Group 1: Tax Reform Objectives - The tax reform aims to address local fiscal difficulties by increasing local financial autonomy and reducing expenditure responsibilities[16] - The reform emphasizes the importance of tax systems in supporting major national strategic tasks, such as achieving common prosperity and developing new productive forces[19] - The goal is to establish a more modern tax system that aligns with China's modernization efforts, focusing on legal compliance and adapting to new economic realities[20] Group 2: Implementation Principles - The macro tax burden should not significantly decrease to ensure sustainable fiscal capacity, with current tax revenue at 14.4% of GDP, down 4.3 percentage points since 2013[22] - Tax reform must respect basic tax principles, ensuring that each tax type primarily serves to generate revenue before any regulatory functions[24] - A gradual and prioritized approach to reform is necessary, considering economic conditions and public acceptance to avoid abrupt changes that could destabilize the economy[25] Group 3: Specific Reform Measures - Immediate measures include merging certain local taxes to enhance local fiscal capacity and streamline tax management[27] - Enhancements to the VAT deduction chain are essential to improve tax neutrality and revenue collection efficiency[28] - The reform will also focus on improving tax support for key sectors, such as technology and green development, to facilitate high-quality growth[30]

Group 1: Central-Local Relationship Reform - The reform of the central-local relationship aims not only to address short-term local fiscal difficulties but also to support high-quality development and a balanced supply-demand relationship in the long term[2] - The reform is crucial for macroeconomic control, local government motivation, and overall economic stability, impacting tax and budget reforms significantly[2] - The current central-local relationship is characterized by a high proportion of local government spending, with local expenditures reaching 23.6 trillion yuan, while total national fiscal revenue is only 21.7 trillion yuan[5] Group 2: Fiscal Challenges and Debt Issues - Local government spending is disproportionately high, with central government spending accounting for only 14% of total expenditures, leading to significant fiscal strain on local governments[5] - Central transfer payments are substantial but unsustainable, creating a "dilemma" where local governments rely heavily on these payments, which can lead to inefficiencies and disincentives for economic development in wealthier provinces[6] - Local debt levels are high, with a combination of explicit and implicit debts used to cover fiscal gaps, raising concerns about liquidity risks and the sustainability of such debt levels[6] Group 3: Recommendations for Improvement - To resolve the central-local relationship issues, it is essential to reduce the responsibilities of local governments and increase the central government's role, thereby alleviating fiscal pressures on local entities[8] - The central government's expenditure ratio should be increased to better match the responsibilities and needs of local governments, as current levels are below those of many developed economies[27] - A dynamic adjustment mechanism for the allocation of responsibilities and financial resources between central and local governments should be established to ensure a more effective fiscal framework[9]

Group 1: Historical Debt Swaps - The first round of debt swaps (2015-2018) saw local governments issue a total of 12.2 trillion yuan in replacement bonds, significantly reducing non-bond government debt to 315.1 billion yuan by the end of 2018[2] - The second round (2019-2021) involved 1.9079 trillion yuan in replacement bonds issued across seven provinces, with a focus on addressing hidden debts through special refinancing bonds[2] - The third round (2021-2022) included 504.18 billion yuan in special refinancing bonds issued by Beijing, Guangdong, and Shanghai, marking the first trials for eliminating hidden debts[2] Group 2: Ongoing and Future Debt Swaps - As of October 23, 2024, 28 provinces are expected to issue 15,277.3 billion yuan in special refinancing bonds, primarily concentrated in the fourth quarter of 2023[4] - The current debt limit for local governments is 46.8 trillion yuan, with an outstanding debt of 44.9 trillion yuan, leaving a maximum space for debt swaps of 19,351 billion yuan[5] - The upcoming fifth round of debt swaps aims to alleviate local government debt pressure and refocus efforts on economic development and public service provision[5] Group 3: Implications and Strategies - Debt swaps are expected to enhance transparency by converting hidden debts into visible ones, thus optimizing local government debt structures and reducing interest burdens[5] - The issuance of special refinancing bonds is limited by local debt caps, necessitating an increase in these limits to facilitate larger-scale debt swaps[5] - Long-term solutions to local debt issues should involve reforms in fiscal systems, debt management, and the transformation of local investment companies to prevent the emergence of hidden debts[8]

