Don't underestimate risks or overall growth trajectory
By Dong Shaopeng
Editor's note: Dong Shaopeng is the Executive Deputy Editor-in-Chief of the Securities Daily. The article reflects the author's opinions and not necessarily the views of CGTN.
Recently Shanghai and Shenzhen stock markets saw several single-day declines rarely experienced before. There are many reasons behind the volatility, including changes to international financial market expectations due to the Russia-Ukraine conflict, a resurgence of Covid-19 cases in China, and more uncertainty in the outlook for Chinese stocks in the U.S.
There are also many related changes in the economy, including weakened investment demand, decreased corporate profit margins, slow consumption growth, and increased inflationary pressures.
Domestic investors are concerned about these adverse factors to which policymakers should pay attention.
It is necessary to conduct risk analyses, study and judge various possible scenarios, and propose targeted measures. It is also vital to dispel unnecessary worries and strive to achieve information symmetry so that the market can fully reflect both positive and negative factors and find the market equilibrium.
We should pay attention to both visible and invisible risk factors in the short and medium terms and also have a full understanding of the trends, patterns, and dynamics of China's development. That's to maintain the overall growth trajectory, even when faced with risks and headwinds.
Last December's Central Economic Work Conference assessed downward pressures and other risks and challenges that the Chinese economy may encounter and proposed targeted countermeasures.
The meeting explicitly stated that China faces three-fold pressures in its development, demand contraction, supply shock, and weaker expectations.
The meeting also clearly requested that all regions and departments move to ensure macroeconomic stability, and all parties should actively promote policies conducive to economic stability.
Over the past three months, policy measures, ranging from increasing fiscal spending, the implementation of tax relief, expanding credit, promoting equity and debt financing, and encouraging consumption growth, and foreign trade support, among others, have been implemented; the overall effect of these policies are starting to show.
On March 15, the National Bureau of Statistics released data showing that, from January to February, China's industrial production saw 7.5 percent year-on-year growth; total retail sales topped 7.44 trillion yuan, up 6.7 percent year-on-year; total trade volume hit 6.20 trillion yuan, up 13.3 percent year-on-year; and national fixed asset investment (excluding rural households) reached 5.08 trillion yuan, up 12.2 percent year-on-year. That was 7.3 percentage points faster than in 2021 and 8.3 percentage points quicker than the two-year average growth rate in 2021.
These achievements still need to be consolidated. The task of stabilizing growth is still arduous, and we cannot relax. Especially in the face of new and complex factors at home and abroad, we need to improve our policy measures, identify and overcome points of difficulty, and "ensure stability on six fronts and security in six areas."
On March 14, the State Council executive meeting made directives requiring improved measures to cope with changes in the external situation to ensure that economic growth, employment, and prices remain stable within a reasonable range.
Specific measures include launching a plan for VAT rebates as soon as possible so that taxes are refunded quickly and that refunds to corporate accounts are timely.
The measures also call for Special Transfer Payments from the Central Government to reach local governments promptly. Financial institutions should be encouraged to introduce measures that better support the financing of small and medium-sized enterprises, and reduce their financing costs.
In addition, measures to improve the business environment, increase support for scientific and technological innovation, and stabilize foreign trade should be implemented as soon as possible. I believe that no policy measures occur in a vacuum, nor can they be effective alone.
To make good policy measures take root and become effective, we must take into account the response of market players to various risk factors. Therefore, to promote the policy measures, we must also include an effective messaging push, explaining the global, market, and industry background, and strive to ensure that the risk factors are managed while maximizing the effectiveness of policy measures.
In the face of various existing and new pressures, we must firmly continue doing what we need to do, continue to strengthen the economic fundamentals and increase scientific and technological innovation.
At the same time, we should not underestimate the various external risk factors. We should strengthen bilateral and multilateral communications, take measures to resolve headwinds, make good use of tailwinds, and maintain a stable and sustainable level of economic growth. We should continue to remain open to the outside world, taking the initiative to align with high international economic and trade standards, promote deep reform and high-quality development with a high level of openness. As long as employment and the economy are stable, we will be able to manage the difficulties and move steadily forward.
As far as the capital market is concerned, it has traditionally been characterized by an overreaction to adversity. Therefore, in the face of overly pessimistic market sentiment, mainstream institutions should play a calming role by continuing to analyze, maintain market stability, and improve investment fundamentals.
By guiding the investment behavior of mainstream institutions, we should convey confidence to the market, maintain the fundamental value of the market, and enhance the independent pricing ability and sustainability of the market. The financial system should make liquidity arrangements to stabilize the market.