The long-awaited reform guidelines have been officially released. From July 15th to 18th, the 20th Central Committee's third plenary session was held in Beijing, where the "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization" (hereinafter referred to as the "Decision") was reviewed and adopted.

Regarding the capital market, the "Decision" mentions it five times, with 10 references to the reform of the capital market. The institutional construction, functional role, opening to the outside world, and internal stability of the capital market are all key points in the text. In addition, the market's high attention to long-term capital entering the market, standardized management of listed companies (including actual controllers, dividends, etc.), and investor protection are also mentioned.

What impact will the "Decision" have on the capital market? Where is the expectation of the A-share market? Which sectors or industries should investors focus on? This article will provide an in-depth interpretation of the decisions and deployments of the third plenary session.

Core focus on promoting reform through Chinese-style modernization

1. From the "Decision" content authorized by Xinhua News Agency on July 21st, what highlights and significant changes are worth paying attention to? What are the core focuses of the "Decision"?

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The "Decision" focuses on promoting reform through Chinese-style modernization. The plenary session emphasized that the current and future period is a key period for comprehensively promoting the construction of a strong country and the great cause of national rejuvenation through Chinese-style modernization, and to further comprehensively deepen reform around promoting Chinese-style modernization. It corresponds to the report of the 20th National Congress, which clearly states that promoting the great rejuvenation of the Chinese nation through Chinese-style modernization is the mission and task of the Communist Party of China in the new era and new journey. In terms of reform goals, the plenary session proposed to continue to anchor the overall goal of comprehensively deepening reform in the new era, which is to improve and develop the socialist system with Chinese characteristics and to promote the modernization of the national governance system and governance capacity. In terms of principles for promoting reform, it is necessary to adhere to the comprehensive leadership of the Party, to be people-centered, to adhere to the correct innovation, to take institutional construction as the main line, to adhere to the rule of law in all respects, and to adhere to a systematic concept.

In terms of reform direction, the plenary session emphasized that reform should continue to be advanced with seven "focuses". That is: focusing on building a high-level socialist market economy system, focusing on developing whole-process people's democracy, focusing on building a strong socialist cultural country, focusing on improving people's quality of life, focusing on building a beautiful China, focusing on building a higher level of safe China, and focusing on improving the Party's leadership level and long-term governance capacity.

In terms of the overall tone, the plenary session is more focused on development and more focused on practical results for a period of comprehensive deepening reform in the future. On the one hand, the plenary session's reform and strategic deployment for a period in the future are more focused on solving various problems faced in current economic development. Compared with the "even number" session of the third plenary session of the "every 10 years" or even longer time in the past, the plenary session emphasized "to complete the reform tasks proposed in this decision by the 80th anniversary of the founding of the People's Republic of China in 2029", focusing on the deployment of reform tasks for the next 5 years. By focusing on key areas of reform, promote Chinese-style modernization to achieve greater results in the key period of starting and starting. On the other hand, while focusing more on development, pay more attention to the practical results of reform. Compared with the public report of the third plenary session of the 18th Central Committee, which proposed "to be bold and steady, to combine top-level design with feeling the stones to cross the river, to promote overall progress and key breakthroughs", the plenary session emphasized "to pay more attention to system integration, to highlight key points, to focus on the practical results of reform" and "to work together to implement the "Decision"".

In the medium and long term, the capital market is more confident and confident in healthy development.After the conclusion of the second and third plenary sessions, on July 19th, the Party Secretary and Chairman of the China Securities Regulatory Commission (CSRC), Wu Qing, presided over an expanded meeting of the Party Committee to convey and study the spirit of the 20th Central Committee's third plenary session, and to research and implement measures. The meeting mentioned: "Unswervingly push forward the comprehensive deepening of capital market reform and enhance the inherent stability of the capital market." How do you view the reform of the capital market? In addition, the "Decision" mentioned: "Establish a long-term mechanism to enhance the inherent stability of the capital market." What do you think are the main aspects of the inherent stability of the capital market?

Focusing on the implementation of the new "Nine National Guidelines," regulatory authorities have always regarded strengthening supervision, preventing risks, and promoting high-quality development of the capital market as an important main line, and have accelerated the introduction of the "1+N" series of policy documents. Currently, regulatory authorities, in conjunction with all relevant parties, have introduced nearly 50 supporting rules, adhering to a problem-oriented approach to optimize relevant institutional arrangements and properly respond to issues of concern to the market, such as delisting, cash dividends, shareholding reduction, and the supervision of algorithmic trading. At the same time, under the high attention and deployment of the Party Central Committee and the State Council, regulatory authorities have closely cooperated with relevant ministries and commissions to jointly promote the implementation of important measures to improve the quality of listed companies and related joint law enforcement and judicial guarantees, forming a joint effort of all sectors of society to care for, build, and govern the capital market. Through the joint efforts of regulatory authorities, relevant ministries and commissions, and all sectors of society in the first half of the year, the capital market has seen many positive changes, and the confidence and strength for the long-term and healthy development of the capital market have been further enhanced.

The stability of the capital market is mainly reflected in the following aspects: First, the capital market system is more improved. In particular, the optimization of the dividend system has already shown initial results, with a significant increase in the number of dividend-paying companies in the first half of 2024, and the total cash dividend amount of all A-shares was 869.84 billion yuan, a year-on-year increase of 5.4%. Second, promote listed companies to enhance investment value. The focus is on three core efforts: strictly controlling the listing process, encouraging listed companies to be excellent and strong, and increasing the intensity of delisting supervision. Third, protect the legitimate rights and interests of investors. Investors are the foundation of the market, and regulatory authorities have always placed strong supervision in a more prominent position. This year, regulatory authorities have joined hands with relevant ministries and commissions to strictly crack down on various securities illegal and criminal activities according to the law, focusing on the financial fraud of listed companies, and continuously building a comprehensive punishment and prevention system. Fourth, effectively maintain market order. Efforts are made to strengthen the monitoring and supervision of high-frequency quantitative trading, off-exchange derivatives, and other trading tools, severely crack down on behaviors that disrupt the market and illegally profit, and prevent market abnormalities and manipulative behaviors.

