Policy Interpretation | Why is the stock market surging? Several unusual points about this meeting

From the Source Research Institute, original title "Several Unusual Aspects of This Meeting".

Summary

The timing of the meeting is unusual, either an additional meeting or significantly earlier. Meetings in April and July this year were held as scheduled. Based on experience, the next economic-related meeting should be held in October or November. Considering issues such as the National Day holiday, it can be speculated that this meeting is likely an additional meeting before the next month's meeting, or at least an emergency advancement of the next month's meeting to September. The main purpose is likely to prevent significant economic downturn issues in advance.

The background of the meeting is unusual, possibly due to some issues in the third-quarter economic data. September is the last month of the third quarter. Based on high-frequency data from the third quarter, the market generally believes that the year-on-year GDP data for the third quarter may fall to around 4.5% to 4.8%, lower than the second quarter. Therefore, it can be speculated that the purpose of this urgent meeting is to plan a set of policies before the start of the fourth quarter to hedge against the economic downturn trend and prepare for achieving an annual GDP growth rate of around "5%".

The policy intensity is unusual, with the previous "924" set of policies exceeding expectations. Before this meeting, many departments had already introduced various related policies, especially the intensity of the "924" new policies had clearly exceeded market expectations. This indicates: first, the macro-management department has already paid attention to the "negative wealth effect" brought about by asset price contraction, which has had a significant negative impact on the economy; second, the current economic downturn issues are quite serious, and significant policies should be promptly introduced to counteract them.

The expression style is unusual, with shorter meeting minutes and updated expressions. Firstly, the length is short and concise. Generally, to improve drafting and publishing efficiency, Xinhua News Agency's political bureau meeting minutes have a relatively fixed format, which also results in a relatively fixed length for each meeting minutes, such as around 2500 words for the "430" meeting minutes, similar to most cases. However, this meeting had only 1200 words and deleted a lot of fixed expressions, indirectly reflecting the urgency of the meeting. Secondly, the expressions are new and strong. Of course, the conventional expressions are still there, just with a stronger tone; on the other hand, many expressions have been reversed: for example, the monetary policy no longer mentions "prudent and precise", but "to reduce the reserve requirement ratio, implement a strong interest rate cut"; real estate is no longer about "urgently building a new model for real estate development, promoting high-quality development of real estate", but directly "to promote the stabilization of the real estate market", "to respond to public concerns, adjust housing purchase restrictions, lower interest rates on existing home loans, accelerate the improvement of land, finance, and tax policies, and promote the construction of a new model for real estate development", and so on.

Event: Beijing, September 26th, Xinhua News Agency - The Political Bureau of the Communist Party of China held a meeting on September 26th to analyze and study the current economic situation and deploy the next economic work. Why was it held at this special juncture? What is unusual about the meeting communique?

Unusual Timing of the Meeting

Either an Additional Meeting or Significantly Earlier

The meeting was originally scheduled for November. According to convention and regulations, the Political Bureau of the CPC Central Committee generally holds a collective meeting approximately once a month, and in the event of emergencies or impending issues, an ad hoc meeting may be convened.

Among them, there are three annual meetings for "analyzing and studying the current economic situation and economic work," which are held at the end of April, the end of July, and the end of November. The meeting at the end of April is for better deployment of the annual economic work after the National "Two Sessions"; the meeting at the end of July is to deploy the economic work for the second half of the year; and the meeting in November is to connect with the annual Central Economic Work Conference at the end of each year to set the tone for next year's economic work.

The meetings in April and July of this year were held as scheduled, and based on experience, the next economic-related meeting should be held in November. However, surprisingly, this time it took place at the end of September, which is very unusual. Therefore, it can be speculated that this meeting is likely an ad hoc meeting, or at least the November meeting has been brought forward to September. The primary purpose is probably to prevent significant economic downturn issues in advance.

Unusual Background for the Meeting

Possibly Issues with Third-Quarter Economic Data

As for why there is a need for an additional meeting related to the economy, or why this meeting needs to be held two months earlier? We speculate that it may be due to a noticeable decline in economic data.

September is a special month, being the last month of the third quarter. The economic performance in the first three quarters of this year was roughly good in the first quarter, flat in the second quarter, and declining in the third quarter. Looking at the performance of individual quarters, the growth rate in the first quarter of this year was 5.3%, the second quarter was 4.7%, maintaining a 5.0% growth rate for the first half of the year. However, based on high-frequency data for the third quarter, it is widely believed that the final GDP year-on-year data for the third quarter may fall to around 4.5% to 4.8%, lower than the second quarter. Additionally, the direct impact of the economic slowdown is on employment. According to data released by the National Bureau of Statistics, we observe the unemployment rate of young people aged 16-24, excluding students, in August this year was 18.8%, which is quite serious.