Group 1: Infrastructure Investment Insights - The Chinese government emphasizes the need for increased counter-cyclical adjustments and a comprehensive set of policies to stabilize growth, highlighting the importance of infrastructure investment[2] - China's total infrastructure investment is globally leading, but per capita public capital stock is only $21,600, significantly lower than the U.S. ($37,300) and Japan ($49,900)[18] - There is a structural imbalance in infrastructure investment, with significant gaps in healthcare, education, and urban development, indicating room for future investment[18] Group 2: Comparative Analysis - China's railway network spans 159,000 kilometers, ranking second globally, but its density is only 1.65 kilometers per 100 square kilometers, much lower than the U.S. (2.99) and Japan (7.3)[3] - In terms of energy, China's self-sufficiency rate is approximately 80%, lower than Russia (184%) and the U.S. (104%), while its per capita electricity generation is less than half that of the U.S. (12,800 kWh)[29] - Healthcare spending in China is only 5.82% of GDP, significantly lower than the U.S. (17.4%) and Germany (12.9%), with per capita spending at $670.5, just 5.6% of the U.S. level[34] Group 3: Future Investment Directions - Future infrastructure investments should align with population migration trends, focusing on urban areas to avoid resource misallocation[5] - Investment in social sectors such as healthcare and education must increase significantly to address the needs of an aging population and declining birth rates[5] - Infrastructure investment should enhance economic growth potential by addressing supply chain bottlenecks and stimulating consumer demand through improved public services[5]

Economic Performance - In Q3 2024, GDP growth fell to 4.6% year-on-year, primarily due to pressures from July and August, with September showing signs of stabilization[1] - The nominal GDP growth rate remained flat at 4% in Q3, attributed to a narrowing decline in the GDP deflator index, driven by rising food prices[1] - September economic growth exceeded expectations, with retail sales and consumer spending showing increases of 1.1% and 1.4% year-on-year, respectively[1] Policy Impact - A series of policies implemented since late September have significantly boosted market expectations and confidence, leading to increased activity in the stock and real estate markets[1] - The issuance and utilization of government bonds have accelerated, contributing to infrastructure investment, with broad infrastructure investment growth rising from 7.9% to 9.3% year-on-year from January to September[1] - The real estate sector has shown signs of recovery, with declines in investment, sales area, and sales revenue narrowing to 9.4%, 11%, and 16.3% year-on-year, respectively[1] Future Outlook - The economy is expected to recover at a faster pace in Q4, with GDP growth projected to rebound to between 4.8% and 5%[4] - Key drivers for recovery include reduced mortgage pressures on residents, improved consumer sentiment, and enhanced liquidity for real estate companies[5] - Ongoing risks include external economic slowdowns, trade tensions, and internal challenges such as insufficient consumer demand and the effectiveness of macroeconomic policies[6]

证券研究报告 | 宏观深度 2024 年 09 月 29 日 投资要点 分析师：罗志恒 执业编号：S0300520110001 电话：010-83755580 邮箱：luozhiheng@ykzq.com 分析师：马家进 执业编号：S0300522110002 电话：13645711472 邮箱：majiajin@ykzq.com 近期报告 《【粤开宏观】采取更大力度的举措扭转经 济下行压力》2024-09-27 《【粤开宏观】特别的会议与积极的信号： 正视困难、坚定信心》2024-09-26 《【粤开宏观】924 一揽子金融政策的深 意：稳地产、稳股市、稳经济》2024-09-24 《【粤开宏观】美联储降息落地，全球大类 资产向何处去？》2024-09-19 《【粤开宏观】经济恢复继续承压，亟需增 量政策支持》2024-09-14 宏观研究 【粤开宏观】对近期政策讨论的思考： 财政如何接力？ 导读 二季度以来，中国经济面临一定下行压力，总需求不足、预期不振，房地产 和资本市场偏低迷、地方财政紧平衡的问题持续凸显，730 政治局会议提出宏 观政策要"持续用力、更加给力"；926 政治局会议进一步明确要求"加力 ...

Group 1: Economic Recovery and Challenges - China's economy is in a post-pandemic recovery phase, achieving a 5.0% growth in the first half of the year, but facing downward pressure as the GDP growth rate in Q2 decreased by 0.6 percentage points compared to Q1[3] - The main contradiction in the economy is insufficient domestic effective demand leading to supply-demand imbalance, affecting confidence and investment[3] - There is a need to address institutional barriers that prioritize supply over demand to resolve the supply-demand imbalance[3] Group 2: Real Estate and Fiscal Policy - Real estate and local finance are core variables affecting economic operation, necessitating optimized real estate policies to reverse declining housing prices and support local debt[4] - Fiscal policy should focus on expenditure growth rather than deficit rates to effectively implement counter-cyclical adjustments[17] - The issuance of additional government bonds is recommended to support local governments and enhance their financial stability[17] Group 3: Debt Risk Management - Local government debt risks are manageable, and the focus should be on mitigating debt risks rather than merely reducing debt scale[19] - Strategies to manage debt include asset revitalization, issuing special refinancing bonds, and enhancing cooperation between finance and fiscal policies[19] - The principle of "whoever's child, whoever carries" should be maintained, with conditions set for central government assistance to avoid moral hazard[20] Group 4: Consumption and Income Distribution - Fiscal policy can enhance both investment and consumption, with short-term measures like cash subsidies potentially boosting consumer purchasing power[7] - Long-term solutions require reforms in income distribution to reduce wealth disparity and improve consumer capacity[24] - Delaying retirement is suggested as one method to alleviate social security pressure on fiscal budgets[25]

