Chen Kexin: Macroeconomic Impact On Commodity Market Trend

Regulatory objectives tend to be flexible and focus on ensuring market demand.

Since the second half of last year, a number of macroeconomic indicators have continued to decline, which has aroused concern and concern of the decision-making departments.

Statistics show that over the past 1 years, GDP has seen a quarterly downward trend, with a cumulative growth rate of 9.2% in 2011, 1.2 percentage points lower than the previous year. This year's economic growth plan index is 7.5%, and the downward pressure is larger.

Investment in fixed assets and industrial added value also dropped considerably.

In 2011, the real growth rate of fixed assets investment (excluding the price rise of investment goods) was only 16.1%. The growth rate of nominal investment in 1 - February this year was 21.5%, down 2.7 percentage points from last year.

December 2011

What is particularly worrying is that Europe's debt crisis has been in constant trouble.

If the worst case occurs, some countries' debt disorderly default triggering a major impact on the global financial system, which will cause a major impact on China's exports.

Even if such a bad situation is avoided, the developed countries in Europe and the United States will also retrench because they cut the deficit and are not conducive to China's trade exports.

Affected by this, China's export growth has narrowed rapidly since 2011. In January this year, it even had a negative growth of 0.5%. In February, the trade deficit of about 30000000000 US dollars.

From the HSBC China PMI index in February this year, export orders data fell to a 8 month low, indicating that this year's export prospects are not very optimistic.

According to the data released by the state energy administration, the electricity consumption of the whole society increased by only 6.5% from 1 to February this year, which has dropped by nearly 6 percentage points compared with the same period last year. This confirms once again that the slowdown in the real economy is obvious and China's economy is still in a downward channel.

Considering the above situation, in order to avoid the "hard landing" situation of economic "tightening effect" and "external environment deterioration", the decision-making departments decided to turn the primary regulatory target to steady growth, and at the same time, control the price level.

Recently, a number of important meetings have been held. It is pointed out that this year we should combine steady growth, price control, structural adjustment, people's livelihood, reform and harmony.

Thus, we will stabilize growth and expand domestic demand, prevent economic growth from falling too fast, and achieve more employment.

Under the guidance of the steady growth target, some substantive easing measures will be introduced one after another.

Since December 2011, the central bank has lowered the deposit reserve rate for two times in a row, and it is expected that there will be several downgrades in the future.

If China's export declines more than expected, it will stimulate domestic demand more vigorously, including stimulating the first demand for housing and improving housing demand, and excluding the possibility of reducing interest rates by financial institutions.

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All this is conducive to the recovery of commodity demand and no bad situation.

If we say that the leading factor in the promotion of commodity prices in the international market is the extremely loose monetary policy in the past period, the leading factors that will drive the price increase in the future will give rise to a marked increase in the demand of the real economy.

Manufacturing industry, as the most important area of consumption of commodities, especially metals, energy and chemical products, is the first to rebound. It undoubtedly indicates the trend of overall commodity market recovery.

Increased consumer demand and cost push affect market price rise.

Our country

With the steady growth measures and the further recovery of the global economy and the steady increase in consumer demand, the import volume of these commodities is expected to increase.

Among them, the total demand for iron ore exceeds 11 billion tons, and because of the priority of importing iron ore, the import volume of iron ore will reach or exceed 7 billion tons in 2012, and import volume will increase.

The substantial increase in import volume of commodities in China is undoubtedly a solid foundation for the international commodity market.

In addition, this year, despite the great economic uncertainty at home and abroad, the main reason is that the European debt crisis and the domestic real estate regulation policy are in a state of confusion. People feel the market situation is difficult to grasp, and the operation strategy is very cautious, and tends to wait and wait.

For example, even domestic enterprises should not carry out the "winter storage" of steel every year.

This is unprecedented.

But overall, China's commodity price index (CCPI) has continued to rise.

In January, it rose by 1.5% in the month and 1.3% in February.

From 1 to February, China's commodity price index rose by 8.2% over the same period last year, significantly exceeding the CPI and PPI gains over the same period.

From the perspective of product composition, the larger ones are basic products such as energy and agricultural food.

Since March, with the gradual deepening of the macro situation, especially the gradual easing of the substantive easing measures of the policy-making departments, the overall market demand will rebound, and the market price will continue to rise.

