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China'S Economy Starts To "Soft Landing"

2008/4/21 15:43:00 17

Regulation Has Slowed Down China'S Economic Soft Landing.

Under the US subprime debt crisis and domestic regulation, China's economy experienced a moderate decline after the five year growth peak.

In April 16th, the National Bureau of statistics released the first quarter economic data. China's economy grew by 10.6% in the first quarter and CPI in March, reaching 8.3%.

Subsequently, the central bank announced that the deposit reserve ratio increased by 0.5 percentage points, and continued to tighten.

However, unlike earlier regulatory measures, most economists believe that this regulation is not aimed at restraining demand, but aiming at excess liquidity.

"Not raising interest rates is because we are worried about a sharp decline in the economy.

This shows the flexibility of regulatory policies while tightening. "

Zhu Baoliang, chief economist of the Ministry of economic information of the state information center, said.

Moderate fall

Most economists and analysts believe that the economic downturn in the first quarter was healthy and mild.

Under the control of credit and industrial policies since the second half of 2007, the investment rebound has been controlled.

Investment in the first quarter increased by 24.6% over the same period, and the price deduction factor actually dropped.

On the export side, with the help of the "crunch" of the subordinated debt crisis, exports in the first quarter amounted to 305 billion 900 million US dollars, an increase of 21.4%, down 6.4 percentage points.

The trade surplus was $41 billion 400 million, a decrease of US $4 billion 900 million over the same period last year.

In terms of consumption, the momentum of steady growth has continued.

In the first quarter, the total retail sales of consumer goods increased by 20.6% over the same period last year, 5.7 percentage points faster than the same period last year.

"Economic growth in the first quarter has been choking and structural changes have taken place.

I have always been optimistic. It turned out to be right.

Investment has been suppressed, exports have dropped and consumption has been stable. The "three conflicts" have been alleviated, and the economy is steadily landing.

Zhu Baoliang said.

The latest Guoxin Securities macro economic spring report points out that China's economic growth is approaching the long-term trend line at the top of the cycle, and the high speed growth in the previous years has also formed adjustment pressure. Therefore, it will enter a cyclical adjustment for more than two years from 2008.

"The overall economic downturn is mild rather than violent.

The first quarter fell to 10.6%, and the second quarter may continue to fall.

Because last year's base is too high, it is the peak of investment and export. "

One of the contributors to this report is Lin Songli, a macro analyst at Guoxin Securities.

A road map of the "soft landing" of the economy is clearly visible. The capital market rate has dropped before the real economy. The Shanghai Composite Index has fallen by nearly 50% from the highest point in October 2007. After that, the growth rate of the export sector has dropped to around 20%, and the future will continue to fall. Finally, inflation and economic growth are coming down.

However, what worries the regulators is that CPI reached 8% in the first quarter, and PPI increased by 6.9% compared to the same period last year, 4 percentage points higher than the same period last year.

Inflation seems to be the trend.

"The key is that in the course of the soft landing of the whole economy, if the policy is inappropriate, too fast, it will easily cause economic downturn, while inflation is slower than the slowdown in economic growth, and stagflation will be possible."

Zhao Xijun, vice president of Renmin University of China finance school, said.

Another difficult problem raised by Zhao Xijun is "excess liquidity".

"In the first quarter, the trade surplus was 41 billion 400 million US dollars, but the foreign exchange reserve increased by US $153 billion 900 million. After deducting foreign direct investment, I estimate that the" hot money "of about 100 billion US dollars will enter, which will increase the difficulty of regulation and control.

Flexible regulation

In April 16th, the State Council executive meeting stressed the importance of "double defense" and said that we should closely follow the new changes in the economic situation, grasp the balance between promoting economic growth and curbing inflation, and maintain steady and rapid economic growth.

Market expectations, despite tight monetary policy keynote unchanged, but with the economic downturn, the promotion of economic growth may lead to the regulation of the front desk, China's economic regulation and control policy has entered a flexible choice period.

In April 16th, after raising the deposit reserve ratio, Zhang Liqun, a researcher at the Ministry of macroeconomic research of the State Council Development Research Center, said that raising the deposit reserve ratio is not aimed at restraining aggregate demand, but aiming at excess liquidity.

At present, the main problem is that foreign exchange reserves are increased more and the pressure on foreign exchange deposits is greater. Deposits of various kinds are increased. Liquidity can be directly and effectively recovered by raising the deposit reserve ratio.

Zhang Liqun believes that the current price rise and the total demand changes between the current period is not closely linked.

"We can see that in the first quarter, CPI rose by 8% over the same period last year, and PPI rose by 6.9% compared with the same period last year, and prices are rising. But after deducting price factors, the real growth rate of investment is down, while export growth is also falling, so the growth of aggregate demand is actually falling."

Zhang Liqun said that the current price increase is still structural, not caused by excessive currency.

The main reasons are: first, some food prices are rising higher; two, the influence of the tail factors is relatively large. This is a special phenomenon. Three, with the reduction of the tail factor in the second half of the year, the price of the supply of farm products such as pork will come up.