By Dong Ximiao Source: CRI Published: 2016-1-2
China`s Central Economic Work Conference 2015 came a little later than usual.
The four-day Central Economic Work Conference 2015 was wrapped up on Dec. 21, 2015. The conference was expected to be more profound as it would not only set the tone for the economic work in 2016, but also make a general plan for the next five years, both of which require much discretion. The conference, which came a little bit later than usual, however, sent many important signals as expected.
First, the conference clearly laid out a blueprint for the economic work in 2016. 2016 is the first year of the decisive stage for comprehensively building a moderately prosperous society. Based on the big picture both domestically and internationally, the economic work in 2016 will include the following aspects:
Adhere to the overall plan of the five goals (economic, political, cultural, social, and ecological progress) as well as the "Four Comprehensives" strategic blueprint. Build up a development concept that is innovative, coordinated, green, open, and beneficial to all; put the concept into practice. Adapt to the new normal of economic growth and stick to the road map of making progress while maintaining the stability by stabilizing growth, adjusting structure, guaranteeing people`s livelihood and preventing risks. Implementing the five pillar policies, namely stable macroeconomic policy, accurate industrial policy, flexible micro-economic policy, practical reform policy, and inclusive social policy. Fulfill the five prioritized tasks, namely reducing capacity, reducing stock, reducing leverage, lowering costs, and overcoming weaknesses.
Second, the conference emphasized fostering supply-side structural reform. In 2016, China will focus on the supply-side to stabilize growth, further liberalize productivity and create new supply sources, optimize the supply structure and improve competitiveness. The conference highlighted the due position of the government in economic activities, saying that the government should maintain the intensity of supervision on the market while unleashing the energy of the market. In this way, the growth can be better stabilized through supply-side structural reform. The reform is a major innovation for promoting economic growth under the new normal, a proactive choice for adapting to the new competition landscape after the international financial crisis, as well as a necessity for adapting to the new normal in China.
2016 is a crucial year for comprehensively deepening the reform, which features four major reforms, including the supply-side reform, a phased increasing of fiscal deficit, stock reduction in the real-estate market, and accelerating the financial reform.
Third, the conference pointed out that 2016 would be heavily tasked with structural reform for socioeconomic development. Domestically, reduction of capacity, stock reduction in the real-estate market, reducing costs for enterprises, increasing effective supply, preventing and managing financial risks are the main focuses in 2016. Internationally, strengthening the cooperation for production capacity and equipment manufacturing is a top priority. Meanwhile, China will also accelerate the negotiations on FTAs and investment agreements and actively participate in the global economic governance.
The conference also proposed measures on increasing effective supply. It proposed to promote the precision of poverty relief, improve the technological capacity of enterprises, support emerging industries, train personnel, improve agricultural production and product quality, facilitate development with innovation and build national hygienic cities and garden cities. The conference also stressed that International cooperation for production capacity and equipment manufacturing is China`s major strategy for harnessing the markets and resources both from China and abroad.
The "One Belt and One Road" initiative is an important platform for conducting international cooperation for production capacity. For the countries along the routes of "One Belt One Road", the International capacity cooperation is conducive to speeding up their industrialization and urbanization, and promoting local socioeconomic development, leading to win-win results.
The conference also brought new opportunities and raised new requirements for the commercial banking industry.
First, the conference stressed accelerating financial reform, including making a plan for financial regulation system reform, deepening the reform of state-owned commercial banks, speeding up the development of green finance. Further reform of the financial system will unleash the vitality in the commercial banking industry and help diversify the business. Investment banking, insurance, funds, and financial leasing can be included in the business scope of commercial banks. This is why commercial banks must seize the opportunity, accelerate their transformation and innovate on their products and services. They should also maintain integrated management and promote intermediate businesses like green bonds so as to reduce the negative effects caused by financial disintermediation and interest liberalization.
Second, precise poverty relief, enterprise technological renovation and equipment upgrading, supporting new industries, consolidating agricultural modernization have been put on next year`s economic work agenda, which would provide more business opportunities for commercial banks. In this way, commercial banks could provide more integrated financial services. On the one hand, they could develop new financial products to back up capital pool. On the other hand, they could participate in project planning, execution, and consultation. By providing integrated financial solutions, commercial banks can improve high intelligence and information services, better serving the real economy.
Third, international cooperation for production capacity and equipment manufacturing brings challenges as well as development potential to the financial industry. Commercial banks can provide more financial services to major cooperation projects through the directional issuance of special bonds. Commercial banks may expand the business of outbound concessional loans into more countries and industries on the condition of strengthening risk management and prevention on preferential loans for foreign aid. In support of international capacity cooperation, Chinese-capital financial institutions should build more overseas branches to provide asset/equity-backed loans overseas, explore the model for overseas loan filing systems, and encourage loan services jointly provided by public and private sectors. Based on the opportunities mentioned above, commercial banks could speed up their internationalization process.
Fourth, the conference stressed that China will prevent and manage financial risks, handle credit default according to the law, hedge against local government debt crisis and implement targeted measures to handle financial risks, never allowing any possibilities for systematic risks or regional risks. These proposals will help create a better social environment for commercial banking development, as well as disposing non-performing loans, guaranteeing the quality of the assets. The conference also stressed the importance of strengthening all-dimensional supervision on various illegal financing, and expressed the determination on curbing any spreading tendency for illegal fund-raising. It proposed to strengthen risk warning systems and properly handle risk cases. As long as financial behaviors are more regulated, there will be more room for the further development of financial institutions.
Dec. 22 is the Winter Solstice, but our planning for the coming spring has already started.
The author is a visiting fellow of the Chongyang Institute for Financial Studies, Renmin University of China.