Incremental policies in the second half of the year are expected

Beneficial to boost market confidence

III. The key points mentioned in the "Decision" include a high-level socialist market economic system, high-quality development, education, science and technology, talent, macro-control, and government governance, which are key issues faced by China's economic development. What positive signals have been released for the A-share market in the latest tone set by the third plenary session?

First, the Party Central Committee attaches great importance to economic work and promotes high-quality development with a pragmatic attitude. Among the 14 reform tasks, six involve economic system reform tasks, emphasizing that "a high-level socialist market economic system is an important guarantee for Chinese-style modernization," fully reflecting the Party Central Committee's high regard for economic work. Among them, the following are worth focusing on:

"Two unwavering" emphasizes "ensuring that various forms of ownership economy use production factors according to the law on an equal basis, participate in market competition fairly, and are equally protected by the law." This creates a good environment for the development of the private economy, and future measures will be introduced in areas such as private enterprises participating in major national construction projects and leading major national technological research and development tasks.

"Improve the incentive and restraint mechanism for promoting high-quality development," which is expected to guide from both incentive and restraint aspects.

"Improve the system and mechanism for developing new quality production forces according to local conditions," clarifying that adapting to local conditions is an important consideration for the development of new quality production forces, to avoid a rush to follow and a glut of supply.The reform of the talent system and mechanism in science and technology education is independently featured, emphasizing the "overall promotion of the integrated reform of the systems and mechanisms of education, science and technology, and talent," and promoting the reform in the field of science and education to play an important role in promoting innovation and accelerating the formation of new quality productive forces.

Coordinated advancement of reforms in key areas such as finance and taxation, and finance. The direction of fiscal and tax reform focuses on increasing local financial autonomy, expanding local tax sources, and appropriately strengthening central government powers. At the same time, it emphasizes that "enhancing the consistency of macro policy orientation" is an important concept, covering both economic and non-economic policies.

In adhering to reform through opening up, it emphasizes "relying on the advantage of China's super large-scale market."

Secondly, the focus on livelihood security measures is prominent. As a key area of concern to all sectors of society, the plenary session emphasized that "ensuring and improving people's livelihoods in development is a major task of Chinese-style modernization," and the reform approach should "strengthen inclusive, basic, and bottom-line livelihood construction, and address the most concerned, direct, and practical interests of the people." The focus is on "improving the income distribution system, perfecting employment-first policies, improving the social security system, deepening the reform of the medical and health system, and improving the support and service system for population development." Social security will focus on improving the social insurance system for flexible employment personnel, migrant workers, and new employment forms, medical and health reform will focus on promoting the expansion and downward flow of high-quality medical resources, and population development support and services will help promote the construction of a fertility-friendly society, and improve the policy mechanism for the development of the elderly care industry and the elderly care industry.

Thirdly, national security is placed in an important position. The plenary session emphasized that "national security is an important foundation for the steady and far-reaching progress of Chinese-style modernization," and called for "achieving a positive interaction between high-quality development and high-level security, and effectively ensuring the long-term stability and security of the country."

At the same time, the public report of this plenary session emphasizes the completion of the annual economic and social development goals, and there is still room for policy increment. We believe that against the background of the second quarter GDP growth rate falling and being lower than the annual growth target, the plenary session emphasizes "unswervingly achieving the annual economic and social development goals," and requires "to implement the macro policies in accordance with the Party Central Committee's decision-making and deployment on economic work." It is expected that policies in the second half of the year to expand domestic effective demand and prevent and resolve real estate risks are still expected, which is conducive to boosting market confidence.

Suggest that investors continue to

Look for thematic opportunities around new quality productive forces.

IV. How do you think the A-share market will perform in the future? Which sectors or industries should investors focus on?

The public report of the Third Plenary Session of the Central Committee places greater emphasis on development and practical results, while also emphasizing the importance of achieving annual goals. The second quarter GDP growth rate of 4.7% is weaker than market expectations and the annual target. Under the support of two factors, the market's expectations for subsequent policies have increased, especially in accelerating the physical work volume of infrastructure construction and optimizing real estate control policies. With the improvement of policy expectations, it is expected that the market will gain certain support at key points.Investors are advised to continue seeking thematic opportunities centered around new quality productive forces. Although the plenary session's communiqué does not provide an extensive discussion on new quality productive forces, there are numerous expressions that reflect the importance placed on their development. For instance, the reform of the science, education, and talent system and mechanisms is highlighted as a separate section, indicating the high level of emphasis the central party committee places on innovation, with innovation playing a leading role in new quality productive forces. The establishment of a robust system to promote the deep integration of the real economy and the digital economy, with data as a new type of production factor, plays a significant role in changing the forms of labor objects and means of production. Green is the foundation color of new quality productive forces, and the plenary session calls for the improvement of mechanisms for green and low-carbon development, with coordinated efforts to reduce carbon emissions, pollution, expand green spaces, and promote growth. It is recommended to closely monitor the industrial opportunities related to the specific reform measures outlined in the "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Advancing Chinese-style Modernization." At present, attention is advised to be paid to directions such as low-altitude economy, semiconductor equipment, specialized equipment, environmental protection equipment, industrial mother machines, and robots.