The Chinese central government has released a new long-term plan for expanding domestic demand that highlights efforts to strengthen the role of domestic capital markets.
On 14 December the Central Committee of the Communist Party of China (CPC) and the State Council jointly issued the “Outline for the Strategic Plan to Expand Domestic Demand (2022 – 2035) (扩大内需战略规划纲要（2022－2035年）).
The Outline calls for “accelerating the cultivation of a complete domestic demand system, expediting the formation of a strong domestic market, and supporting the clearing out of domestic economic circulation.”
With regard to the financial sector, the Outline calls for “strengthening the role of capital markets in financing the real economy, increasing the share of direct financing – and in particular equity financing,” as well as “expanding the scale of bond financing and driving bond market linkages and connections.”
The Outline highlighted a range of problems faced by efforts to expand domestic demand in China over the medium-to-long term, including “insufficient effective supply capability, considerable disparities in allocation, low levels of modernisation of the circulation system, incomplete consumption mechanisms and investment structures that still need optimisation.”
Manufacturing sector a focus
The manufacturing sector is another area of focus for the Outline, which calls for “driving high-quality development of the manufacturing sector to establish a great manufacturing powers, and guiding various forms of high-quality resources and factors of production to concentrate in the manufacturing sector.”
“[We must] expand the intensity of investment in the optimisation and upgrade of traditional manufacturing, expand investment in advanced manufacturing areas, and raise the quality and efficiency of the manufacturing supply system.”
Government to guide private investment
The Outline calls for “expanding the intensity of support and guidance for private investment,” as well as “improving support policies, employing the guidance and leadership role of government funds and guiding private capital to participate in major projects and areas to supplement shortcomings, including new infrastructure, new urbanisation, transport and hydrology.”
According to the the Outline, the Chinese government will “encourage private enterprises to increase investment in R&D, drive equipment upgrades and technological improvements, expand investment in emerging strategic industries, increase sovereign innovation capability and grasp and possess core technologies for independent intellectual property.”
“[We] will encourage and guide non-state owned capital to participate in the transformation and restructuring of state-owned enterprises by means of multiple methods including controlling equity investments and asset acquisitions,” the Outline said.
“[We] will pragmatically protect the lawful rights and interests of private enterprises, and cultivate and maintain a fair and competitive investment environment. We will strengthen services, guidance and standardisation management for private enterprises.”