20210308-招银国际-Consolidate_recovery_and_nurture_new_drivers_5页_612kb

2021 China Government Work Report Summary

Core Content

The 2021 China Government Work Report outlines the government's strategy to consolidate post-pandemic economic recovery and nurture new growth drivers during the 14th Five-Year Plan period. The focus is on scientific innovation, reforms, and a stronger domestic market to ensure stable and sustainable growth.

The report sets a GDP growth target of above 6.0% for 2021, which is in line with the broader goals of the 14th Five-Year Plan. The new urban employment target is set at 11 million, and the surveyed urban unemployment rate is expected to remain around 5.5%. The CPI target is around 3%, and the government aims for stable quantity and improved quality in import and export. Personal income growth is to remain stable, and energy consumption per unit of GDP is to reduce by 3%. For the first time, grain yield is mentioned as a primary target, highlighting the importance of food security and agricultural development.

Main Themes and Key Points

1. Economic Recovery and Growth Drivers

• Consolidate recovery: The government aims to stabilize the economy post-pandemic, ensuring a sustainable recovery.
• Nurture new drivers: Emphasis is placed on scientific innovation, reforms, and domestic market expansion.
• GDP growth: Targeted at above 6.0%, with a forecast of ~8% due to the low base from 2020.
• Employment: Target of 11 million new urban jobs and urban unemployment rate of 5.5%, consistent with 2019 goals.
• Grain yield: A new target of >1.3 trillion jin (669.5 billion kg) is set, underscoring the government's commitment to agricultural security.

2. Policy Support

• Fiscal policy: Maintains continuity, stability, and sustainability, with a deficit of RMB 3.57 trillion (around 3.2% of GDP), slightly lower than 2020 but higher than 2019.
• Special local government bonds: RMB 3.6 trillion will be issued, down from RMB 3.75 trillion in 2020.
• Central transfer payment: RMB 2.8 trillion will be transferred to local governments, up from RMB 2 trillion in 2020.
• Tax reduction: More targeted tax cuts for small businesses, individual merchants, and R&D expenditures.

3. Monetary Policy

• Flexible, precise, and appropriate: Monetary policy aims to support the real economy while avoiding asset bubbles and financial risks.
• M2 and TSF growth: Will be in line with nominal GDP growth.
• Liquidity: Maintained at reasonable and ample levels.
• Macro leverage ratio: Kept stable.
• Inclusive loans: Large commercial banks are expected to increase inclusive loans by 30% YoY.

Key Growth Drivers

1. Technological innovation:

   • R&D expenditure is to grow at >7% CAGR during the 14th Five-Year Plan.
   • Central budget for basic research will increase by 10.6% in 2021.
   • 100% tax deduction for R&D expenses is allowed for manufacturing firms.

2. Reforms:

   • The government aims to enhance reforms to incentivize market participants.

3. Domestic demand:

   • Efforts will be made to enlarge domestic demand and explore the domestic market.

Provincial and Municipal Growth Targets

Nation-wide Economic Indicators

Conclusion

The 2021 Government Work Report emphasizes sustainable recovery, innovation-driven growth, and targeted policy support. Fiscal and monetary policies are designed to be more precise and efficient compared to pandemic-era measures, with a focus on real economy support and risk management. The report also highlights the importance of food security and agricultural development through the new grain yield target.