Macro Conversations 79: Three Lenses on the Two Sessions
Summary
The demand-side theme of the Two Sessions is to bring subsidies, income, social security, and asset prices together in restoring consumption. Of the RMB1.3T in ultra-long-term special government bonds, RMB300B will fund consumer-goods trade-ins, with eligible categories expanding from “8+N” to “12+N” to include smartphones, tablets, smartwatches, and smart bands. 顾坤 stressed that vouchers alone are not enough: the property and equity markets must stabilize before the “wealth effect” can restore household balance sheets.
Fiscal policy may shift from proactive to more proactive, while monetary policy must continue to follow through. New government debt will total RMB11.86T in 2025, up RMB2.9T from the previous year, with the deficit ratio reaching 4% for the first time. Monetary policy has shifted from prudent to moderately loose; 顾坤’s blunt translation is “more money, lower costs,” while 徐杰明 said further coordinated moves, including reserve-ratio and interest-rate cuts, still warrant close attention.
The RMB1.3T in ultra-long-term special government bonds is tasked simultaneously with security, equipment upgrades, and directly boosting consumption. RMB800B will go to “two major” projects and RMB500B to “two new” programs, including RMB200B for equipment upgrades and RMB300B for consumer-goods trade-ins. The central government will bear 90% overall, roughly 85% in eastern regions and 95% in western regions, reducing the extent to which local fiscal disparities constrain implementation.
The policy chain for new quality productive forces is extending from infrastructure investment to capital-market exits for unprofitable technology companies. Eligible special-bond projects now include information technology, new materials, biomanufacturing, the low-altitude economy, quantum technology, commercial spaceflight, and computing equipment. On Mar. 11, the CSRC proposed cautiously restoring the STAR Market’s fifth listing standard. 顾坤 summarized the mechanism this way: “Technological innovation is the endogenous force behind industrial innovation; industrial innovation is the externalized value of technological innovation.”
The clearest source of incremental liquidity for A-shares is long-term capital making long-term investments, not a one-off sentiment shock. Over the next 3 years, public funds’ holdings of A-share free-float market cap must rise by at least 10% annually; the 2025 pilot program for insurers’ long-term equity investments will exceed RMB100B. Evaluation periods will extend beyond 3 years, and beyond 5 years for the National Social Security Fund; large state-owned insurers are also being asked to strive to invest 30% of annual incremental premiums in equities.
Beyond IPOs, mergers and acquisitions are being shaped into a new exit channel for technology companies and the private market. Only about 100 companies listed on the A-share market in 2024, down 68% year on year. Meanwhile, state-owned enterprises and central SOEs completed more than RMB580B in acquisitions, accounting for 76% of total A-share M&A. New rules for the first time support cross-industry integration, A-share-on-A-share deals, and acquisitions of unprofitable companies across all boards, while shortening lockups for qualifying private funds.
Policy ambitions remain constrained by the “impossible triangle” of growth, debt, and high-quality development. The CPI target has fallen from the long-standing level of around 3% to 2%, the first time since 2004 that it has been set below 3%, underscoring that deflationary pressure and weak consumer confidence remain the starting point. 徐杰明’s closing formulation was “grand ambitions and a triangular dilemma”: fiscal policy has moved first, monetary policy must follow, and whether consumer confidence and economic vitality can recover remains to be seen.
Deep dive
1. Policy implementation starts with procedure—and when the case is clear, fund it in one shot
李丰 corrected his earlier judgment that the private-sector promotion law would pass during the Two Sessions. Under the current legislative procedure, the bill must undergo 3 rounds of review and revision; only 2 have been completed so far. His legal colleagues therefore believe the National People’s Congress Standing Committee should review it again this year before completing the formal voting process.
顾坤 said the meeting’s “unchanged” feature was pragmatic progress and pursuing stability while seeking progress; what has “changed” is the search for a more efficient, higher-quality development path. Policymaking should happen “as early as possible, never later than necessary,” while implementation should continuously incorporate market feedback and close the loop.
He used the STAR Market’s fifth listing standard as a case study in implementation. The market has long pointed out that some technology companies possess core technologies and clear industrial applications but remain in the investment phase. Restoring a listing channel for high-quality unprofitable technology companies is a concrete response to that demand.
2. Consumption stimulus expands from “giving people money to buy things” to income, security, and wealth effects
徐杰明 began with the macro backdrop: GDP growth and the surveyed urban unemployment rate were broadly on target and stable, but CPI deviated materially from its previous target. The 2025 inflation target has been lowered to 2%, the first time since 2004 that it has fallen below 3%, reflecting deflationary pressure, weak consumer confidence, and insufficient economic vitality.
He distilled the special action plan to boost consumption, released on Mar. 16, into 4 measures: raise incomes, increase willingness to consume, guide consumption patterns, and improve the consumption environment. Alongside wage growth and higher rural incomes, the plan specifically highlights expanding channels for property income and using long-term funds from insurance, social security, and pensions to stabilize the equity market.
