Financial Market Opportunities under the Background of China's Economic...
Title:Financial Market Opportunities under the Background of China's Economic Stabilization
Based on economic data from the first three quarters，both production and demand showed clear marginal improvements，indicating that China's economy is stabilizing and rebounding，laying the foundation for a robust recovery.
China's Economy has Initially Stabilized
Following a brief recovery in the first quarter，China's economy has weakened in the second quarter due to the real estate market's drag and a lack of confidence among businesses and residents. However，since July，the main economic indicators have shown marginal improvement，showing signs of initial stabilization，and the rebound momentum in some areas is relatively strong，exceeding market expectations. In aggregate，the economic growth for the third quarter was 4.9%，in comparison to 5.2% for the cumulative first three quarters. The momentum of economic recovery is promising，and it is expected that the targeted 5% economic growth for the full year will be successfully achieved by the end of the year.
The recovery of China's economy is closely related to the adjustment of relevant policies at the Politburo meeting of the Chinese Communist Party at the end of this July. The shift in policy tone at this significant meeting has led to a more relaxed and inclusive approach，significantly increasing the transparency of future economic policies.
For example，in terms of financial policy，the central bank continues to cut interest rates and reduce the reserve requirement ratio (RRR)，injecting liquidity into the market and reducing corporate financing costs. On the other hand，responding to the recent stock market downturn，measures have been implemented to stimulate and fortify the capital market，fostering investor confidence. These strategies include，but are not limited to，the reduction of stamp duty by half，stricter enforcement of the standards associated with stock reduction practices，a gradual intensification of the pace of initial public offerings (IPOs) and refinancing，a reduction in the margin requirement for margin financing and securities lending，and adjustments to Huijin stock holdings in the four major banks along with the acquisition of ETFs.
In terms of fiscal policy，in addition to speeding up the issuance of special bonds，the government began to formulate and implement a debt package. This involves assisting local governments in effectively preventing and addressing debt risks by issuing special refinancing bonds to replace certain local financing platform debts and settle outstanding arrears.
The government has updated its real estate regulatory and control policies in light of changing market dynamics. Recognizing significant shifts in the relationship between supply and demand in the real estate market，there is a determination to timely adjust and optimize real estate policies. To mitigate the economic impact of the recent housing market downturn，the government has introduced a series of policies. These include adjustments to down payment requirements for first and second homes，lower mortgage interest rates for first homes，and a nationwide prohibition on "denying loans." Additionally，some cities have relaxed purchase restrictions. These measures aim to enhance buyer confidence and stimulate property sales.
In addition，the internal driving force of economic growth is also increasing. For example，consumption，especially service consumption，has grown rapidly，and the export of three new products (electric manned vehicles，lithium batteries and solar cells) has maintained strong growth，ensuring double-digit growth for more than three consecutive years，which has greatly supported the improvement of economic operation.
Current Primary Issue Facing China's Economy is the Deficiency in Aggregate Demand
Simultaneously，attention must be given to various factors that impact and restrain economic recovery. For example，confidence of the private sector remains weak and expectations are low，income growth is slow，private sector investment momentum needs to be sustained，local government debt pressures are high，and risks in the real estate market remain unclear. The external environment is intricate and challenging. The global economic slowdown is expected to affect China's foreign demand. Tensions between China and the US not only impact China's foreign trade but also poses a challenge to China's industrial transformation and upgrading. Geopolitical uncertainties have further amplified the challenges for China's import and export activities and prices.
In particular，the resolution of risks in the real estate market is not optimistic. Real estate sales，investment and prices have not yet picked up significantly. According to data released by China's National Bureau of Statistics，the housing construction area of real estate development enterprises decreased by 7.3% from January to October. The newly started housing area decreased by 23.2%，while completed housing area increased by 19%. The sales area of commercial housing decreased by 7.8% year-on-year，and the sales of commercial housing decreased by 4.9%. National real estate development investment decreased by 9.3% year-on-year.
