Financial Reform Initiatives
Since 2022, China has gradually relaxed restrictions on foreign investment in the domestic financial market. By the first half of 2024, the foreign shareholding ratio increased from 10% to 22%, enhancing market liquidity and introducing more international experience. According to the Financial Times, Goldman Sachs’ investment return rate in the Chinese market reached 16%. The debt crisis of Evergrande Group in 2021 exposed potential risks in the financial system. To prevent similar incidents, the China Banking and Insurance Regulatory Commission (CBIRC) introduced new regulatory measures in 2022, requiring financial institutions to increase their capital adequacy ratio from 10% to 12%.
According to data from the People’s Bank of China, in the first half of 2024, the issuance of green bonds reached 600 billion yuan, a year-on-year increase of 20%. The Economic Daily reported that green finance not only promotes environmental protection but also stimulates the development of related industries. The new energy vehicle industry has grown rapidly with the support of green finance. In the first half of 2024, Tesla and BYD’s sales in the Chinese market increased by 30% and 35%, respectively. The COVID-19 pandemic posed severe challenges to China’s economy. In 2020, GDP growth was only 2.3%, the lowest in many years. To promote economic recovery, the government launched a series of fiscal stimulus policies, including large-scale infrastructure investments. According to Xinhua News Agency, from 2021 to the first half of 2024, the total infrastructure investment exceeded 12 trillion yuan. These investments not only directly created millions of jobs but also boosted the growth of related industries such as construction materials and mechanical equipment. In 2023, the demand for cement and steel increased by 18% and 12%, respectively. Financial reform and economic recovery are closely linked, jointly driving China’s sustained economic development. The government, enterprises, and individuals are actively participating and contributing to the reform.
Economic Recovery Plan
In 2021, the Chinese government announced a fiscal stimulus plan totaling over 4 trillion yuan, focusing on infrastructure construction and technological innovation. According to Xinhua News Agency, from 2021 to the first half of 2024, the total infrastructure investment exceeded 12 trillion yuan. These investments not only directly created millions of jobs but also stimulated the growth of related industries such as construction materials and mechanical equipment. In the first half of 2024, the demand for cement and steel increased by 18% and 12%, respectively. As a representative of emerging industries, new energy vehicles performed particularly well in the recovery plan. According to the Economic Daily, in the first half of 2024, the production and sales of new energy vehicles reached 2.5 million and 2.2 million, respectively, a year-on-year increase of 20%. Tesla and BYD’s sales in the Chinese market increased by 30% and 35%, respectively. Additionally, according to the People’s Daily, in 2023, the nationwide issuance of consumption vouchers totaled 200 billion yuan, directly driving consumption growth. In 2023, the total retail sales of social consumer goods increased by 8% year-on-year, with the catering and tourism industries seeing growth rates of 12% and 15%, respectively.
In 2023, China’s total exports reached 3.8 trillion US dollars, a year-on-year increase of 10%. According to the Southern Daily, electronic products and mechanical equipment were the main drivers of export growth, increasing by 20% and 15%, respectively. In 2022, the People’s Bank of China repeatedly lowered the loan prime rate (LPR) from 4.05% to 3.7%. In 2023, the loan balance of small and medium-sized enterprises increased by 18% year-on-year, and financing costs decreased by an average of 1.5 percentage points. According to the Beijing Youth Daily, in 2023, 13 million new jobs were created nationwide, and the urban surveyed unemployment rate dropped to 4.8%. The service and manufacturing sectors saw the largest increases in employment, growing by 8% and 10%, respectively.
Fiscal Stimulus Plan
According to Xinhua News Agency, from 2021 to the first half of 2024, the government’s total investment in infrastructure exceeded 12 trillion yuan. In 2023, the demand for cement and steel increased by 18% and 12%, respectively, and sales of mechanical equipment increased by 12% year-on-year. To stimulate domestic demand, the government issued consumption vouchers totaling 200 billion yuan in 2023. The People’s Daily reported that these vouchers covered multiple industries, including retail, catering, and tourism, directly driving consumption growth. Data show that in 2023, the total retail sales of consumer goods increased by 8% year-on-year, with the catering and tourism industries growing by 12% and 15%, respectively.
While promoting consumption, tax reduction policies also reduced the burden on enterprises and promoted economic recovery. According to the China Securities Journal, in 2023, the government introduced a series of tax and fee reduction measures, totaling 1.8 trillion yuan for the year. The corporate income tax rate for small and micro enterprises was reduced from 20% to 15%, and the value-added tax rate for manufacturing enterprises was reduced from 13% to 10%. For the new energy vehicle industry, the government introduced a series of subsidies and preferential policies in 2023. The Southern Daily reported that the subsidy standard for purchasing new energy vehicles was increased from 10,000 yuan to 15,000 yuan, and the implementation period of the subsidy policy was extended. Thanks to these support measures, in the first half of 2024, the production and sales of new energy vehicles reached 2.5 million and 2.2 million, respectively, a year-on-year increase of 20%.
Employment support policies are also a key part of the fiscal stimulus plan. To address the employment pressure caused by the pandemic, the government introduced multiple employment support measures in 2023, including vocational training and employment subsidies. According to the Beijing Youth Daily, in 2023, 13 million new jobs were created nationwide, and the urban surveyed unemployment rate dropped to 4.8%. The People’s Bank of China repeatedly lowered the loan prime rate (LPR) in 2023, from 4.05% to 3.7%, to reduce corporate financing costs.