Macroeconomic Observation: Is China'S Economy Continuing To Fall?

The stock market continued to fall for two years. The growth rate of China's economy in the same period did not sound as fresh as it seemed at first. It fell from 11.9% in the first quarter of 2010 to 8.9% in the fourth quarter of 2011.

For the reasons for the economic downturn,

In the light of the current situation, the European debt crisis is unlikely to recede in the near future.

In February 13th, Moodie lowered the sovereign credit rating of 6 euro zone countries, including Italy and Spain.

At home, the central government's determination to regulate and control real estate is still undiminished. Meanwhile, the financial situation of local governments also makes people worry about the decline in investment in infrastructure construction.

Will China's economy continue to be "down" in 2012? When will the economy become visible?

Growth continued to fall

The purchasing managers index (PMI) increased by 0.2 percentage points in January to 50.4 in December, and returned to a critical value of 50 in second months after falling to 49 in November.

Nevertheless, there is little suspense in the downward trend of the economy in the first quarter.

Teng Tai, vice president and chief economist of Minsheng securities, told reporters of "excellence" that PMI's stabilization means that the inventory cycle started from June last year has not been as intense as in the second half of last year, but it will still continue to the end of the first quarter.

From the perspective of demand cycle, risk will continue to be released: export risk and risk of falling investment in fixed assets.

In view of the peak of debt repayment in Europe in 3 and April, the release date of export risk is in April. If there is no big deal, this year's exports will be guaranteed. The risk of falling investment in fixed assets will mainly be that commercial housing investment and local infrastructure investment will continue to decline in the one or two quarter, while the three and fourth quarter will slow down.

Without the "black swan" incident, tengtai expects that this year's export surplus will drop from $150 billion last year to 90 billion -1000 billion, while the growth rate of fixed asset investment will also drop from 24% to 20%.

UBS also believes that investment in exports and fixed assets will be the two main reason for China's economic growth. UBS is expected to increase its total residential construction area by more than 10% this year, with the support of affordable housing investment (down 10 percentage points over the previous year), but exports are likely to grow at zero.

Haitong Securities (9.59, -0.01, -0.10%) chief economist Li Xunlei (micro-blog) predicts that real estate investment growth in 2012 will be 12%, down 18 percentage points from last year, but the proportion of affordable housing is still too small. China's economic growth can not be compensated by affordable housing.

The situation of private economy in 2012 is still not optimistic.

Zhou Dewen, chairman of the Wenzhou Association of small and medium enterprises (micro-blog), told the "elite" reporter that over the past one or two years, many private enterprises have flocked to high-risk speculative areas such as real estate, private lending and so on. Under the heavy pressure of real estate regulation and private lending chain breaking, the private economy has been in the most difficult period since 2008. Last year, 270 private entrepreneurs in Wenzhou ran away because of the capital chain break.

Zhou Dewen believes that the return of private economy to industry requires the government to introduce a series of practical supporting policies. For example, the State Council has asked the new 36 rules to be completed in the first half of this year to promote private capital access to finance, energy, pportation and other fields.

In addition, the two biggest pressures of the private economy are "financing difficulties" and "tax burdens".

When these policies are completed, they will finally be implemented at the grassroots level, and it will take three months to half a year.

Therefore, Zhou Dewen said that this year's private enterprises will be more difficult than last year, and private investment can not be expanded.

The whole year's economy will be down, and it will be possible to hit bottom rebound in the first quarter of next year.

Sun Lijian, vice president and finance professor of Fudan University, told micro-blog reporters that central authorities have realized the importance of steady growth this year. Although private investment may be hard to pick up and the market is still weak, the investment of central enterprises may rebound first.

But the government's support for investment will not be the same as that of 2008, because the current market mentality is relatively calm, and it can more easily layout some strategic investments, such as education, scientific research and so on.

