Time to Correct: From Unmet Expectations to Signal Release

On the 8th, the first working day after the National Day holiday, the much-anticipated A-share market broke 1 trillion yuan within 20 minutes, with the Shanghai Composite Index once surging to 3,600 points. There was also a highly anticipated press conference that day—the National Development and Reform Commission (NDRC) press conference. The market's keen interest in this event was due to previous rumors that China would introduce large-scale fiscal stimulus policies, such as a 2 trillion yuan national debt plan or even a 10 trillion yuan fiscal measure.

However, the press conference did not mention these contents as expected by the outside world. This led to market disappointment and concern that the national policy was not strong enough. But if we delve into the signals behind the press conference, it actually revealed an extremely important policy direction, not only involving the adjustment of market sentiment but also pointing towards the optimization of the business environment.

01

Why did expectations fail to materialize?

The market's high expectations for this press conference were mainly due to the recent positive market atmosphere and policy shifts. Reports from foreign media and suggestions from economists all led people to anticipate that China would adopt unprecedented fiscal measures. However, the NDRC did not provide specific content on large-scale fiscal stimulus in this press conference, a result that was outside many people's expectations.

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But in fact, it was unrealistic to expect the NDRC to announce major fiscal stimulus policies at this press conference.

Firstly, large-scale fiscal policies like these usually require a higher level of decision-making mechanism and are not released solely by the NDRC.

Secondly, fiscal efforts need to go through the approval procedures of the National People's Congress and cannot be implemented quickly in the short term. Moreover, the current government wants to avoid the risks brought by stock market bubbles and excessive leverage, continuing to promote a "slow bull" style of steady growth, rather than leading the market to a "mad bull" mode through short-term stimulus.

Therefore, the absence of the expected fiscal policy is due to various reasons such as timing, implementation procedures, and economic structural adjustments. The market's disappointment is more due to a misreading of the policy situation.

02The True Purpose of the Press Conference

Despite the absence of any announcement regarding large-scale fiscal stimulus measures, the press conference conveyed two significant signals:

(1) Stabilizing market expectations and maintaining economic confidence.

The conference reiterated the country's established policy directions in stabilizing real estate, employment, local debt, and other areas, and indicated that these policies will continue to be advanced. Through this meeting, the government sent a clear message to the market: the country will not allow the economy to fall into recession, and policies will be gradually implemented to stabilize market sentiment.

The relevant analysis by CCTV also pointed out that the core purpose of the National Development and Reform Commission (NDRC) is to enhance market confidence, with financial policies being merely short-term measures. The true goal is to maintain the sustainable and healthy development of the real economy. The ultimate goal of national policies is to form a long-term virtuous cycle of growth through a series of structural policies.

(2) Correcting market negative expectations and optimizing the business environment.

More notably, Zheng Shanjie, the director of the NDRC, emphasized the issue of law enforcement involving enterprises at the meeting. He clearly stated that the country will crack down on illegal law enforcement, profit-driven law enforcement, and arbitrary fines to protect the business environment of enterprises. This statement was extremely strong and was reiterated at the Prime Minister's symposium on the same day.

Currently, many local governments are facing tight fiscal revenues and rely on fines and other means to fill the gaps, leading to frequent inspections and penalties for businesses. This not only undermines the local business environment but also severely damages the confidence of enterprises. For example, a county in Shandong, in order to complete its annual revenue target, imposed huge fines on enterprises, and the "negotiators" even made outrageous remarks, claiming that "it's too simple to bankrupt a company"... A series of illegal law enforcement phenomena by some local governments have greatly affected the development of innovation and entrepreneurship, the normal operation of enterprises, and the confidence of entrepreneurs, thereby forming a negative flywheel, with fewer and fewer people starting businesses, fewer and fewer job opportunities, and less and less income...

These phenomena reflect the profit-driven law enforcement mindset of some local governments in times of fiscal difficulties, which not only seriously affects the normal operation of enterprises but is also a desperate remedy for local development and economic recovery.

Therefore, the NDRC's special emphasis on correcting law enforcement issues involving enterprises is aimed at restoring the confidence of enterprises and protecting their legitimate rights and interests. This measure is not only conducive to improving the business environment but also helps to stimulate market vitality and promote the healthy development of the real economy.03

Core of the Policy: Expectation Management and Structural Reform

From this press conference, it can be seen that the focus of national policy has shifted from short-term stimulus to long-term structural reform. By managing market expectations and optimizing the business environment, the government hopes to lay the foundation for the sustainable development of the economy.

(1) Financial policy is a short-term measure, with the core being the real economy.

Although financial policy has an adjusting effect on short-term market sentiment, its real purpose is to buy time and space for the healthy development of the real economy. The message conveyed by the press conference is that the country will not rely on short-term stimulus, but hopes to guide the market through policy, promoting structural adjustments in the real economy.

(2) Optimize the business environment and stimulate corporate vitality.

The country's strong correction of law enforcement chaos involving enterprises is precisely to optimize the business environment, allowing enterprises to operate in a fairer environment. By cracking down on arbitrary fines and inspections, the government hopes to unleash the innovation and development momentum of enterprises, laying the foundation for the long-term growth of China's economy.

(3) Expectation management is an important part of economic policy.

The signal conveyed by the "press conference" indicates that negative market emotions and expectations need to be corrected. Economic policy is not only achieved through specific measures, but more often influences the economic trend by regulating market expectations and confidence. At present, stable expectations are an important factor in ensuring the smooth development of the economy.Conclusion

Although the "press conference" on the 8th did not introduce the large-scale fiscal stimulus policy that the market had anticipated, it conveyed a more important signal—that the country will continue to advance structural reforms, maintain the stability of market expectations, correct negative emotions, and optimize the business environment. These measures demonstrate the government's profound understanding and planning for future economic trends. Short-term stimulus is not the country's first choice; stable economic growth and a healthy market environment are the core directions of national policy.

In the future, the development of China's economy will increasingly rely on the recovery of the real economy and the optimization of the business environment.

Recently, when communicating with friends, I have sensed that everyone's confidence is gradually being restored. Some are starting to think about how to undertake new projects, while others are considering how to strengthen their enterprises... When expectations are positive, people dare to take action.

It's like when a person falls seriously ill and feels physically weak, they may choose not to participate in certain activities, adopting an attitude of "if you can lie flat, then lie flat," focusing on recuperation and prioritizing survival. When they feel their "health" gradually improving, or when they know there is a cure available, their confidence soars, their eyes brighten, and the "illness" gradually recedes under the influence of your vitality.

It is time to start correcting deviations; this signal has been sent out.