As far as housing prices are concerned，in October，housing prices in all cities collectively declined. The year-on-year growth rate of housing prices in 70 cities was -0.6%，which was basically the same as last month，but the growth rate of the chain decreased slightly to -0.4%，and the cities in decline further increased，indicating that the whole industry is still in a downturn and continues to drag down the overall economic recovery.
It is evident that the risks faced by real estate enterprises are still being addressed. In addition，the situation for large-scale housing enterprises remains bleak due to disruptions in the capital chain，despite some progress.
Firstly，real estate sales are lower than expected，hindering the recovery of cash flow for housing enterprises，and the storm of housing enterprises may continue to ferment.
Moreover，the current level of financing support for housing enterprises remains insufficient. At present，the proportion of bank financing for housing enterprises is smaller than that of pre-sale sales contracts，with bank loans playing a major role. Other forms of financing support，such as bond financing and equity financing，are not effective enough to provide robust financial support for housing enterprises.
Thirdly，the liquidity risk and asset impairment of housing enterprises continue to spread. Risk has the mechanism of contagion，self-reinforcement and self-realization. The current risk in housing enterprises is not confined to large private housing enterprises but extends to small and medium-sized housing enterprises，with the potential spread of risks to state-owned enterprises and central enterprises.
In addition，in October，consumption increased rapidly year-on-year，reaching 7.6%，2.1 percentage points faster than last month，and the growth rate of the chain was 0.07%，indicating that consumption is indeed recovering slowly with great resilience. This is actually related to the low base in the same period last year. The growth rate of consumption in the same period last year was only -0.5%. In other words，the two-year average consumption growth rate is only 3.55%，and the cumulative consumption growth rate is 3.75% in two years.
The highlight of consumption lies not only in the rapid growth of catering，alcohol，tobacco，and entertainment consumption driven by holiday factors but also in the robust performance of automobile consumption，which increased by 11.4% year-on-year. This rapid growth trend continued into November，with retail passenger car sales increasing by 18.0% year-on-year from November 1 to 20，up from 10.2% in October.
Unfortunately，online sales were relatively low during the "Double 11" promotion period. According to Syntun，a third-party research company tracking e-commerce sales，from October 31 to November 11，the cumulative sales (GMV) of integrated e-commerce platforms and live e-commerce platforms increased by 2.08% year-on-year，significantly lower than last year's 13.7%，the lowest level in many years.
There is Still Much Room for Macroeconomic Policy Expansion in the Future
It is important to note that while the basic repairs are currently proceeding at a moderate and unhurried pace，we are expected to remain vigilant with regard to the sustainability of the follow-up measures. Given the uncertainty surrounding the impact and sustainability of countercyclical policies，significant challenges are anticipated next year，necessitating substantial efforts to stabilize growth and mitigate risks. The Chinese government will continue to introduce more relaxed and radical economic stimulus measures. At present，the government remains cautious about increasing leverage，leaving ample room for policies to respond to unexpected challenges and changes. To achieve high-quality development，prevent and resolve various risks，the Municipal Government of China expects that there is still much room for expansion of macroeconomic policies in the future.
On October 24 this year，it was officially announced that the central government will issue 1,000 billion yuan of national debt in the fourth quarter of this year，and all the additional national debt will be allocated to local governments through transfer payment，so as to focus on supporting post-disaster recovery and reconstruction，making up for the shortcomings of disaster prevention and mitigation，and improving China's overall resilience to natural disasters. Despite the economy achieving stability，the foundation remains less robust.
At this stage，the issuance of treasury bonds and the breach of the traditional 3% deficit ratio red line have strong signal significance and clear expansion intention，which indicates that more conventional or unconventional active fiscal policies will be seen in the future. From the perspective of national debt alone，this policy will undoubtedly help stabilize the expectations of economic entities，boost the confidence of society as a whole and expand aggregate demand. At the same time，it will also help to prevent the