The market's attention to macroeconomic policies is rapidly heating up, with the "promotion of a new round of large-scale equipment renewal and consumer goods replacement" sparking widespread discussion.

The large-scale equipment renewal, which the country is vigorously promoting, covers multiple industry sectors with a broad market space, reaching an annual scale of more than 5 trillion yuan.

Traditional demand stimulation policies usually act directly on increments, while equipment renewal and replacement reflect an adjustment in policy thinking to "extract increments from the stock."

Research institutions generally believe that equipment renewal and replacement, driven by reducing energy consumption and emissions and improving technical standards, can both enhance industrial production efficiency and significantly release potential demand.

As relevant industrial policies and financial support policies continue to be implemented, equipment renewal is expected to become an important investment mainline throughout the second half of 2024, deserving of high attention.

Assisting the development of advanced manufacturing through equipment renewal has become a key factor in the economic competitiveness of various countries.

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Developed countries such as the United States and Japan have implemented "reindustrialization" strategies to reshape the new advantages in global manufacturing competition.

Data from the National Bureau of Statistics show that in July, the added value of high-tech manufacturing industries above a designated size grew by 10% year-on-year, accelerating by 1.2 percentage points compared to June, and was 4.9 percentage points higher than the total industrial growth above a designated size, maintaining a higher growth rate than the total industrial growth above a designated size throughout the year.

On July 25th of this year, the National Development and Reform Commission and the Ministry of Finance issued a notice on "Several Measures to Strengthen Support for Large-Scale Equipment Renewal and Consumer Goods Replacement," arranging about 300 billion yuan in special long-term government bonds to support large-scale equipment renewal and consumer goods replacement.

The Ministry of Finance, the National Development and Reform Commission, the People's Bank of China, and the Financial Regulatory General Bureau recently issued a notice clarifying the fiscal interest subsidy policy for equipment renewal loans.

According to the notice from the four departments, business entities must meet two conditions to obtain fiscal interest subsidy support for equipment renewal loans: first, the business entities must implement equipment renewal actions according to the requirements of the "Notice on Printing and Distributing the Action Plan for Promoting Large-Scale Equipment Renewal and Consumer Goods Replacement" issued by the State Council, and be included in the list of alternative projects determined by relevant departments such as the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Transport, and the Ministry of Agriculture and Rural Affairs; second, the loans issued by banks to business entities must obtain the People's Bank of China's equipment renewal-related re-lending support.

Those who meet the above conditions will receive a 1 percentage point interest subsidy on the principal of bank loans from the central finance, with a subsidy period not exceeding 2 years.

Previously, on April 7th, the central bank announced the establishment of a 500 billion yuan re-lending facility for scientific and technological innovation and technical transformation, with an interest rate of 1.75%, a term of 1 year, and the possibility of two 1-year extensions, to implement the State Council's executive meeting's decision to promote a new round of large-scale equipment renewal and consumer goods replacement.

The recipients include 21 financial institutions such as the China Development Bank, policy banks, state-owned commercial banks, China Post Savings Bank, and joint-stock commercial banks.

According to the notice, business entities implementing equipment renewal, if included in the list of alternative projects determined by relevant departments, can apply for equipment renewal loans to the relevant banks in their locations and provide relevant certification materials as required.

The handling banks, referring to the list of alternative projects determined by relevant departments, review and approve the loan applications of business entities according to market principles, independently decide whether to issue loans and the conditions of the loans, and timely approve and disburse loans for qualified applications.

Everbright Securities stated that it is estimated that equipment renewal and transformation loans will be concentrated in October.

On the one hand, the interest rates of the relevant loans are relatively low, which can stimulate corporate financing needs; on the other hand, in the case where there are not many market-oriented demand projects, if they do not participate in the investment of related projects, they will not only find it difficult to meet the central bank's credit allocation requirements but also face the risk of customer loss.

This will provide strong support for credit allocation in October.

How to seize the opportunity, on August 21, the General Office of the National Development and Reform Commission and the Comprehensive Department of the National Energy Administration announced the "Implementation Plan for Large-Scale Equipment Renewal in Key Energy Fields," pointing out that by 2027, the investment scale of equipment in key energy fields will increase by more than 25% compared to 2023, focusing on the implementation of energy-saving transformation, heating transformation, and flexibility transformation of coal-fired power units "three transformations linkage," and realizing equipment renewal and technical transformation in fields such as power transmission and distribution, wind power, photovoltaics, and hydropower.

On August 30th, the Ministry of Finance, as usual, released the "Report on the Implementation of China's Fiscal Policy in the First Half of 2024," clarifying the focus of the next fiscal policy, which is first to make good use of long-term special government bonds to support the "two new" and "two heavy" work.

The so-called "two new" refers to large-scale equipment renewal and consumer goods replacement, and the State Council has already issued a work plan on March 7th; "two heavy" refers to the implementation of national major strategic projects and the construction of safety capabilities in key fields.

The aforementioned fiscal policy implementation report points out that the next step is to increase the intensity of fiscal policy implementation, first to strengthen support for the "two new" work, including arranging and making good use of long-term special government bond funds, optimizing the support methods for equipment renewal through increasing scale, lowering thresholds, expanding scope, and simplifying processes; by enhancing local autonomy and leveraging local creativity, supporting local enhancement of consumer goods replacement capabilities.

Implement policies such as car replacement subsidies and new energy city bus and power battery renewal subsidies.

This indicates that the use of funds for the 1 trillion yuan long-term special government bonds to be issued in 2024 may continue to be adjusted, with more used to support the "two new."

Looking forward, research institutions believe that the security of industrial chains and supply chains, as well as intelligence, greening, and high-endization, will be the main lines of development for China's manufacturing industry in the medium and long term.

The demand for replacement in sub-segments with a large scale of equipment ownership is expected to be further strengthened under a series of policies.

With the improvement of manufacturing performance, the recovery of industrial capacity utilization rate, and under the high-standard guidance of action plans and the strong support of local policies, the valuation of high-growth small and medium-sized market value targets with high performance growth outlook is expected to be repaired.