The Tsinghua Wudaokou Chief Economist Forum will be held in Beijing on September 28, 2024. Nomura Securities' Chief Economist for China, Lu Ting, will attend and speak.

On September 24, the People's Bank of China, the China Securities Regulatory Commission, and the China Banking and Insurance Regulatory Commission issued a package of financial policies that drew market attention. Lu Ting revealed that he comes from the front line of the market and "clearly feels the change in the atmosphere of foreign capital."

There was a time when foreign capital basically did not touch our assets, but in the past week, the number of phone calls and video conferences requested by global investors has increased sharply. This week's policy is in line with public sentiment, giving a feeling of sudden relief after a long drought, with a very positive and enthusiastic response,' Lu Ting said.

However, Lu Ting pointed out that after the announcement of reserve requirement ratio cuts and interest rate cuts, there may still be room for monetary policy, but the effect may be limited, and fiscal relief has become a consensus.

Regarding fiscal efforts, Lu Ting emphasized that we cannot simply rely on stimulating infrastructure production as before, but should focus on consumption. "We need to focus on household income, and even solve some issues that have emerged in the Chinese economy, including the problem of excessively low fertility rates."

Lu Ting supports that in the short term, considering the difficulties faced by local finances at the moment, the most urgent task is to raise funds by increasing treasury bonds, increasing transfer payments, maintaining the basic operation of local governments, especially local governments without stable industrial basic income. "If not relieved, there may be more opportunistic law enforcement and distant fishing-style law enforcement practices," he particularly emphasized, to effectively curb the contraction of local finances and prevent the deterioration of the local business environment.

Lu Ting stressed, "Infrastructure must not be abandoned", and efforts should be made to accelerate the national key projects that have already begun, regional and cross-regional key projects, because these projects have been carefully reviewed. "Especially in densely populated and relatively developed areas where the population is still flowing in, we need to find ways of expenditure that can be formed in the short term but will not cause serious problems in the medium to long term".

Lu Ting believes that, along with social security reform, structural reforms of transfer payments should be carried out simultaneously. "In some small and medium-sized cities, while there is excessive infrastructure construction in county towns, the infrastructure construction in large cities is far from sufficient, which poses efficiency issues," Lu Ting said, because resources are not allocated based on population inflow and market supply and demand. He believes that the transfer payment system should change according to population movements. In terms of urban land planning, adjustments should also be made based on population movement.

Regarding real estate issues, Lu Ting emphasizes the priority of "ensuring delivery of houses," which should take precedence over "purchasing and storing."

He explains that China's real estate operates on a presale system, thus, real estate is actually a futures market, not a spot market. "Many people when making policy recommendations, always treat it as a spot market, thinking that the issue with real estate is that too many houses are being built without being sold, but in reality, maybe not that many houses are being built, but too many are being sold before completion."

He pointed out data related to Country Garden, with around 0.036 million units of unsold houses completed by Country Garden, about 0.73 million units sold but not finished building, and 0.35 million units currently under construction but not sold, forming a ratio of "1:20:10."

"Should our policies address this '1,' or should we focus on the '20'?" Lu Ting questioned.

He emphasized that the current real estate market needs to address the market failure and government failure issues that arise under the presale system. "We need to address the confidence issue, to let homebuyers know that they will receive the house, which is the most critical aspect of rebuilding market confidence and order."

Lu Ting estimates that the government would need over 0.03 million billion yuan to solve the 'ensuring delivery of houses' problem.

He reiterated that in the real estate issue, the most crucial debt chain is not between real estate developers and banks, but between real estate developers and homebuyers.

To clear the market and rebuild confidence is the only way to stabilize the real estate market, as stated by Lu Ting. He mentioned, "If this is not done well, stabilizing the market will be quite difficult."

Lu Ting also suggested increasing the retirement pensions for certain groups. "We need other policies to compensate for the low-income class. This not only can increase the income of nearly 0.17 billion low-income elderly people, but also alleviate the worries of 0.29 billion migrant workers, enhancing their willingness and ability to consume."

He explained that our country's retirement pension structure is divided into three categories. The top 7% of the population have a retirement income of around 7,000 yuan per month, with 38% retiring through enterprises receiving about 3,000 yuan per month, while the average monthly income of 55% of the population is 225 yuan.

Lu Ting said, "Raising the income of this lower segment has significant meaning. This involves 0.3 billion migrant workers, who make up half of the non-agricultural employed population. If they know that after retirement, their income will not be 200 or 500 yuan, but 800, their consumption will also increase. This could even change China's human capital investment, as these 0.3 billion migrant workers can provide more education support for their children, which I believe has considerable significance."