According to CF40’s latest macroeconomic quarterly report ‘China's Countercyclical Fiscal Policy and Sustainability of Government Debt’, China has never heavily relied on budgetary spending to provide counter-cyclical stimulus. 1/5 Instead, it mainly adopts a model where local governments, financial institutions and local government financing vehicles work together to boost investment. 2/5

China could consider implementing negative individual income tax (IIT) to boost consumption and employment, advises CF40 research department. 1/4 It means that the government provides taxpayers with a certain amount of subsidy when the level of working income is lower than a given threshold. 2/4

The PBC's "benign neglect," an indirect policy tool devised in 2022 to influence the value of the RMB, was quite successful. It allows the market to determine the exchange rate while retaining capital controls as a last resort.1/5 It should be the most effective currency strategy for China's central bank, said CF40 Advisor Yu Yongding in a recent seminar.2/5

Despite the shrinking working-age population, there is a tremendous pool of surplus rural labor in China., said Caifang, Chief Expert of National Think Tank of Chinese Academy of Social Sciences. 1/5 Many analysts predict that China will not have a rapid growth rate in the future or emerge as the largest economy in the world because its working-age population and total labor have stopped growing. 2/5

#China could consider implementing negative individual income tax (IIT) to boost consumption and employment, suggests CF40 Research Department in a 2022 policy brief ‘Negative Individual Income Tax: Some Thoughts on Policies to Drive Employment and Consumption’. 1/4 It means that the government provides taxpayers with a certain amount of subsidy when the level of working income is lower than a given threshold. 2/4

Given China’s macroeconomic environment in December 2022, the following policies should be taken to boost China’s economic growth and deal with potential risks, said ZHANG Bin, CF40 Nonresident Senior Fellow: 1/5 1. Lower interest rate by 25 bps each time until the employment and growth targets are hit.
2. Issue new types of fiscally subsidized bonds and policy loans to support investment in public goods and quasi-public goods infrastructure projects that feature limited returns.2/4

At the 4th Bund Summit, experts looked back on the asset management sector in China over the five years from the release of the new asset-management rules till their delivery. 1/6 They witnessed the sector returning from playing a part as the “shadow of banks” to its due roles, with narrowed risks and increased importance to the real economy. 2/6

At a recent CF40 seminar, experts agree that China's economy will rebound in 2023, but disputes remain over the strength of the rebound, which is caused by the different views on the scarring effect left by the pandemic and the recovery momentum of the real estate sector. 1/4 China's economy is in the early stage of bottoming out, providing a window period for the macro policy to play a pivotal role. Experts called for more vigorous fiscal policy, breaking the 3% deficit rate constraint and focusing on subsidizing low-income households and SMEs. 2/4

The latest CF40 quarterly report led by Dr. Zhang Bin, CF40 Senior Fellow and Deputy Director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, points out several major challenges facing the Chinese economy in the second half of the year: 1) pandemic-induced uncertainties; 2) weakening of consumption, real estate and export at the same time; 3) enlarging gap between fiscal revenue and expenditure of local governments; 4) possibilities of new risk events; and 5) further escalation of global geopolitical conflicts.

Global economic recovery faltered. In June, JPMorgan Global Composite PMI was 53.5, 2.2 pps up from May; JPMorgan Global Manufacturing PMI was 52.2, 0.1 pps down from May. Total social financing (TSF) grew faster. June recorded a YoY growth in M1 of 5.8%, 1.2 pps high than in May; that of M2 was 11.4%, 0.3 pps higher than in May. TSF grew YoY by 10.8%, 0.3 pps higher than the increase in May.