The RMB300B trade-in pool is double last year’s RMB150B, with eligible categories expanding from “8+N” to “12+N” to include smartphones, tablets, smartwatches, and smart bands. 徐杰明 said this should both boost demand for “AI + consumer electronics” and steer upgrades in the industrial and consumption mix.
顾坤 added the local-government incentive angle: if a larger share of consumption-tax revenue were allocated to local governments, they would have more incentive to improve the consumption environment. At the same time, subsidies can become sustainable consumption rather than a short-lived pulse only if “involutionary competition and price wars” are curbed, better housing is built, and the property and equity markets are stabilized.
3. RMB11.86T of new debt pushes fiscal policy to a historic new intensity
徐杰明 broke down the RMB11.86T total increase in government debt, up RMB2.9T from the previous year: RMB5.66T in fiscal deficits, RMB4.4T in local special-purpose bonds, RMB1.3T in ultra-long-term special government bonds, plus RMB500B in special government bonds to recapitalize large state-owned commercial banks.
The deficit ratio reached 4% for the first time. Of the RMB5.66T deficit, 85.9% is central-government deficit, focused on increasing transfers to local governments, safeguarding grassroots “three guarantees,” pensions, medical insurance, and childcare subsidies, while also supporting technological and industrial innovation and structural tax and fee cuts.
Local special-purpose bonds can fund investment and construction, land purchases and reserves, acquisitions of existing commercial housing, and local debt resolution, including the settlement of overdue corporate payables by local governments. The cap on the share that can be used as project capital was also raised from 25% to 30%. This both targets bottlenecks and adds further leverage.
The significance of the RMB500B recapitalization for state-owned banks goes beyond the principal amount. Citing economists’ estimates, 徐杰明 said it could generate more than RMB4T in additional credit and push the largest state-owned banks to direct more lending toward small and micro businesses, private companies, technological innovation, and advanced and future industries.
4. The RMB500B “two new” pool under ultra-long-term government bonds is already showing multiplier effects
陈丰 split the RMB1.3T into RMB800B for the “two major” programs and RMB500B for the “two new” programs: RMB200B for equipment upgrades and RMB300B for consumer-goods trade-ins. Versus 2024, the total pool rises by RMB300B, with consumer-goods funding up RMB150B and equipment-upgrade funding up RMB50B.
Equipment-purchase investment rose nearly 16% year on year in 2024, contributing more than 65% of total investment growth. Vehicle scrappage replacements reached 2.7M and replacement upgrades exceeded 3.1M; more than 3,300 consumers purchased over 5,200 home appliances through the trade-in program. In the first 2 months of 2025, new-energy vehicle sales rose more than 26% year on year and home-appliance sales volume increased more than 36%—the policy clearly triggered a “buy, buy, buy” impulse.
Funding is shared at differentiated rates: the central government bears 90% overall, roughly 85% in eastern regions and 95% in western regions. The Shanxi delegation also proposed including security capabilities in the cultural-relics and museum sectors within the support scope. 陈丰 said that if adopted, the policy could bring more support to cultural-relic protection and the broader cultural sector.
5. New quality productive forces need both state-built foundations and capital-market exits
顾坤 divided new quality productive forces into 3 layers: infrastructure, technology platforms, and industrial applications. Infrastructure should be funded mainly by the government and state-owned capital, with private capital playing a supporting role, to sustain longer and more complete industrial chains and allow them to keep generating industries and jobs.
Policy priorities cover integrated circuits, artificial intelligence, biomanufacturing, energy and the environment, as well as intelligent driving, humanoid robots, 6G, 巨深智能, quantum computing, the low-altitude economy, and commercial spaceflight. The key is not the technology list but “bringing the fruits of technological innovation into concrete industries in a timely manner.”
Special bonds now additionally support information technology, new materials, biomanufacturing, the low-altitude economy, quantum technology, commercial spaceflight, and computing equipment. The STAR Market’s fifth listing standard provides a financing exit for companies that still require sustained R&D investment, ensuring that the “deep integration of technological and industrial innovation” is more than a slogan.
6. “Investing in people” defines social spending as productive investment in high-quality development
顾坤 broke down the idea that “investing in people is equivalent to investing in physical assets” into 2 layers. In the narrow sense, education, training, and employment build the capacity to innovate, create, and generate wealth, while culture and tourism, healthcare, and eldercare improve quality of life. In the broad sense, it also covers the young and old, childcare, and better housing.
The growing presence of more interdisciplinary fields in university expansion is, in his view, an early-stage effort to connect technological innovation with future industries: “Many breakthrough innovations emerge at the intersection of disciplines or technologies.”
徐杰明 added that general public-budget spending will rise by RMB1.2T to RMB29.7T, covering free preschool education, childcare subsidies, integrated childcare and early-education services, and eldercare support. The minimum basic pension for urban and rural residents will increase by RMB20 per person. The amount is small individually, but across the population it will still create a meaningful flow of funds into the market and continue to support the silver economy.
