Vol.160 Macro Conversations 77 | A Different Lens on These Nine Things in the Government Work Report (Recorded March 7)

Summary

• The normalization of IPOs “will definitely happen, and will usually very likely happen after the Two Sessions.” The host reiterated his earlier call, noting that all 3 prerequisites have made progress: ETF and public-fund inflows have made pricing capital somewhat more rational; average daily turnover in China’s capital markets has roughly doubled since the second half of last year, rising from below RMB1T to above RMB1T but below RMB2T; and foreign investors have begun modestly reallocating to China, adding marginal liquidity. The report’s pledge to “reform and optimize the systems for stock issuance, listings, mergers and acquisitions” is consistent with the goal of creating a smoother secondary-market exit for primary-market investments and a healthier cycle.
• Bringing long-term capital into the market is the capital market’s main theme. Household deposits began moving into ETFs and some actively managed public funds in 2024; personal pension insurance was added last year, and commercial supplemental medical and critical-illness insurance could be promoted more aggressively next. The host’s analogy—“Buffett got rich after 50” (“巴菲特在五十岁之后变得有钱”)—reflects how the US 401(k) system brought insurance-based long-term capital into markets in 1978, when Buffett was 48. The report also calls for “strengthening strategic-force reserves and market-stabilization mechanisms,” though he admitted he did not know what specific financial arrangements that referred to.
• The division of labor in technological innovation is being rewritten. Major institutes and national laboratories will “move down the stack” into foundational research, while application-driven breakthroughs will be led by technology champions as the main force, with institutions guaranteeing that companies participate in national science and technology policymaking. The host speculated that company-led breakthroughs from DeepSeek, 哪吒 and robotics during the Lunar New Year may have prompted the language. Companies applying for and undertaking major technology projects should become a very important policy direction.
• The Private Economy Promotion Law is sending a flurry of signals that implementation is near. Protecting entrepreneurs’ lawful rights, addressing corporate arrears at the source, establishing a credit-repair regime and simplifying corporate exits all target the large number of people placed under high-spending restrictions after the economic difficulties of the past 1-2 years, especially business owners and entrepreneurs. He also linked BYD’s Hong Kong share issuance of more than $5B to the arrears issue: China’s manufacturing chains are long, and repeated extensions and pledges of receivables can drag down the cash flow of the entire chain. Both the government and leading companies may be working to resolve corporate payment arrears.
• The formula for consumer policy is “turn what isn’t smart into smart, and what isn’t tech-enabled into tech-enabled,” while rapidly expanding services. Because wages account for a much larger share of service-sector revenue than of manufacturing revenue, services can address both employment and per-capita income. Internet, culture and education—fields traditionally viewed as off-limits—are included in pilots to stabilize foreign investment. Combined with the unified national market, his conclusion was simple: “If it is open to foreign capital, it will also be open to private capital.”
• The biggest change in the policy-execution paradigm since 2023 is “rallying around common purpose and making priorities clear.” The emphasis is on listening to market voices, coordinating expectation management and shaping positive social expectations. The coordinated actions by financial regulators on Sept. 24 last year were the template; the government report and yesterday’s press conferences by the Ministry of Finance, NDRC, PBOC and CSRC delivered the same approach again, coordinating around shared objectives including capital markets, small and micro businesses, inclusive livelihoods and “two priorities, two upgrades.”

Deep dive

1. How policy is made matters more than what it delivers: expectation management becomes a methodology

• The host, with 李翔 absent and the episode recorded solo, opened by saying that the pre-meeting “guess-the-number” market chatter had been broadly accurate, while the market response showed that policy had “slightly exceeded expectations or matched them.” The more important point, however, was the report’s call to “listen to market voices” in policy implementation, coordinate expectation management and “shape positive social expectations.”
• His assessment: this is the biggest change in policy decision-making and implementation since 2023—“rallying around common purpose and making priorities clear.” The coordinated action by financial authorities targeting the capital market on Sept. 24 last year was the clearest expression of this approach. At yesterday’s press conferences, the Ministry of Finance, NDRC, PBOC and CSRC each handled their own mandates while coordinating toward shared goals covering capital markets, small and micro businesses, inclusive livelihoods and “two priorities, two upgrades.”

2. Technological self-reliance is split into 2 tracks, and companies get the lead

• The line from the report that mattered most to him was: “Leverage the leading role of technology champions, deepen enterprise-led integration of industry, academia and research, guarantee institutionally that companies participate in national science and technology policymaking, and undertake major technology projects.” The division of labor is now clear: national laboratories and major institutes will move down the stack into foundational breakthroughs, while leading companies become the main force in application-driven major projects.
• His speculation, with the source’s uncertainty intact: the company-led breakthroughs from DeepSeek, 哪吒 and robotics during the Lunar New Year, which were “striking and impressive both domestically and internationally,” may have led companies to be placed “in an unusually prominent and specific way” as the main force. That should represent a major policy advance for companies applying for technology projects and serving as the implementing entities for major breakthroughs.

