What to watch out for at the Central Economic Work Conference: Release of Five Major Signals The annual Central Economic Work Conference is the most authoritative vane for judging the current economic situation and future macro policy trends.

This year's Central Economic Work Conference is the final meeting of the "Twelfth Five-Year Plan" and is also expected to make arrangements for the "13th Five-Year Plan", so it has received special attention.

What are the highlights of this year’s conference can be gleaned from the five major signals recently released.

Signal 1: "Ren Zhongping's" "Four Changes" On the 18th, "People's Daily" published a signed article by "Ren Zhongping", which focused on the current status and problems of China's economy.

For observers of China's political situation, the importance of the three words "Ren Zhongping" is self-evident.

Since his first appearance in 1993, "Ren Zhongping" has never been absent whenever China encounters important junctures.

This time, "Ren Zhongping"'s article is more than 8,000 words long. It mainly discusses China's development direction. It seems to be a grand topic, but the text contains judgments on China's current economic situation.

For example, "Ren Zhongping" proposed "four unchanged" this time, that is, the fundamentals of long-term economic development have not changed, the basic characteristics of good economic resilience, sufficient potential, and large room for maneuver have not changed, and the good prospects for sustained economic growth have not changed.

The supporting foundation and conditions have not changed, and the forward trend of economic structural adjustment and optimization has not changed.

This argument is basically consistent with the statement of the Politburo meeting held on the 14th of this month, that is, "the economy is generally stable, making progress while being stable, and improving while being stable", which means that high-level officials remain optimistic about the current economic situation.

This judgment will affect the overall tone of macroeconomic policies next year. This is also the first issue that needs to be clarified at the Central Economic Work Conference.

Since 2011, China’s policy tone has been “seeking progress while maintaining stability.”

How to set the tone for this meeting has attracted much attention.

Signal 2: Zhu Guangyao’s “deficits can be reviewed and adjusted.” On November 12, staff from Shanxi Taiyuan Bank displayed the new version of 100 yuan.

After determining the overall tone of macroeconomic policies, the next step for the Central Economic Work Conference is to decide on the “fiscal + monetary” policy mix for the next year.

Since 2010, China has adhered to a proactive fiscal policy and a prudent monetary policy.

But last year, new content was added to the description of fiscal and monetary policies, that is, "the active fiscal policy must be strong, and the monetary policy must pay more attention to the appropriateness."

If this year's meeting will still make targeted requirements for "fiscal + monetary" policies, there may be new ideas released.

As far as fiscal policy is concerned, there is a signal that cannot be ignored: In November this year, Vice Minister of Finance Zhu Guangyao publicly stated that the current global economy is facing the most severe and complex situation since 2009.

"From the lessons of the financial crisis, we need to consider whether traditional economic theory needs to be adjusted, and whether the 3% deficit ratio red line and the 60% debt ratio red line can be reviewed and adjusted."

China's fiscal deficit ratio in 2015 has been raised to 2.3% from 2.1% in 2014, but it is still lower than the international warning level of 3%.

In addition, the Political Bureau meeting held on the 14th has listed "reducing the burden on enterprises" as an important part of next year's work, and it is expected that there may be more specific statements at the Central Economic Work Conference.

At the same time, as the marginal effect of monetary policy on economic growth gradually decreases, the expansion of the deficit will also increase the importance of fiscal policy in macroeconomic control.

Signal 3: The Fed's interest rate hike "boots in" Xu Hongcai, director of the Economic Research Department of the China Center for International Economic Exchanges, compared with fiscal policy, the specific formulation of monetary policy may also change.

Since the beginning of this year, the central bank has cut interest rates and reserve requirements six times.

Xu Hongcai, director of the Economic Research Department of the China Center for International Economic Exchanges, told "National Wednesday" that last year's statement that monetary policy was "appropriately tight" may be replaced by statements such as "more flexible and more targeted."

Another factor that cannot be ignored in monetary policy is the "boot landing" of the Federal Reserve's interest rate hike.

Experts said that although as far as China is concerned, positive factors such as its current economic resilience, sufficient foreign exchange, and more macro-control tools, as well as the dividends brought by deepening reforms, have formed strong and positive fundamentals, but the Fed’s interest rate hikes are unlikely.

The "negative impact" will still inevitably lead to problems such as increased pressure on capital outflows, and it is necessary to make targeted adjustments to macroeconomic policies.

"Taking into account the pressure of accelerating capital outflows, there is less room for monetary policy interest rate cuts next year, but to ensure reasonable growth of money supply, the statutory deposit reserve ratio is expected to fall further, and may have to be cut 5 to 7 times." Xu Hongcai said.

Signal 4: The Ministry of Housing and Urban-Rural Development’s “De-Inventory Plan” The Politburo meeting held on the 14th proposed “resolving real estate inventory.”

According to multiple media reports, the Ministry of Housing and Urban-Rural Development recently convened local housing authorities to study destocking plans, which included promoting farmers to purchase houses, changes in demolition compensation methods, and strengthening the management of commercial housing.

Among them, promoting farmers to buy houses is the main focus of the policy.