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This marks the 816th article from the Xijing Research Institute and the 755th by Dean Zhao Jian.

Listen closely. The Government Work Report presented during the annual Two Sessions sets the policy tone for the year. If I had to encapsulate this year's report in one sentence, it would be: "Promoting development for security and fostering a consumption-driven society through people-centric policies."

This aligns with my emphasis since last year on China's future monetary and fiscal policies: people-centric finance and a consumption-oriented society (Zhao Jian: Where is the Future?). This year's report unusually emphasizes "investing in people" rather than over-investing in "things," as I have consistently advocated. By enhancing public sentiment through people-centric finance, we bolster the country's greatest intangible asset—sentiment.

Between development and security, the importance of development stands out. While security safeguarded development amidst pandemic and war turbulence, today we must adjust, using development to secure long-term economic and social stability. Stagnation in development leads to shrinking wealth, declining incomes, and youth unemployment—the ultimate insecurity. I have highlighted this in numerous past articles, including the concept of "resolving debt through development and developing while resolving debt," consistent with my article from two years ago, "Zhao Jian: There is No Shortcut to Resolving Local Government Debt, Only Through Development."

Concerning consumption and production, consumption takes precedence. Past reports prioritized expanding production, establishing a modern industrial system, and promoting production. This year's report shifts focus, prioritizing demand expansion through consumption rather than traditional investment methods. Never have I seen such a high-level emphasis on consumption, placing it at the forefront of tasks. Expanding consumption, increasing its GDP share, making it the primary economic growth driver, and testing investment effectiveness through consumption signify economic progress. A consumption-driven society is a hallmark of a moderately prosperous and affluent society. In less developed economies, reducing consumption and increasing savings is essential for capital accumulation. Only when economic development reaches a certain stage can the material basis for expanded consumption be achieved. This year's report's emphasis on consumption confirms a new stage in China's economic development.

How to boost consumption? Mere slogans are insufficient. The report outlines three key measures: Strengthening livelihood security and improving social welfare (increasing pensions and unemployment benefits reduces precautionary savings, freeing up budgets for current consumption); implementing robust trade-in incentives (last year's 150 billion yuan was effective; this year doubles to 300 billion yuan for even greater impact); and promoting moderate price recovery (setting a more realistic CPI target of 2%, one percentage point lower than last year's 3%, to boost expectations). Why? A realistic goal encourages policy departments like the central bank to fully achieve it, driving prices up. The current consumption slowdown partly stems from falling prices and rising cash value, prompting people to hoard money, awaiting further price drops before consuming, especially for durable goods and real estate. These measures will significantly enhance consumption and accelerate the transition from deflationary to inflationary deleveraging.

This year's report also hints at the long-absent "entrepreneurial spirit," evident in its meso-industrial approach to fostering new productive forces. The report highlights three key points: Cultivating emerging and future industries (e.g., commercial aerospace, low-altitude economy, biomanufacturing, quantum technology, embodied intelligence, and 6G); transforming and upgrading traditional industries (accelerating manufacturing's digital transformation and nurturing industry-digital service providers); and stimulating the digital economy's innovation vitality (continuing the "AI+" initiative, integrating digital technology with manufacturing and market advantages, supporting large model applications, and developing intelligent, connected new energy vehicles, AI smartphones, computers, and robots). This professional industry planning reflects an entrepreneurial mindset, focusing purely on economic development, unlike recent years' emphasis on technology and industrial security.

The strongest signal comes from the deficit rate's leap from 3% to 4%. This small percentage point marks a significant ideological shift. Notably, during the pandemic's toughest years, the deficit rate peaked at 3.8%. This year's 4% rate meets market expectations, equating to a 5.66 trillion yuan deficit, a 39.4% YoY increase—higher than 2020's 36.2% and the highest in a decade. General public budget expenditure is targeted at 29.7 trillion yuan, up 4.4% YoY, a 0.8 percentage point increase from last year.

"Stabilizing the real estate and stock markets" is another strong signal, formally proposed at last year's Political Bureau meeting and reiterated in this year's report, indicating its political significance. This signals a policy environment shift for Chinese asset revaluation (refer to internal report "Zhao Jian: Revaluing China"). As a political task, the stock market will likely avoid major issues, though "stabilization" does not imply exponential growth. The real estate market may be accelerating towards its bottom, with first-tier cities potentially leading structural recovery. The "houses are for living in, not for speculation" mantra is a distant memory, now replaced by advocacy for local governments to implement tailored policies, making real estate a test of local governance.

Monetary policy shifts from prudent to moderately loose, with "targeted RRR cuts and interest rate reductions," while fiscal policy becomes more active, akin to sharpening weapons and tightening bows for action. Local special debt, previously restricted, will not only increase in volume but also expand its scope. Previously, special funds targeted advanced modern industries; now, they can be used for debt resolution, storage, and repayment—another significant ideological shift.

Numerous strong signals indicate a return to an economic construction focus. The report adds: "Improving systems and policies to promote economic, cultural, and exchange cooperation across the Taiwan Strait." This seemingly ordinary sentence carries strong significance, signaling a return to both "economic construction" and "peace and development" themes. What do these signals mean for China's economic recovery and asset revaluation?

For a detailed discussion on this Government Work Report, join my upcoming member live broadcasts. I will analyze:

1. This year's report's tone changes and their capital market implications.

2. High-level economic judgments from the report.

3. Concrete monetary and fiscal policy investments. Why doesn't moderate monetary easing immediately trigger RRR cuts and interest rate reductions? How will expanded deficit funds be spent, and which areas/industries will benefit?

4. The technology sector's surge and Two Sessions' inspiration. Will China's economy recover as anticipated, and how long will asset revaluation last?

I will also delve into China's AI industry and Hong Kong stocks' recent twists, especially leading Chinese concept stocks. Join our Research and Communication Conference for online exchanges and certainty in a complex market.