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Securities Times reporter Wu Qi

The Third Plenary Session of the 20th Central Committee of the Communist Party of China was held in Beijing from July 15 to 18, 2024. On July 18, the highly anticipated "Communiqué of the Third Plenary Session of the 20th Central Committee of the Communist Party of China" was released.

The plenary session reviewed the achievements that have been made, clarified the direction and goals of my country's next step in comprehensively deepening reform, and made systematic arrangements for the institutional construction involved.

After the release of the plenary session’s communiqué, Securities Times reporters interviewed a number of public funds to interpret the plenary session’s decisions and arrangements, and to jointly study and implement the spirit of the plenary session.

Publicly offered funds generally believe that the plenary session has arranged the direction and key points for further deepening reforms in multiple fields, including macroeconomic policies, economic system reform, and fiscal and taxation reform, which will serve as a guide for advancing reform and development for a long time in the future. Comprehensive and systematic reforms ensure the steady development of the economy, and at the same time provide institutional guarantees for the structural characteristics of high-quality development. This is the source of systematic returns, a definite institutional dividend, and the blue ocean of value investment that investors value most.

Reforms in multiple areas

Make specific arrangements

The plenary session made specific arrangements for reforms in a number of areas.

The plenary session put forward seven "focuses", namely, focusing on building a high-level socialist market economic system, focusing on developing people's democracy throughout the process, focusing on building a socialist cultural power, focusing on improving people's quality of life, focusing on building a beautiful China, focusing on building a safer China at a higher level, and focusing on improving the party's leadership level and long-term governance capabilities.

In terms of economic system reform, Bosera Fund believes that it is mainly about improving the unified large market, improving the basic system of the market economy, building a series of industrial development systems and mechanisms around high-quality development, paying attention to optimizing the macro-control system, and establishing a regional coordinated development system and mechanism.

The plenary session also pointed out that education, science and technology, and talent are the basic and strategic support for China's modernization, and made specific arrangements for the reform of the above three areas. The construction of relevant opening-up systems has received more attention. Taking the initiative and shaping a good development environment is also reflected in the arrangements such as strengthening the construction of foreign-related rule of law, building a more effective international communication system, improving the foreign-related national security system, and deepening the foreign affairs work system.

The plenary session also made many new arrangements in the fields of politics, culture, social livelihood, and ecological civilization, such as improving the mechanism for promoting the construction of a rule of law society and improving the support and service system for population development.

A public offering fund in South China said that in terms of the macro-control system, reforms in key areas such as finance and taxation will be the focus of reforms in the next five years. Regarding the short-term macroeconomic environment, the plenary session analyzed the current situation and tasks, and emphasized the unswerving realization of the annual economic and social development goals.

Yang Delun, chief economist of Qianhai Kaiyuan Fund, said that the communiqué of the plenary session made an in-depth exposition of various issues of my country's economic and social development from a strategic perspective, emphasizing that through further comprehensive deepening of reform, we can promote Chinese-style modernization and achieve sustainable development. It provides guidance for many tasks such as economic system reform in my country in the next few years and enhances the confidence of the people across the country in economic growth.

Devoting ourselves to leading the way in science and technology

The wave of economic boom

The key points of the plenary session's communiqué include key issues currently facing my country's economic development, such as a high-level socialist market economic system, high-quality development, education, science and technology, talent, macro-control and government governance.

The first half of the plenary session's communiqué deeply depicts the path of China's modernization development. Wei Fengchun, chief economist of CSOP Asset Management, pointed out that this has clear guiding significance for investment.

From the communique itself, Wei Fengchun pointed out that it has three significances. First, the plenary session emphasized the importance of comprehensively deepening reform, aiming to promote the development of Chinese-style modernization. The core content of the reform includes improving the market economic system, promoting scientific and technological innovation, deepening supply-side structural reform, and promoting regional coordinated development. Comprehensive and systematic reform ensures the steady development of the economy, and at the same time provides institutional guarantees for the structural characteristics of high-quality development. This is the source of systematic benefits, a certain institutional dividend, and the blue ocean of value investment that investors value most. Second, Chinese-style modernization is a unique modernization path suitable for China's national conditions. While the economy is developing rapidly, maintaining social stability and national independence is the biggest prerequisite. The realization of this goal will undoubtedly have an important impact on the investment environment and policy orientation, which largely defines the boundaries of investment layout and is the greatest portrayal of investment risks and returns. Third, the new development concept, namely the development concept of innovation, coordination, greenness, openness, and sharing, is the new guiding ideology for the development of the socialist economy with Chinese characteristics. This is an overall guidance for investment layout, and it points out a clear path for macro, industrial and asset layout.

In terms of specific investment areas, Wei Fengchun pointed out that improving the new national system is one of the highlights of this conference. The new national system emphasizes the guiding role of the government in the field of science and technology, which will bring more policy support and resource investment. Investors can pay attention to industries and enterprises related to the new national system, such as leading enterprises in high-end manufacturing, information technology, biomedicine and other fields. These enterprises may get more development opportunities with the support of national policies. The improvement of the overall efficiency of the national innovation system will promote scientific and technological innovation and industrial upgrading. Investors can pay attention to investment opportunities in the field of science and technology, such as artificial intelligence, blockchain, biotechnology, etc. At the same time, the upgrading and transformation of traditional industries may also bring investment opportunities.

Wei Fengchun believes that it is necessary to make it clear that the development of education, technology, and talent is a long-term process, and investors should have a long-term investment perspective and focus on industries and companies with long-term development potential. This means that patient capital will become the main force in interpreting value investment in the new era.

The above-mentioned South China public offering fund stated that building a high-level socialist market economic system is a relatively important task, and it is clear that the role of the market mechanism needs to be better played, both "let it live" and "control it". In addition, around high-quality development, specific institutional arrangements have been made in terms of developing new quality productivity in accordance with local conditions and promoting the deep integration of the real economy and the digital economy.

Changing investment thinking

Welcome the new era of technological revolution

"Major national conferences usually include forecasts for the overall economy, outlooks for the next stage of different industries, and revelations of key future policies." Yao Yudong, deputy general manager and chief economist of Dacheng Fund, said that as shown by many past experiences, investors will be full of confidence in the market after major national conferences. In terms of specific investment directions, the country has focused on the development of new quality productivity in recent years. Investors can make certain choices in investment directions and strategies by paying attention to the past, present and future of new quality productivity, that is, transforming and upgrading traditional industries, strengthening existing emerging industries and laying out the construction of future industries. China's future development must be of high quality, with scientific and technological innovation as an important guide.

In order to welcome the technological revolution in the new era, Wei Fengchun believes that it is necessary to transform traditional investment thinking and methods.

First, when the economic growth paradigm and structure remain unchanged, economic growth and corporate development follow specific laws of prosperity and decline, and investors do not need to consider the impact of paradigm shifts. However, institutional changes have already begun, and we need to not only keep our heads down to pull the cart, but also look up to see the road ahead.

Second, in the era of "great change" with technological revolution as the main line, the old paradigm has become invalid. The first thing to fight is the "mean reversion" theory advocated by value investment and the obsession of value investors with this theory. The fundamental reason for the failure of mean reversion is that technological revolution will cause the enterprises representing the old economic order to go bankrupt and die.

3. Although innovation is the key to growth, the opportunities brought by innovation may still be missed or misunderstood by traditional investors. Investors need to focus on the leaders, promoters and beneficiaries of disruptive innovation and identify large-scale investment opportunities.

4. During the major institutional reforms, the market economy will play a fundamental role in resource allocation, and entrepreneurs will become the main force in modernization construction. This is a major change in investment layout.