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The CPC Central Committee's decision on further deepening reform and promoting Chinese-style modernizationDecide》Official Release

On July 18, 2024, the Third Plenary Session of the 20th Central Committee of the Communist Party of China adopted the "CPC Central Committee's Decision on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization".Decide” (hereinafter referred to as the “Decision”). The full text of the “Decision” was officially released on July 21 [1]. We briefly comment on it as follows:

The goal of further comprehensively deepening reform and advancing Chinese-style modernization.Compared with the "Communiqué" issued on the day the Third Plenary Session of the 18th CPC Central Committee ended, the strategic deployment and overall requirements covered in the "Decision" are more comprehensive and detailed. The overall goal of comprehensively deepening reform is to continue to improve and develop the socialist system with Chinese characteristics, promote the modernization of the national governance system and governance capabilities, and "build a high-level socialist market economic system in an all-round way" by 2035. The "Decision" deploys institutional and mechanism reforms involving the economy, politics, law, people's livelihood, etc., and emphasizes "enhancing the systematic, holistic and coordinated nature of reforms."

The Decision covers 15 major items and 60 articles, with high aspirations and wide content. The Decision of the CPC Central Committee on Several Major Issues Concerning Comprehensively Deepening Reforms, issued at the end of 2013 at the Third Plenary Session of the 18th CPC Central Committee, included 60 specific field plans. This Decision, based on the affirmation of the "epoch-making" significance of the Third Plenary Session of the 18th CPC Central Committee, makes systematic arrangements for further comprehensively deepening reforms:

1. The great significance and overall requirements of further comprehensively deepening reform and promoting Chinese-style modernization.(1) The importance and necessity of further deepening reform in an all-round way, focusing on the background of reform; (2) The guiding ideology of further deepening reform in an all-round way; (3) The overall goal of further deepening reform in an all-round way, involving deployment in seven areas, emphasizing "giving full play to the decisive role of the market in resource allocation and better playing the role of the government"; (4) The principles of further deepening reform in an all-round way, emphasizing "strengthening top-level design and overall planning, breaking and establishing at the same time, and establishing before breaking."

2. Build a high-level socialist market economic system.In terms of the market environment, we should both “let it run freely” and “control it well”; (5) adhere to and implement the “two unshakable” principles; “promote the independent operation of natural monopoly links and market-oriented reform of competitive links in industries such as energy, railways, telecommunications, water conservancy, and public utilities”; and “formulate a law to promote the private economy”; (6) build a unified national market; “optimize the residential tiered water, electricity, and gas price system, and improve the pricing mechanism for refined oil products”; “reduce the logistics costs of the entire society”; “build a unified national electricity market”; and “actively promote the initial public offering economy”; (7) improve the basic system of the market economy.

3. Improve the system and mechanism to promote high-quality economic development.These include (8) improving the system and mechanism for developing new productive forces in accordance with local conditions, with a focus on “strategic industries such as new generation information technology, artificial intelligence, aerospace, new energy, new materials, high-end equipment, biomedicine, and quantum technology”; (9) improving the system for promoting the deep integration of the real economy and the digital economy; (10) improving the system and mechanism for developing the service industry and “breaking down administrative barriers to cross-regional operations”; (11) improving the system and mechanism for building modern infrastructure, including “developing general aviation and low-altitude economy, and promoting the optimization of toll road policies”; and (12) improving the system for enhancing the resilience and security of the industrial chain and supply chain.

4. Establish a system and mechanism to support comprehensive innovation.These include (13) deepening comprehensive education reform and “optimizing the allocation of regional education resources”; (14) deepening science and technology system reform, including “building a science and technology financial system that is compatible with scientific and technological innovation”; and (15) deepening reform of the talent development system and mechanism.

V. Improve the macroeconomic governance system"Strengthen the consistency of macroeconomic policy orientation", including (16) improving the national strategic planning system and policy coordination mechanism, and "exploring the implementation of national macroeconomic balance sheet management"; (17) deepening fiscal and taxation system reform, including "increasing local autonomous financial resources", "appropriately strengthening central government powers and increasing the proportion of central fiscal expenditure"; (18) deepening financial system reform, and again mentioning "increasing the proportion of direct financing" and "supporting the entry of long-term funds into the market"; (19) improving the implementation mechanism of regional coordinated development strategies.

6. Improve the system and mechanism for urban-rural integrated development.These include (20) improving the institutional mechanisms for promoting new urbanization; (21) consolidating and improving the basic rural management system, and “orderly advancing the pilot program of extending the second round of land contracts for another 30 years after they expire”; (22) improving the support system for strengthening, benefiting and enriching farmers; and (23) deepening land system reform.

7. Improve the system and mechanism for high-level opening up.These include (24) steadily expanding institutional opening-up; (25) deepening foreign trade system reform; (26) deepening foreign investment and outbound investment management system reform, and “promoting orderly opening-up in areas such as telecommunications, the Internet, education, culture, and medical care”; (27) optimizing the regional opening-up layout; and (28) improving the mechanism for promoting high-quality joint construction of the Belt and Road Initiative.