Zheng Chaoyu, a professor at the school of economics at Renmin University of China, told reporters at the "elite" that it might be wrong to stimulate real estate in the financial crisis, but now and in the future, infrastructure construction is still a very important part.

This is subject to local government revenue (China Index Research Institute (micro-blog) data show that in January this year, the 300 cities nationwide land leasing income decreased by 67% over the same period), and also came to some kind of "good": the CBRC is studying the conditions permit local government financing platform loan repayment plan.

Paradox of pformation and upgrading of enterprises

The debate over China's economic growth prospects is largely due to confusing short term issues with the medium and long term problems, but if only in the short term, the state of sustained economic growth will be difficult to carry out industrial pformation and upgrading.

Li Xunlei believes that China's economy will need investment rather than consumption to boost economic growth in the coming period, because China's population flow is still very large, so there is still a lot of room for investment. "Now if we want to solve the problem of traffic jam in Beijing, if you want to increase consumption, you will increase more cars. If it is investment driven, that is to repair the subway and elevated, so how can China's economy rely on investment or consumption?"

"Before we want to nurture an emerging industry in the process of stimulating the economy, how can it be? The emerging industry itself is an adventure. Only when the economic situation is good, people dare to make risky investments. When the economy is relatively cold, forward-looking investment is more daring to cast."

Zheng Chaoyu said.

Even if the government provided financial support, it only solved the problem of capital investment in the early stage of enterprises, and could not overcome the high risk characteristics of new industries.

Zhou Dewen said frankly, "some people say that this year is the key year for pformation and upgrading. When the financial crisis came, it was also mentioned that there were still some enterprises heading for pformation and upgrading.

Most of the small and medium-sized private enterprises can not pform and upgrade, and can only go to the road of joint upgrading.

If these enterprises are to be pformed and upgraded now, the capital of these enterprises will surely flow from labor-intensive manufacturing to a more speculative virtual economy, resulting in "industrial hollowing out", which is what has been seen in the past few years.

Zhou Dewen believes that a more practical approach is to force and guide these enterprises to joint mergers and acquisitions to achieve optimal allocation of resources.

The key problem is that industries, especially manufacturing, must be made to make money.

In the past year, the national tax revenue growth rate has reached 22.6%, while the economic growth rate of the same period is only 9.2%, while the loan interest rate is high.

Therefore, even if external demand is stable, only two domestic factors of "high tax burden" and "high interest rate" are enough to make labour intensive manufacturing industry lose attraction.

In Sun Lijian's view, China's comparative advantages in the global economy are labor-intensive and capital intensive industries.

Blind pformation and upgrading are actually abandoning their own advantages and then taking advantage of their weaknesses to participate in global competition.

Now, to make the manufacturing industry attractive, the most direct way in the short term is to let the government make profits - tax cuts.

Prudent monetary loosening

After a year of policy adjustment, the consumer price index (CPI) has come down. It is generally expected that China's CPI will be below 3.5% this year.

Recently, the central bank estimated that the growth rate of broad money supply (M2) in 2012 was 14%, which is slightly higher than 13.6% in 2011, but far lower than 19.7% in 2010 and 27.68% in 2009.

This suggests that if inflation is pushed up, the factor of money supply may not be particularly prominent.

Li Xunlei said that the stock of M2 is up to 85 trillion (1.8 times the total G D P in 2011), which is supernormal and takes time to digest and reduce.

Therefore, the central bank will be more cautious about loosening the currency, and monetary policy may still tighten.

In addition, imported inflation is also one of the reasons why the central bank can not easily let go.

Because of the current M2, and the weakening of the world economy and the decline in global fixed asset investment growth, the price of precious metals may still have room for growth, but the prices of producer commodities may be down.

In this regard, Yao Jingyuan's judgment is different - commodity prices generally rise.

Because if the European debt crisis can not be solved, only the invoice will eventually increase the liquidity of international non-ferrous metals and oil prices. If the world economy recovers, 3 billion of the world's population is moving towards industrialization and urbanization, which will inevitably increase the prices of bulk commodities.

