主题：【中金评论】2004年中央经济工作会议 -- Chieftain

Like Fed Chairman Greenspan’s rhetoric, official standard line of Chinese policymakers is hard to interpret, by intention.

But we are happy to offer our takes on the communiqué:

How long will macro-adjustment stay? As the communiqué pointed out, “all comrades of the party should fully appreciate that macro-adjustment is necessary, long-term and challenging.” We read this as an endorsement from the apex of the communist party on the administration’s economic policies, since the party deems macro-adjustment as a concrete form of revamping the party’s governing power. So, macro-adjustment is also a party propaganda, and it’s going to stay for a long time.

What are major goals of macro-adjustment? As the communiqué laid out as the top priority, a stable and relatively rapid economy growth, which we read as 8-9% GDP growth, and basic price stability, which we read as around 3% headline annual CPI, are desirable. In the short-run, the administration will continue to control the excessive growth of fixed-asset investment and its aggregate scale, and we believe officials will be more comfortable to see below 20% y-o-y growth of fixed-asset investment. In the long-run, macro-adjustment is intended to increase the contribution from consumption to economy growth, thus optimizing relations between investment and consumption. To achieve these goals, the party pledged strong support to boost agriculture sector and increase farmer’s income level, in hope it will lift consumptions from both urban residents and rural dwellers.

What does “prudent” mean to monetary policy? As Wu Xiaoling, deputy governor of the PBoC, stated in Beijing on Nov. 30, “discrepancy between the growth of M2 and the sum of GDP growth and headline CPI likely will be further narrowing going forward.” We read this as a signal that money and credit supply likely will stay appropriately tight in 2005. Since controlling the excessive growth of fixed-asset investment and stabilizing price are short-term focus of macro-adjustment, we have adequate reason to believe that monetary policy will be moderately tightening-biased in 2005. The communiqué also emphasized the role of “market mechanism” and “economic approach” in allocating resources, which we read as a sign that moderate interest rate hikes at a measured pace (maximum 100bps) are possible in 2005.

Fiscal policy stance will be shifted from “proactive” to “prudent” in 2005. But what does “prudent”, again, mean? Chinese officials have intentionally avoided using “expansionary”, “neutral” or “contractive” in describing policy stance. While the fiscal policy has actually been expansionary after the Asian financial crisis, the administration has used the term “proactive” to label fiscal policy stance for the past seven years since 1998. The communiqué also shunned away from the term of “neutral fiscal policy” since it literally means “zero fiscal impulse” and may restrain the administration from being proactive when necessary. Prudent fiscal policy gives the administration maximum flexibility to accommodate different vested interest groups, which means transition to fiscal neutrality will be phased and gradual.

Why didn’t the communiqué mention reform of FX regime? At the sensitive market juncture, it’s wise not to add fuel to rampant speculations. As Chinese senior leaderships have emphasized again and again, a speculative environment and international pressures can only be counterproductive in terms of speeding up China’s reform of FX regime. We have noticed with interests that a recent report from the US Treasury Department to the Congress concluded again that China didn’t manipulate its currency, while instead highlighted ground works that China had laid down in order to move towards a more flexible FX regime, and we believe the Treasury Department is on the right course. The communiqué stated that China will further deepen “financial system reform” in 2005, and that includes reforming FX regime in our view.