China’s economic performance rebounded. The official manufacturing PMI in June stood at 50.2, 0.6 percentage points (pps) up from May. 1/7 Manufacturing PMI of large businesses was 50.2, 0.8 pps lower than in May; that of medium-sized manufacturers was 51.3, 1.9 pps up from May; and that of small ones, 48.6, 1.9 pps up from May.2/7

CF40 member ZHONG Wei points out that to realize a steady operation of China’s economy in 2022, we need to understand what it means to be “steady” from different frames of reference and policy perspectives.
Read more at: mp.weixin.qq.com/s/KlRv7dtcpPaZ… 1/6 1. Maintain the long-term trend of growth since the reform and opening up. Despite the shift from high speed growth to high quality growth, it may be necessary to maintain a growth rate of no less than 4% or slow down the pace to make it manageable. 2/6

Prof Huang Yiping, CF40 Academic Committee Chairman, stressed recently that China should continue to press ahead with market-oriented financial reform. 1/5 “Let the market play a bigger role in the resource allocation of the financial system, instead of relying on government intervention,” he said.

Specifically, he said China needs to move forward at two fronts: financial innovation and financial supervision. 2/5

While still in the early stage of development, #DeFi could play an important role in the future financial system as the blockchain becomes more expansive and traditional assets, more tokenized. 1/8 Given that the main challenges hindering the development of DeFi are similar to those facing the traditional financial system, regulation of it could draw on some of the existing rules, CF40 says in a recent article:

mp.weixin.qq.com/s/707W5vSg3_aH…

2/8

Current macro policies should avoid hard landing in the property market while boost the overall economic vitality,pointed out by Zhang Bin, Zhu He and Zhong Yi at CF40 in the working paper How to Prevent the Risk of Hard Landing in the Real Estate Market.1/6 The paper argues China’s #economy still faces great downward pressure in the short term. In particular,risk of hard landing in the #housing market should be prevented. Its threat to financial system is limited,but it will take a heavy toll on the real economy.2/6

In a recent research on Disclosure Standards for Sustainability Information led by CF40 Executive Council member Tu Guangshao, several recommendations for improving the #sustainability #disclosure framework of corporates (“the company” below) in China were made: 1. Sustainability governance

1) Disclosing the company’s structure for sustainable development governance.

2) Disclosing the responsibilities of management in terms of assessing and managing the risks and opportunities related to sustainable development.

The pursuit of common prosperity is a dynamic, long-term process that spans across generations, says Zeng Zheng, a CF40 Young Economist. It requires scientific planning, steady progress and sustained momentum. 1/12 In this process, it’s crucial to understand the relationship between government functions and market forces and their coordination in 3 dimensions. 2/12

How is China’s recent export performance? #PMI for new export orders has been declining since May, but total #exports have maintained a fast growth, especially in the last two months, setting new record highs for the same period. Such divergence could be confusing. 1/5 In a recent article, CF40 research associate and deputy director of the Research Department ZHU He says China’s surprisingly strong #exports after July come more from increased cost than demand. 2/5 mp.weixin.qq.com/s/lUuGDhKrSnDr…

Regulatory measures targeting China's education, health care, and Internet sectors have been rolled out in rapid succession, which are thought to be part of China’s drive towards common prosperity. 1/6 In a recent report, CF40 Youth Economist Forum member XIONG Yuan and Guosheng Securities Analyst YANG Tao analyze the meanings, realizations and goals of common prosperity, along with its implications for the economy and industries. 2/6

Sudden turns in macroeconomic policies before Q3, 2021 would be inadvisable, says Zhu He, CF40 Research Fellow. It’s not yet time for macroeconomic policies to change direction, not to mention the speed of the turn, he says. 1/8

cf40.com/en/news_detail… Recent data suggest a slowdown in China’s recovery, with the output gap closing at a slower pace. It remains uncertain whether #export and real estate #investment can sustain momentum in the next two quarters. 2/8

Dr. Zhang Bin at CASS suggests to give full play to the flexibility of the #RMB exchange rate as a buffer for China’s macroeconomic stability: 1/6

cf40.com/en/news_detail… Whether it is to deal with the difference in relative demand changes at home and abroad, or to handle the impact of international capital flows, maintaining a flexible RMB exchange rate would be a major coping strategy. 2/6