8. Improve the system of full-process people’s democracy.These include (29) strengthening the system of people’s democracy; (30) improving the consultative democracy mechanism; (31) improving the grassroots democratic system; and (32) improving the overall united front work pattern.

9. Improve the socialist legal system with Chinese characteristics.These include (33) deepening reform in the legislative field; (34) deepening the promotion of administration according to law; (35) improving the system and mechanism for fair law enforcement and justice; (36) improving the mechanism for promoting the construction of a society ruled by law; and (37) strengthening the construction of the rule of law in foreign affairs.

10. Deepen the reform of cultural systems and mechanisms.These include (38) improving the responsibility system for ideological work; (39) optimizing the supply mechanism for cultural services and cultural products; (40) improving the comprehensive network governance system; and (41) building a more effective international communication system.

11. Improve the system to protect and improve people’s livelihood.These include (42) improving the income distribution system; (43) improving the employment priority policy; (44) improving the social security system, “implementing the individual pension system”, “accelerating the construction of a new model for real estate development”, “allowing relevant cities to cancel or reduce housing purchase restrictions, cancel the standards for ordinary and non-ordinary residential properties”, and “improving the real estate tax system”; (45) deepening the reform of the medical and health system; and (46) improving the population development support and service system and “developing the silver economy”.

12. Deepen the reform of the ecological civilization system.Promote carbon reduction, pollution reduction, green expansion and growth, including (47) improving the basic system of ecological civilization; (48) improving the ecological environment governance system; (49) improving the green and low-carbon development mechanism.

13. Promote the modernization of the national security system and capabilities.These include (50) improving the national security system; (51) improving the public security governance mechanism; (52) improving the social governance system; and (53) improving the foreign-related national security mechanism.

14. Continue to deepen defense and military reforms.These include (54) improving the leadership and management system and mechanism of the People’s Army; (55) deepening the reform of the joint combat system; and (56) deepening cross-military and local reforms.

15. Improve the Party’s leadership in further comprehensively deepening reform and advancing Chinese-style modernization.These include (57) upholding the centralized and unified leadership of the Party Central Committee in further deepening reform in an all-round way; (58) deepening the reform of the Party’s construction system; (59) deepening the Party’s work on building a clean and honest government and combating corruption; and (60) implementing reform with a dogmatic spirit.

For those areas that are more closely related to the economy and capital markets, we recommend that you focus on the following areas: 1) From the perspective of the relationship between the government and the market, the Decision emphasizes "giving full play to the decisive role of the market in resource allocation and better playing the role of the government"; 2) Adhere to and implement the "two unshakable" principles, and promote the concentration of state-owned capital in important industries and key areas related to national security and the lifeline of the national economy, in public services, emergency response capabilities, public welfare areas, etc. related to the national economy and people's livelihood, and in forward-looking strategic emerging industries; 3) Promote the independent operation of natural monopoly links and market-oriented reform of competitive links in industries such as energy, railways, telecommunications, water conservancy, and public utilities; 4) Improve the system and rules of the factor market, improve the circulation system, and accelerate the cultivation of a complete domestic demand system; 5) Accelerate the formation of production relations that are more compatible with new quality productivity, promote the aggregation of various advanced production factors to develop new quality productivity, and significantly improve total factor productivity. Encourage and regulate the development of angel investment, venture capital, and private equity investment, better play the role of government investment funds, and develop patient capital. 6) Improve the population development strategy with a focus on coping with aging and declining birth rates; 7) Establish a central and local fiscal relationship with clear responsibilities and powers, coordinated financial resources, and regional balance; 8) Accelerate the establishment of a housing system that combines renting and purchasing, and accelerate the construction of a new model for real estate development, etc.

The "Decision" is beneficial to the medium- and long-term development of the capital market, and we will pay attention to its subsequent implementation.In our previously released "Brief Comments on the Communiqué of the Third Plenary Session of the 18th CPC Central Committee", we believe that the medium- and long-term reform dividends combined with the high-quality construction of my country's economy are the cornerstones for the steady development of my country's capital market. This decision mentions capital market construction in many aspects, including "improving the capital market function of coordinating investment and financing, preventing risks, strengthening supervision, and promoting the healthy and stable development of the capital market", "supporting the entry of long-term funds into the market", "improving the quality of listed companies, strengthening the supervision and delisting system of listed companies", "establishing a long-term mechanism to enhance the inherent stability of the capital market", "improving the behavioral norms and constraints of major shareholders and actual controllers", "improving the dividend incentive and constraints of listed companies", "improving the investor protection mechanism", "promoting the connection of regional equity market rules and the unification of standards", "orderly expansion of my country's capital market opening up to the outside world", etc. The "Decision" reflects my country's high attention to the construction of a financial power, especially in the field of high-quality development of the capital market. Combined with the previous newNine ArticlesWith the continuous improvement of the "1+N" capital market policy system, the development of the capital market will also help to better serve my country's development strategy and enhance the ability of financial institutions to better serve the real economy.

Source: China International Capital Corporation

Li Qiusuo Analyst SAC License No.: S0080513070004 SFC CE Ref: BDO991

Li Jin Analyst SAC License No.: S0080520120005 SFC CE Ref: BTM851