7. Higher-level opening serves exports, industrial upgrading, and cultural expansion overseas
顾坤 highlighted new forms of offshore trade, green trade, and digital trade, alongside support for financing, settlement, foreign exchange, export credit insurance, and overseas exhibitions. Market access will continue to open up; Suzhou’s pilot program allowing foreign investment across the biopharmaceutical value chain is one example of attracting foreign capital into high-end industrial chains.
Institutional opening is expanding into the internet, culture, telecommunications, healthcare, and education, alongside stronger intellectual-property protection and streamlined approvals for cross-border data. His summary: operate in the large domestic market while also “opening the doors to do business,” enabling domestic and international circulation to move toward each other.
徐杰明 placed TikTok, DeepSeek, and Ne Zha’s popularity on the same continuum. Compared with the earlier model of “trading market access for technology,” this round of opening places more emphasis on exporting services, culture, and soft power—another side of consumption and industrial upgrading.
8. The core shift in long-term capital entering the market is the simultaneous adjustment of fund size and evaluation horizons
陈丰 listed the hard constraints: over the next 3 years, public funds’ holdings of A-share free-float market cap must rise by at least 10% annually, implying several hundred billion renminbi in new capital each year; the 2025 pilot for insurers’ long-term equity investments will be at least RMB100B.
Management, custody, trading, and distribution fees charged by public funds will fall further, with total fee reductions expected to exceed RMB45B. Two Sessions delegates also proposed tax incentives for long-term equity investment, but 陈丰 explicitly described this as “something to look forward to implementing,” not an existing policy.
Public funds, state-owned insurers, and pension funds will adopt evaluation periods of more than 3 years, while the National Social Security Fund will use a horizon of more than 5 years. Large state-owned insurers are also being asked to strive to invest 30% of annual incremental premiums in equities.
On that basis, 陈丰 expects long-term capital and foreign investors to bring more than RMB1T in incremental funds to A-shares, raise institutional and foreign ownership, reduce short-term volatility, and strengthen market resilience. This is a policy projection, not an unconditional promise about market performance.
9. Easing foreign-investor access now covers equities, bonds, M&A, and derivatives
Foreign-investment restrictions in manufacturing have been fully removed, while opening pilots in the internet, culture, healthcare, telecommunications, and education sectors are expanding. Eligibility thresholds and approval procedures for foreign investors acquiring domestic companies or making strategic investments in listed companies have also been further simplified.
QFII, RQFII, and Stock Connect will continue to deepen, while Swap Connect will support China’s bond market and Hong Kong’s financial center. The scope of capital-market opening has expanded from single-stock investment to bonds, M&A, private placements, and derivatives trading.
On Mar. 12, the China Foreign Exchange Trade System proposed waiving, from April, all interbank renminbi foreign-exchange derivatives trading fees for maturities of more than 2 years. 陈丰 viewed the move as another positive signal for attracting more foreign capital into China’s capital markets.
10. IPOs, M&A, and a 20-year national fund are rebuilding the technology-capital cycle
After the IPO pace was temporarily tightened on Aug. 27, 2023, only 100 companies listed on the A-share market in 2024, down 68% year on year. The Two Sessions again called for optimizing listing standards for the STAR Market, ChiNext, and the Beijing Stock Exchange; 陈丰 therefore believes 2025 will bring a new window for hard-tech companies to go public.
M&A has already accelerated. State-owned enterprises and central SOEs completed more than RMB580B in acquisitions in 2024, accounting for 76% of total A-share M&A and reaching a nearly 13-year high. Since 2015, A-shares have completed nearly 13,000 M&A transactions; the success rate has improved markedly over the past 3 years and reached a nearly 10-year high in 2024. For the first time, reforms support cross-industry M&A. 华大九天’s proposed acquisition of 芯和半导体 through a combination of share issuance and cash was cited by 陈丰 as a real-world example of supply-chain integration.
A-share-on-A-share transactions can use a simplified review process, with the relevant review and registration completed within 12 working days. Every board can acquire unprofitable companies. Once a private fund’s investment term has exceeded 5 years, its transaction lockup can be shortened to 6 months; when the target is a small or medium-sized company, the lockup can be reduced from 24 months to 12 months.
During the Two Sessions, policymakers proposed establishing an “aircraft-carrier-scale” national venture-capital guidance fund with a 20-year duration, covering quantum technology, biopharmaceuticals, future energy, artificial intelligence, 巨深智能, and 6G. In an “imperfect” analogy, 顾坤 compared the state to a “large investment company”: using PE thinking to cultivate Huawei-like chain leaders and bring in “catfish” such as Tesla, while using VC thinking to “invest early, invest small, invest in tech, and invest for the long term.” 徐杰明 left the constraint intact: growth, debt health, and high-quality development still form a “triangular dilemma.”