In addition, the main commodities are pushing up the cost of each other, as well as the general rise in wage levels, which also makes the cost of commodities more unabated during the year, thus pushing up the bottom line of the market price.

The first factor is the high price of oil.

Most commodities are high-energy consumption products.

The surge in oil prices will not only drive up the price of related energy products - coal, natural gas and electricity, but also significantly increase the production and logistics costs of other commodities, such as grain, oil, cotton, ore and metals.

For a while, the tension between the West and Iran was tight, and geopolitical risk pushed the international market oil price back to 100 US dollars / barrel.

If war broke out between the United States and Iraq, and the Strait of Hormuz was blocked, the price of oil would quickly reach the price of more than 150 US dollars per barrel, which would once again raise the power cost of all commodities, push up the cost of logistics, and even block the supply channels of some commodities.

The second factor is the rise in wages.

Commodity is a labor-intensive product, and the wages of laborers constitute an important cost factor.

From the perspective of the improvement of the wage level of workers in China, since last year, many areas in China, especially coastal areas and first tier cities, have begun to encounter "recruitment difficulties".

The main reason is that the wages of workers are low and the need for a strong upward adjustment is needed.

As the driving force of national economic growth has shifted from export oriented to domestic demand, wages will increase rapidly and substantially in the future, which will become an important factor for the increase of China's commodity cost and become an important factor in raising the purchasing price of agricultural products.

It is also expected that there will be a centralized release process for these factors in the next few years, which will become the driving force to support the overall price level.

Even the overcapacity of some products can not reverse this trend.

The third factor is that the developed countries continue to implement loose monetary policy.

As is known to all, western countries such as Europe and the United States, for a long time, suffer from too much debt and owe too much debt. It is impossible to repay them by "real gold and silver" through normal channels. Currency depreciation and other unconventional debt reduction will become the main way to unload the debt burden.

Affected by this, although the dominant factor that drives commodity price inflation in the future will be gradually reduced by the devaluation factor to the demand factors of the real economy, the loose monetary policy of developed countries will continue to be implemented.

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Affected by these factors, commodity prices will still face the impact of liquidity this year, and China's import inflation pressure is still strong, which can not be underestimated.

That is why commodity prices are often associated with the dollar index in many cases, rather than an important reason for the reverse change.

Cost increase requires increased liquidity injection.

The revival of commodity prices at home and abroad, as well as the continuing rise, especially the surge in oil prices, will undoubtedly increase the cost driving force of China's prices and stimulate the general level of prices to rise.

If the average price of oil in the international market is maintained at 95 US dollars per barrel this year alone, it will push up the domestic comprehensive price level by more than 1 percentage points.

However, the momentum of price rise is still strong in the future, which does not mean that monetary policy must be tightened.

In fact, the increase in prices caused by cost increases is not directly related to liquidity.

On the contrary, this cost driven price increase requires more liberal monetary policy.

Because as prices rise and the cost of purchase increases, even more money is needed to maintain the same size of the total economy.

Otherwise, it is bound to inhibit the activities of the real economy, and even lead to the shrinkage of economic growth.

Moreover, too strict monetary policy, artificially restraining the reasonable growth of loan volume of financial institutions, will also force some capital supply of the real economy, especially the supply of small and medium-sized enterprises, and turn to private channels with high interest rates, thereby stimulating the increase of interest cost of capital and enhancing the driving force of China's price level.

From the present point of view, the domestic deposit reserve ratio and the loan interest rate of financial institutions are significantly higher than those of other major economies. The cost of capital used by domestic enterprises is significantly higher than that of other major economies, which is not conducive to curb the excessive price rise, but also to prevent the excessive rise of housing prices. In fact, it is "oil spill fire fighting", which enhances the difficulty of macroeconomic regulation and control of China's price level.

Therefore, more relaxed monetary policy will be implemented this year, and the deposit reserve ratio and loan interest rate will be lowered several times, which is close to the level of other economies in the world. It should become an important measure to stabilize prices.

On the other hand, the larger adjustment of monetary policy to loose direction will also help boost confidence, stimulate domestic demand and speed up the pformation of economic development strategy.

Implementation is relatively