Government Work Report: What are the new changes?

How to respond to the new changes in the "increasingly complex and severe" external environment? This may be the core issue of today's government work report—against the backdrop of insufficient effective demand, the trade and technology sectors will face greater shocks, which requires further policy intensification:

Policy efforts must be early and sufficient: The report emphasizes that policies should be proactive, and "when opportunities arise, they should be fully utilized at once." Given the flexibility of policies in recent years, if this is insufficient, further policy intensification may follow.

Technology must "accelerate": Compared to last year's Central Economic Work Conference, there is a stronger emphasis on "accelerating the construction of a modern industrial system," with emerging and future industries becoming key to breaking through global competition; as last year, the importance of science and education to invigorate the country and innovation to lead development has also been highlighted.

Foreign trade and foreign investment must be more "active": Under the accumulation of external pressures, foreign trade should support diversification on one hand and improve export and domestic sales channels on the other; the highlights in foreign investment include expanding comprehensive openness in services such as the internet, telecommunications, healthcare, and education.

Boosting consumption is "planned and ready," waiting for the right moment: In addition to the 300 billion long-term special government bonds to support trade-ins, perhaps more importantly, there are other sufficient policy reserves, such as mechanisms to enhance consumption capacity (income) and the expansion of services in health, elderly care, childcare, and domestic services.

Specifically, there are five major signals in the government work report worth noting:

Aggregate policy: Responding to uncertainty "with countermeasures." When tariffs meet the Two Sessions, in the face of frequent tariff increases by the U.S., the government work report's statement that "policies should be implemented as early as possible, better early than late, seizing time against various uncertainties, and when the opportunity is clear, fully utilize it at once" provides an answer. This time, China faces external uncertainties with greater "confidence" and more policy reserves.

Consumption: A significant "countermeasure." The frequency of "consumption" appearing in this year's government work report has noticeably increased, with mechanisms such as "normal wage growth mechanisms for workers," "childcare subsidies," and "diversified service supply in health, elderly care, childcare, and domestic services" being improved, indicating that the "countermeasure" of consumption is already prepared. As economic downward pressure increases, consumption will be introduced at the right moment.

![](https://mmbiz-qpic.wscn.net/mmbiz_png/zWatvMNHicnerd9dA0Jar62zQb6Ibribr7bibVVKx1NSOL1XGNQdUthiaQMcHzGnIKCmGXW9CWjQw3rDSJYP4YyEkQ/640? Industry: The "content" of technology is marginally increasing. Although "new quality productivity" remains in the second position of key work priorities, the addition of the word "accelerate" indicates that the recent focus is still on technology. In addition to continuing to emphasize areas such as artificial intelligence, commercial aerospace, and low-altitude economy, embodied intelligence, 6G, artificial intelligence smartphones and computers, and intelligent robots also urgently need to be consolidated and accelerated in development.

In addition, similar to last year, the important boost for "new quality productivity," "revitalizing the country through science and education" (talent factors) is listed in the third position of work priorities (Figure 1), constructing a support system for "education - research - talent" under the revitalization of the country through science and education.

Monetary: Continuing the "moderately loose" tone, under the appeal of "racing against uncertainty," a reserve requirement ratio cut may welcome a realization window.

First, external "uncertainty," represented by tariffs, is imminent, and total tools such as reserve requirement ratio cuts may have welcomed a "timely" landing window.

Second, recent domestic interest rate and exchange rate risks have eased somewhat, especially as the previously "rushed" government bond rates have generally retreated, once again leaving room for monetary easing.

Third, the coordination and cooperation of fiscal and monetary policies are key to effectively implementing policy "combinations." Since the beginning of the year, the pressure of government bond supply has significantly increased. We expect that monetary policy may welcome a "move" timing, with total operations represented by reserve requirement ratio cuts likely to land first.

Fiscal: Welcoming three major "breakthroughs." By 2025, the scale of government debt in our country will officially enter the "13 trillion +" era, demonstrating the greatest "sincerity" of fiscal efforts in the new year, accompanied by three major highlights:

The first "breakthrough" is the deficit rate set at 4%, which not only breaks the highest record of the deficit rate in our fiscal history, with the 3% deficit rate's implicit constraint no longer in effect, but also represents the largest increase in the target deficit rate in history.

The second "breakthrough" is that with the expansion of the use of new special bonds to include debt repayment, land reserves, etc., the new special bond quota has for the first time exceeded 4 trillion yuan; however, if we exclude the 0.8 trillion yuan for debt repayment, this year's new special bond quota has decreased by 0.3 trillion yuan compared to last year The third "breakthrough" is that special government bonds are debuting in two forms for the first time. One type is ultra-long-term special government bonds (CNY 1.3 trillion) used for "dual circulation" and "dual innovation"; the other type is special government bonds (CNY 0.5 trillion) used to supplement the capital of large state-owned commercial banks.

Authors of this article: Tao Chuan, Shao Xiang, Zhang Yunjie, Zhong Yumei, Source: Chuan Yue Global Macro, Original title: "Government Work Report: What New Changes? (Minsheng Macro Tao Chuan Team)"

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