For the US dollar and the trend of economic policy in Europe and America, Sun Lijian believes that although the weak dollar is a trend, the dollar can not be weakened because of the existence of the European debt crisis.

Zheng Chaoyu also believes that even if the introduction of the third round of quantitative easing (QE3), the dollar will not necessarily weaken, because this is good for the US economy.

A more logical conclusion is that as long as there is no substantial improvement in the European debt problem, it will reduce global demand for commodities and promote the appreciation of the dollar.

With the appreciation of the US dollar, commodity prices will be difficult to rise, and China will be less affected by imported inflation.

The European debt crisis will turn the corner, the dollar will depreciate, and commodities will further soar, bringing greater import inflationary pressure to China.

Food and agricultural products (12.57,0.30,2.44%) have a greater impact on inflation in China. A very important reason is that the weight of food and agricultural products in C P I is larger, accounting for 30% (which is proportional to the proportion of household income used for food).

Yao Jingyuan thinks that the rise of the price of food and agricultural products is related to the monopoly and imperfection of the circulation system of agricultural products in China. We need to break the monopoly through reform.

Impact on small and medium enterprises

Since the economic growth rate is basically a foregone conclusion, is it a short-term adjustment or a trend shift? Is China's economic growth rate going to a higher level?

The more mainstream view is that moderate economic decline will help adjust China's economic structure and pform its economic growth pattern.

Yao Jingyuan believes that 8% should be a relatively good growth rate for China's economy. Once less than 8%, it will encounter unemployment, financial revenue and declining corporate profits.

Wang Xiaolu, deputy director of the National Economic Research Institute of China reform foundation, believes that the economic growth rate of 8%-8.5% is acceptable, and the current structural imbalance is very serious.

Over the past ten years, the consumption rate has dropped from 62% of GDP to 47%, while the saving rate has increased from 38% to 53%, which means that half of GDP is used for investment.

If the structural adjustment is not good, China's economic growth rate will probably drop to 6.7% in the next ten years, and if it can achieve structural adjustment, it will probably achieve 9.3% growth in the future.

Some economists believe that in the absence of a complete recovery in China's economy, the so-called "exit policy" is not too lagging behind, but rather impatient.

Yao Jingyuan also said that the withdrawal of the stimulus means that the economy should be restored to normal and the market's own strength to promote economic growth.

But in fact, in the process of policy withdrawal, the small and medium-sized private enterprises in the market forces are actually more impacted.

Mining institutional dividends

With a slight look "

Teng Tai believes that China's system dividend is larger than any other country, because China has huge state-owned assets, and land is also state-owned. After the property rights mechanism is further clarified, efficiency will be greatly improved.

"Where there is no efficiency or monopoly, there are institutional dividends that can be excavated."

"There are still many problems in China's system, and the solution is reform."

Li Xunlei said, "deregulation, lowering barriers to entry will generate dividends."

Yao Jingyuan believes that steady growth and structural adjustment must be closely integrated with the pformation of government functions, and the government should be retired from the front line and pformed into a service-oriented government.

"If government functions change, the pressure of government expenditure will be reduced, so that fiscal policy will play a greater role."

Based on the fact that China is still a developing country with a urbanization rate of only 50%, investment is still very important to China's economy, but we need to attach importance to a problem. The main body of investment should not be a government but an enterprise.

In the case of the government as the main body of investment, redundant construction, blind construction and image engineering are unavoidable.

Sun Lijian suggested that the reform should be extended to the upper reaches of the industrial chain, such as resources and finance, because these industries formed a certain monopoly advantage after the crisis. In the case of too much competition in the downstream manufacturing industry, too much upstream resources and financial sectors occupied the profit of the downstream manufacturing industry.

We should break the monopoly position in the upstream sector and enhance economic efficiency through reform.