A macro deduction about the future environment: How to choose the direction again

First, the Ministry of Finance announced the issuance arrangements for special treasury bonds in 2024. This time the national debt terms include 20, 30 and 50 years, with interest paid semi-annually, totaling up to 1 trillion. This issuance of special treasury bonds was carried out under the circumstances of great downward pressure on the economy. Historically, similar measures have usually been successful in stimulating the economy. For example, during the Asian financial crisis in 1998, when China Investment Corporation was established in 2007, and during the fight against the COVID-19 epidemic in 2020, special government bonds were issued, which ultimately played a significant economic stimulus role.

The issuance of special treasury bonds is mainly due to the fact that enterprises and residents are de-leveraging and have insufficient credit demand, and the central government needs to increase leverage to play a leading role. This special national debt can be regarded as an important means of economic stimulus, which will most likely bring the economy back to the track of medium-speed growth.

The uses of national debt mainly include the following five points:

1. Food security

2. Energy security

3. Stability and security of industrial and supply chains

4. Urban infrastructure and supporting infrastructure for affordable housing projects

5. Ecological environment protection and restoration

I pay special attention to the fourth point: urban infrastructure and supporting infrastructure for affordable housing projects. This may involve the renewal of old cities, the transformation of urban villages and the construction of affordable housing, but these renovations and construction are limited to megacities and cities with an urban population of more than 3 million. This means that the real estate market in these cities will receive more financial support, and relatively speaking, the bottom of the market will be more solid.

Looking at a deeper level, this large-scale issuance of government bonds marks the beginning of a new era. The status of government bonds has been strategically elevated, and monetary policy will rely more on anchoring RMB government bonds. The logic behind this is that simple monetary policy in the past has had limited effect, and we must adopt a more active fiscal policy. As part of fiscal policy, national debt is a means to achieve fiscal expansion.

It should be noted that the special treasury bonds issued this time are mainly for institutional investors and individuals cannot participate. However, this round of RMB will continue to weaken in the future. #5月市场关键事件