Therefore, we speculate that: the purpose of this urgent meeting is to plan a package of policies before the start of the fourth quarter, in order to hedge against the downward trend in the economy and prepare for achieving an annual GDP growth rate of around "5%" in the final sprint.

Unusual Policy Intensity

The Previous "924" Package of Policies Exceeded Expectations

Prior to this meeting, many departments had already introduced various related policies, especially the intensity of the "924" new policies had clearly exceeded market expectations.

For example, in terms of monetary policy: preparing to cumulatively reduce the reserve requirement ratio by 0.5 percentage points, lowering the central bank's policy rate, namely the 7-day reverse repurchase operation rate, by 0.2 percentage points, guiding the simultaneous downward adjustment of loan market quoted interest rates and deposit rates to maintain the stability of commercial banks' net interest margins;

In the real estate industry: guiding commercial banks to reduce the interest rates on existing housing loans to near the rates for new loans, with an average expected reduction of about 0.5 percentage points; unifying the minimum down payment ratio for first-time and second-time home buyers, reducing the national minimum down payment ratio for second-time home loans from the current 25% to 15% nationwide;The People's Bank of China has increased the support ratio of central bank funds for the 300 billion yuan re-lending for affordable housing from the original 60% to 100%.

In terms of the capital market: Establishing convenient support for securities, funds, and insurance companies to swap assets, allowing qualified securities, funds, and insurance companies to obtain liquidity from the central bank through asset pledging, creating special re-lending for stock repurchases and holdings to guide banks to provide loans to listed companies and major shareholders for repurchasing and holding stocks, and so on.

The above policies indicate: First, the macro-management department has attached great importance to the "negative wealth effect" brought about by asset price contraction, which has had a significant negative impact on the economy; second, the current economic downturn issue is quite serious, and substantial policies should be promptly introduced to counteract it.

In addition, the "Opinions of the CPC Central Committee and the State Council on Implementing the Employment Priority Strategy to Promote High-Quality and Full Employment" issued on the 25th also repeatedly mentioned matters related to economic growth and employment stability, providing further confirmation of the above viewpoints.

Unusual Expression

Shorter Meeting Minutes, Updated Expression

Prior to this meeting, many departments had already introduced many related policies, especially the strength of the "924" new policy has clearly exceeded market expectations.

First, it is concise and to the point. Generally, to improve the efficiency of drafting and publishing, Xinhua News Agency's release of the Political Bureau meeting minutes follows a relatively fixed format, usually consisting of political orientation, economic status, work orientation, specific follow-up work focus, and other major parts. This also results in a relatively fixed length for each meeting minutes, for example, the minutes of the "430" meeting are about 2500 words, similar to most cases. However, this meeting only has 1200 words, and a large number of fixed expressions have been deleted, reflecting the sense of urgency.

Second, the expression is new and the intensity is strong.

Of course, the conventional orientation is still there, just more emphasized.

For example, in terms of finance: "We must increase the countercyclical adjustment of fiscal and monetary policies, ensure necessary fiscal expenditures, effectively carry out grassroots 'three guarantees' work, issue and use ultra-long-term special national bonds and local government special bonds well, and better leverage the role of government investment in driving growth";

In terms of employment: "We must firmly protect the bottom line of people's livelihood, focus on the employment of key groups such as fresh graduates, migrant workers, poverty alleviation population, zero-employment families, strengthen assistance to difficult-to-employ groups such as the elderly, disabled, and long-term unemployed, and enhance assistance to low-income populations".

Many expressions have been reversed:

For example, there is a reiteration of "Some new situations and problems have emerged in the current economic operation. We must comprehensively, objectively, and calmly view the current economic situation, face difficulties, strengthen confidence, and effectively enhance the sense of responsibility and urgency in doing economic work", rather than the conventional expression of "maintaining stability while facing various challenges".

For example, the monetary policy no longer mentions "prudent and targeted", but instead "lowering the reserve requirement ratio, implementing substantial interest rate cuts";

Real estate is no longer about "urgently building a new development model for real estate, promoting high-quality development of real estate", but directly "promoting the stabilization of the real estate market" and "responding to public concerns, adjusting housing purchase restrictions, lowering interest rates on existing housing loans, accelerating the improvement of land, fiscal, financial, and other policies, and promoting the construction of a new development model for real estate"By Xu Bonan