The recently concluded China's Central Economic Work Conference (henceforth "Conference") has made its judgment on the economic trend next year and set the macro policy tone to prioritize stability and seek progress while maintaining stability for next year. From the contents of the Conference Communique, the expression of relevant policies this year is different from that of previous years. In the view of researchers at ANBOUND, various policies mentioned in the Conference have places greater emphasis on continuity, addressing new changes in the increasingly complex economic situation with the combined effects of policy combinations.

Judging the economic situation next year, there have been some changes at this meeting, with a more specific expressions of the "structural, cyclical, and phased contradictions", that is, China's economic development is facing the triple pressure of "shrinking demand, supply shock, and weakening expectations". There are two lines of meaning, on the one hand, there is pressure on the whole macro-economy to continue slowing down, which requires "making progress in the midst of stability" in macro policies. In fact, it focuses more on supporting the economic downturn and preventing economic growth from stalling. On the other hand, in the midst of the downward pressure on the economy, it has been confirmed in the Conference that the contradiction in the overall economy lies not only in the supply side, which has been emphasized many times before, but also on the demand side. This is consistent with the previous judgment of ANBOUND on the economic situation. In terms of policy thinking, the Conference not only emphasized "increasing the intensity of cross-cyclical economic policy strategy", but also put forward the idea of "organic combination of cross-cyclical and counter-cyclical macro-control policies". This is consistent with the countercyclical adjustment policy proposal put forward by ANBOUND, which attaches importance to the demand side.

From the perspective of the macro situation, the decline of the real estate market needs attention, which is not only the supply side but also the demand side. Some studies show that real estate and related upstream and downstream industries to economic growth is about 25%, which means that the impact of the contradiction in real estate demand will be more significant and wider next year. This will not only affect economic growth next year, but also pose a structural challenge to economic growth for a considerable period of time. In addition, the implementation of the policy of implementing the dual carbon goals (i.e., reaching peak carbon emissions by 2030 and achieving carbon neutrality by 2060) not only puts pressure on energy supply, but also gives rise to demand problems, leading to higher inflation. This year, a wide range of phenomena have shown that these factors constitute both short-term and long-term changes. In this regard, as ANBOUND repeatedly emphasized, macro-policy needs to focus on demand-side issues and avoid the economic growth to fall out of control.

Judging from China's economic situation, while the macroeconomic policy of next year will tend to be relaxed in its implementation, but the overall easing is limited, with the structural policy still has a considerable share. The Conference proposed to continue implementing proactive fiscal and prudent monetary policies. This tone is basically the same as last year's statement. Notably, it was suggested in the Conference that sound monetary policy should be flexible and moderate, and that liquidity should be reasonable and adequate. Leading financial institutions have increased their support for the real economy, especially small and micro enterprises, scientific and technological innovation, and green development. This means that monetary policy will be relaxed in terms of aggregate control; at the same time, structural tools will continue to strengthen efforts to support small and micro, scientific, and technological innovation and green development, and improve the structure of the allocation of financial resources. As the size of structural instruments continues to expand, the strength of structural monetary policy will increase next year and its policy effects will gradually become apparent.

Next year's fiscal policy will be within the scope of "moderately positive". In terms of fiscal policy, the conference places a greater emphasis on the need to improve efficiency, which means that it is not necessary to take scale expansion as the main direction, but to improve policy effectiveness and pay more attention to precision and sustainability. In the Conference, it has been proposed that the intensity of public finance expenditure should be guaranteed, and the progress of expenditures should be accelerated; implementing a new tax reduction and fee reduction policy, strengthen support for small, medium and micro enterprises, individual industrial and commercial households, manufacturing, and risk resolution, and appropriately carry out infrastructure investment in advance. At the same time, it is necessary to resolutely curb the new hidden debts of local governments. Judging from this statement, on the one hand, the overall tone of fiscal policy is still on the loose side, and the deficit next year is expected to remain quite large. However, in the direction of public finance expenditure, it is different from the previous focus on infrastructure and land development. This time, more emphasis is placed on support for micro-market players, the protection of people's livelihood, and the area of risk prevention. For infrastructure investment in traditional fields, the principle of "moderate advance" is mentioned, and it is required to resolutely curb "new hidden debts". This means that the space and content of fiscal policy expansion will be subject to certain constraints. Researchers at ANBOUND would like to point out that the multiple goals proposed by the Conference on fiscal policy will be inevitably be difficult to implement in practice next year, especially the increasing financial pressure on local governments in recent years, which will significantly weaken the ability to implement "proactive" fiscal policies.

In the Conference, it is also suggested that local areas can propose their own reform policies to maintain the basic conditions of macroeconomic stability. This actually gives local areas some policy flexibility and initiative, but at the same time requires attention to the effectiveness and impact of policies. This means that new requirements have been put forward for the position and perspective of local policy implementation, requiring local authorities to have strategic and systematic considerations for local policy implementation, which in fact increases the difficulty in it and needs to be further improved in terms of ability and thinking. The new changes in the situation mean that it is actually difficult for a single policy or reform to have a fundamental impact on the entire macroeconomics. The basis of policy needs to be based on economic laws and respond to the increasingly complex and changeable economic situation with systematic policy coordination.

Final analysis conclusion:

From the content of the Central Economic Work Conference, macro-policies adhere to the tone of "stability and striving for progress in the midst of stability". However, the "moderate relaxation" of monetary, fiscal and other macro policies should not be understood and judged solely from a single, monolithic aspect. Moore importantly, it needs to be comprehensively analyzed and evaluated from the perspective of systematization and continuity. Under the circumstances that the economic situation being complex and difficult to adjust, it will be significantly harder to implement macro policies next year, and the requirements for policy coordination and systematization will be significantly increased.