Economic Outlook - The Central Political Bureau meeting was held earlier than usual, indicating heightened attention to the current economic situation and macro policies[2] - The meeting acknowledged the overall stability of the economy but highlighted new challenges, emphasizing the need to face difficulties and boost confidence[9] Fiscal Policy - The fiscal policy aims to ensure necessary spending, with a focus on the "three guarantees" (employment, basic living needs, and market entities), and accelerate the use of special bonds[10] - The total fiscal scale for the year is projected to reach approximately CNY 9.78 trillion, close to CNY 10 trillion, but fiscal revenue growth has been weaker than expected, with a 2.6% decline in general public budget revenue from January to August[11] Monetary Policy - The meeting proposed significant interest rate cuts, including a potential 0.5% reduction in the reserve requirement ratio, which could provide around CNY 1 trillion in long-term liquidity[13] - The policy interest rate is expected to be lowered by 0.2%, impacting the entire interest rate system, with the MLF rate already reduced from 2.30% to 2%[13] Real Estate Policy - Emphasis on stabilizing housing prices, ensuring supply, and promoting demand, with new measures to control supply and improve quality in the real estate market[14] - The meeting introduced new terms such as "promoting the stabilization of the real estate market" and adjustments to housing purchase restrictions[14] Support for Enterprises - The government aims to assist enterprises in overcoming difficulties by standardizing regulatory practices and promoting the development of the private economy[15] - A proposed law to support the private economy is expected to create a better environment for non-public ownership[15] Employment and Social Welfare - The focus is on safeguarding the bottom line of people's livelihoods, particularly for vulnerable groups such as recent graduates and low-income families, with plans for direct financial assistance[16] - The government has initiated measures to provide one-time living subsidies to disadvantaged groups, ensuring timely support[17]

证券研究报告 | 宏观点评 2024 年 09 月 24 日 分析师：罗志恒 执业编号：S0300520110001 电话：010-83755580 邮箱：luozhiheng@ykzq.com 分析师：马家进 执业编号：S0300522110002 电话：13645711472 邮箱：majiajin@ykzq.com 分析师：原野 执业编号：S0300523070001 电话：15810120201 邮箱：yuanye_zb@ykzq.com 近期报告 《【粤开宏观】美联储降息落地，全球大类 资产向何处去？》2024-09-19 《【粤开宏观】经济恢复继续承压，亟需增 量政策支持》2024-09-14 《【粤开宏观】逆周期政策仍需发力，增量 货币政策"箭在弦上"——8 月金融数据 点评》2024-09-14 《【粤开宏观】大类资产配置研究（一）： 当前国内资产的宏观交易主线及未来价格 走势》2024-09-08 《【粤开宏观】如何理解城投"退平台"与 声明市场化经营主体？》2024-09-05 宏观研究 【粤开宏观】924 一揽子金融政策的 深意：稳地产、稳股市、稳经济 摘要 9 月 24 日上午，中国人 ...

证券研究报告 | 宏观点评 2024 年 09 月 19 日 投资要点 宏观研究 【粤开宏观】美联储降息落地，全球 大类资产向何处去？ 分析师：罗志恒 执业编号：S0300520110001 电话：010-83755580 邮箱：luozhiheng@ykzq.com 分析师：马家进 执业编号：S0300522110002 电话：13645711472 邮箱：majiajin@ykzq.com 近期报告 《【粤开宏观】经济恢复继续承压，亟需增 量政策支持》2024-09-14 《【粤开宏观】逆周期政策仍需发力，增量 货币政策"箭在弦上"——8 月金融数据 点评》2024-09-14 《【粤开宏观】大类资产配置研究（一）： 当前国内资产的宏观交易主线及未来价格 走势》2024-09-08 《【粤开宏观】如何理解城投"退平台"与 声明市场化经营主体？》2024-09-05 《【粤开宏观】当前宏观政策面临的两大 "叙事陷阱"》2024-09-01 摘要 北京时间 9 月 19 日凌晨，美联储议息会议决定降息 50bp，将联邦基金利率目 标区间下调至 4.75%-5%，是 2022 年 3 月启动加息周期后的首次降息 ...