3. The Private Economy Promotion Law sends signals on arrears and credit repair

• The report calls for protecting the lawful rights of private companies and entrepreneurs, encouraging eligible private companies to establish and improve corporate systems with Chinese characteristics, addressing arrears at the source and penalizing bad-faith defaults. He believes these provisions are directly related, at the legal-system level, to the forthcoming Private Economy Promotion Law and should be an immediate positive for entrepreneurial confidence.
• He speculated that a secondary-market event possibly linked to arrears was BYD’s Hong Kong share issuance of more than $5B. His reasoning: China’s manufacturing chains are long, and if receivables within the chain are repeatedly extended and pledged, the cash flow of the entire chain becomes “extremely tight or poor.” Whether at the government-company level or between companies—particularly between chain leaders and key suppliers—“both sides may well be working to resolve the problem of corporate arrears.”
• Another provision calls for strengthening the social credit system, establishing a credit-repair regime and improving simplified corporate exits. The target is the large number of people placed under high-spending restrictions after business difficulties, bankruptcies and unpaid debts over the past 1-2 years, especially business owners and entrepreneurs. How companies can quickly and effectively liquidate through bankruptcy, and how founders can repair their credit, “is ultimately a fairly long-term issue—it is the credit system itself.”

4. The consumer fix: add technology, expand services, and open equally to foreign and private capital

• The report identifies a “structural mismatch in consumer supply,” which he interpreted as 2 problems: insufficient effective demand and vicious competition on the supply side. He summarized the policy direction as using technology to raise the value of existing goods: “turn what isn’t smart into smart, what isn’t tech-enabled into tech-enabled, and what isn’t digital into digital.”
• The second pillar is services, including tourism, culture, healthcare, education and “services within manufacturing”—chip design, biomanufacturing and innovative-drug R&D. The logic is that wages make up a much larger share of service-sector revenue than manufacturing revenue, so developing services can simultaneously boost employment and per-capita wages.
• Pilot programs to stabilize foreign investment will include the internet, culture and education—areas “normally considered unlikely to open.” Combined with the unified national market and stronger action against unfair competition, his conclusion is that these sectors will open equally to private companies, SOEs and foreign capital, with factors allocated through market mechanisms: “Simply put, if it is open to foreign capital, it will also be open to private capital.”

5. A weaker hukou system and more archaeology: 2 easy-to-miss threads

• New urbanization continues the direction set by the Third Plenum of the 20th Central Committee: granting urban status to rural migrants and providing public services based on permanent residence, including education, housing support, pensions and healthcare that were previously tied to hukou. He reiterated his earlier view that China’s hukou system may weaken and disappear over the medium to long term, leaving another 20 percentage points of urbanization potential. Home purchases, children’s education and even retirement will increasingly take place in the city of residence rather than the place of registration.
• The report mentions systematic protection of cultural heritage and the research and use of archaeology for the first time. His benchmark was Japan: despite having a much smaller population and territory than China, over the past 20-plus years it has devoted more than 1x to 4x China’s manpower and funding to archaeology, respectively. This is part of restoring and promoting traditional culture and values.

6. Capital markets: Buffett’s long-money logic and the 3 conditions for IPO normalization

• The call to “vigorously promote the entry of medium- and long-term capital into the market” confirms his earlier forecast: in 2024, household deposits moved into ETFs and some actively managed public funds, including personal pension insurance launched last year. Commercial supplemental medical and critical-illness insurance could be promoted more aggressively next. His analogy was that “Buffett got rich after 50” (“巴菲特在五十岁之后变得有钱”) because the 401(k) system brought insurance-based long-term capital into US markets in 1978, when Buffett was 48. As for what financial system or fund arrangement is meant by “strengthening strategic-force reserves and market-stabilization mechanisms,” he said plainly, “I don’t know.”
• On the rumors circulating in late February that IPOs would return to normal, he maintained his earlier view: “It will definitely happen, and will usually very likely happen after the Two Sessions.” The 3 prerequisites are being checked off: ETFs and public funds have partially rationalized pricing capital; average daily turnover has roughly doubled from below RMB1T to above RMB1T but below RMB2T, which is “basically enough”; and foreign investors have begun modestly reallocating to China. With technology investment in the primary market requiring a smooth secondary-market exit and active M&A across the industrial chain, “restoring IPOs to normal should be reasonable—and inevitable.”