The Political Bureau of the Central Committee of the Communist Party of China held a meeting in July 31st. The conference analyzed and studied the current economic situation and deployed the economic work in the second half of the year. The main spirit of this meeting should be how to resolve the three yuan problem of the current economic growth, de leveraging, and Sino US trade frictions under the new economic conditions. As pointed out at the meeting, the current economic operation is stable and changeable, facing some new problems and challenges, and the external environment has changed significantly. Therefore, we should do well in steady employment, stable finance, stable foreign trade, stable foreign investment, steady investment and steady anticipation. Here is the two new formulation, that is, the current economic situation is stable and changing, and we should do a good job of stabilizing six.
The stable and changing economic situation is based on three aspects. First, the Sino US trade war has been launched, which will have a tremendous impact and impact on the economic and trade relations between China and the United States. This will not only lead to the re pricing of the corresponding commodities, but also lead to the restructuring of the existing supply chain. All these will have a huge impact on employment and foreign trade. Two, from the economic data released in July, the pressure of domestic economic growth has increased and fixed investment has declined. The three is the sharp change in the international market. Therefore, faced with this changing economic environment, the conference put forward six countermeasures.
Indeed, faced with the changing economic situation, we must adopt new countermeasures. The question now is how we can judge the economic situation that is undergoing tremendous changes. For example, when the Sino-US trade war begins, we must be sure how much impact will the Sino-US trade war have on China's economy? According to the calculations of the major international investment banks, the Sino-US trade war was completely launched, and the worst outcome would have an impact on China's GDP growth, directly reducing GDP by 0.3-0.6%. The indirect impact will impact China's fragile financial system and major adjustments in its corresponding product supply chain. For example, an American enterprise that produces intelligent family climate control system, which has imported thermostat and other components from China, has decided to set up a factory in the United States to avoid trade war risks because of the 25% extra tariff on trade war. If this happens, it will have a greater impact on China's export trade and employment. Therefore, how to estimate the impact of the Sino US trade war on China's economy and how to minimize the loss of this trade war should be the most important.
How to assess the changes in the domestic economic situation? If we look at the economic data from last month, both fixed asset investment growth and export growth, the growth is slowing. But does this mean that the driving force of China's economic growth is weakening? More careful analysis should be carried out. This decline or slowdown mainly refers to the reduction of government led infrastructure investment. Therefore, this time the response is to re-increase investment in infrastructure, re-increase efforts to the central and Western fixed assets investment. Some people believe that the current macro policy adjustment of the country requires more active finance and more loose monetary policy, which may be a "new four trillion" positive fiscal policy. Sequelae of the "four trillion" expansionary policy in 2008 have not yet been solved. Is "new four trillion" unsustainable? However, there is no need to worry too much. The current government has more experience than before, where the trend of the new policy will be very clear.
For example, in the six-point strategy of this meeting, clearly put forward the determination to solve the real estate market problems, resolutely curb the rise of housing prices. That is to say, the conference emphasizes that fiscal policy should be more active, and that monetary policy is more relaxed, early on the vigilance, can not be loose money into the real estate market, in order to blow up the price of assets again. However, to curb the rise of housing prices, since 2016, it has been said that this is the main policy of real estate regulation, but now it is still stressing this point, which also shows that the government's previous real estate regulation policy is certainly not good. This time there is no new effective real estate regulation and control policy to curb the rise of housing prices, the market is certainly still holding a skeptical eye. Therefore, this policy in Resolutely Curbing the rise of housing prices policy or economic leverage to start with, do not use too many administrative means to confront the market.
Perhaps the biggest change in the current international economic situation is the emergence of the U.S. economy from the new Normal of weakness since the 2008 financial crisis. The US GDP growth rose by 4.1% in the second quarter of this year, the fastest growth since 2014, the unemployment rate in the United States maintained at a low level, the labor participation rate rose and the inflation rate began to reach the target level, which meant that the US economic growth was looking for a higher balance, and the increase could be maintained at 2.5%-3%. So the pace of normalization of the Federal Reserve's monetary policy will be further accelerated, which will affect the exchange rate of the dollar, the impact of the dollar will be further strong. All these will have a great impact on the RMB. For other developed countries, the European Union, Japan, Canada and other countries, although the problems of trade friction are also affected, but the situation in these countries is also in a stable growth period. This is, of course, advantageous to the export of Chinese products. Emerging markets are likely to be heavily affected by the strong dollar, and are now mostly in turmoil. However, trade frictions between China and the United States are a gain for them.
Therefore, it is very important to deal with the changing economic situation at home and abroad and to seek stability and change naturally, but do not worry too much. Because the change of external situation has impact and impact on the domestic economy, but it will not be as big as expected. Therefore, it is still the focus of the current economic work in China to make great efforts to prevent and resolve the three major battles of major risks, accurate poverty alleviation and pollution prevention and control, and to accelerate the pace of reform and opening up. In particular, the problem of steady growth and deleveraging is to adhere to the existing deployment and how to strengthen the current fragile Chinese financial system. Because of the recent events that have been revealed, the fragility of the Chinese financial system is a weakness in the current domestic economy. If it is not able to strengthen the Chinese financial system, it is impossible for us to overcome the problems in the current economy. The best solution to Sino-US trade frictions is certainly through negotiations, which seek and protect national interests in the medium and long term.
