Haitong: With the issuance of 10 trillion yuan in intensified bonds and the background of Trump's election, it is recommended to focus on the fields of information technology, industrial software, and cyclical industries.
Haitong released a research report stating that under the background of a 10 trillion strong debt strengthening policy and Trump's election, the intensity of countercyclical adjustments may continue to increase, and the importance of autonomy and controllability is expected to continue to rise. In particular, the strong debt policy introduced by the Ministry of Finance this time will directly benefit the computer industry, and it is recommended to focus on the computer business cycle and fiscal IT. With Trump taking office, the pressure faced by China's technology industry may be further increased, and the importance of autonomy and controllability is expected to continue to rise. It is recommended to pay attention to innovation and industrial software.
Haitong's main points are as follows:
"6+4+2" trillion yuan, local debt "three arrows released".
On November 8, the Twelfth Meeting of the Standing Committee of the Fourteenth National People's Congress voted in favor of the resolution "Resolution of the Standing Committee of the National People's Congress on Approving ". The resolution proposes, in order to implement the decisions and arrangements of the Central Committee of the Party, to suggest increasing the debt limit of local governments by 6 trillion yuan to replace hidden debts. Minister of Finance Lou Fuan said, "(6 trillion yuan) is the 'headline act' of a series of incremental policies for 2024."
In addition to the "6 trillion yuan", the debt conversion policy also includes "incremental" measures. Lou Fuan introduced that starting from 2024, 8,000 billion yuan will be allocated each year from the issuance of new local government special bonds for five consecutive years to supplement the financial resources of government funds, specifically for debt conversion, totaling 40 trillion yuan to replace hidden debts. "With the 6 trillion yuan debt limit approved by the Standing Committee of the National People's Congress this time, the total local debt resources will be directly increased by 100 trillion yuan." Lou Fuan said. In addition, the hidden debts of 20 trillion yuan from the reconstruction of shantytowns due in 2029 and beyond will still be repaid according to the original contracts. "The above three policies work together. By 2028, the total hidden debt that local governments need to digest will be greatly reduced from 14.3 trillion yuan to 2.3 trillion yuan. The average annual digestion amount will be reduced from 2.86 trillion yuan to 460 billion yuan, less than one sixth of the original amount, greatly alleviating the debt conversion pressure." Lou Fuan said, overall, what has been introduced is a comprehensive, targeted debt conversion "combination punch", with direct effects and significant impact.
In the proactive planning of the next fiscal policy, the intensity of countercyclical adjustments may continue to increase.
According to the website of the Chinese government, an official from the Ministry of Finance stated that the Ministry of Finance is actively planning the next step of the fiscal policy and increasing the intensity of countercyclical adjustments. On the one hand, continue to ensure that the incremental policies take effect. The strength of the incremental policies in 2024 is significant, and the stimulus effect on the economy is beginning to show. Many policy effects will continue to be released in 2025. The Ministry of Finance will work hard to promote related work, implement those already launched, and expedite the ones that are yet to be launched. Currently, relevant tax policies supporting the healthy development of the real estate market have been submitted for approval, and will be released soon. The debt replacement work for hidden debts will kick off soon. Work on issuing special national bonds to supplement the core tier-one capital of large state-owned commercial banks is being accelerated. The Ministry of Finance is coordinating with relevant departments to study and formulate detailed policies to support the recovery of idle land, increase land reserves, and purchase existing commercial real estate for affordable housing. On the investment aspect, with the continuous implementation of the next fiscal policy, it is recommended to focus on the computer business cycle and fiscal IT.
With Trump's election as the President of the United States, the importance of autonomy and controllability is expected to continue to rise.
Trump has been confirmed as the next President of the United States. According to the official account of the China Fortune Management 50 Forum, during Trump's first term as president from 2017 to 2020, he implemented suppressive economic and trade policies against China, which had negative impacts on China's exports, production, and technological development. Since 2023, Trump has stated that if re-elected, he will continue to implement a "America First" policy, imposing stricter economic and trade pressures on China. In 2023, Trump proposed on his campaign website to establish the "Strategic National Manufacturing Initiative (SNMI)", claiming to "take a series of reform measures to fully eliminate America's reliance on China in all key areas". From the above initiatives and statements, it is evident that Trump has accepted the idea of using domestic industrial policies to pressurize China and to advance the plan of the decoupling of China and the US.
Additionally, it is expected that after Trump's re-election, in terms of investments, more restrictions will be placed on a wider range of American entities investing in China. Leveraging federal government contracts and tax breaks, more American businesses in China will be forced to relocate their supply chains out of China, leading to Chinese technology companies delisting from US stock exchanges. With Trump taking office, the pressure faced by China's technology industry may be further increased, and the importance of autonomy and controllability is expected to continue to rise. It is recommended to focus on innovation and industrial software sectors.
Risk warning: The risk of technological development falling short of expectations and policy implementation falling short of expectations.
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