protection (carbon emissions, air control, water pollution control, etc.), food security and energy security, which may be reflected in the capital market.
Chart 2 Main indicators of economic and social development during the 14th Five-Year Plan period Source：The State Council
② New measures may be taken to promote consumption
In the context of "building a domestic cycle as the main body, mutual promotion of domestic and international dual circulation " development pattern, the "14th Five-Year Plan" focuses a lot on consumption. Notable details mainly include "promoting the transformation of consumer goods such as automobiles from purchase management to use management" and "expanding holiday consumption and improving the holiday system". The above statement means that except for a very few big cities, the car purchase restriction policy may be gradually withdrawn during the 14th Five-Year Plan period, and there may be more holidays, not to rule out increasing the number of "small holidays" or extending the time of vacation.
③ Clarification on the direction for reforming the tax system
"The 14th Five-Year Plan" mentions "improving personal income tax system…… optimizing tax rate structure ", "pushing forward real estate tax legislation", and "giving full play to the regulation of housing tax". The adjustment of personal income tax and the substantive promotion of real estate tax are expected to become the focus of the tax system reform.
④ A package of solutions to deal with an aging population is expected to be put in place
In response to the trend of population aging, the 14th Five-Year Plan clearly proposes to "make the birth policy more inclusive, promote the integration of the birth policy with economic and social policies", and "gradually postpone the legal retirement age". This means that the one-child policy may be fully liberalized, and the long-discussed deferred retirement will be implemented.
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