Has China'S Economic Alarm Been Sounded?

Although the recent small cycle of economic recovery, but the cost is considerable, medium and long-term downward pressure is still large, short-term W type, medium and long-term L type. China's economy has been down for 35 consecutive quarters (more than 8 years). This is the longest recession since reform and opening up.

Moodie and S & P downgraded China's sovereign rating outlook: Based on rising debt, uncertain economic reform and declining external reserves. The three reasons for Moodie's downfall in March 2nd were the rise in China's government debt, the drop in foreign reserves caused by capital outflow and the uncertainty in promoting reform. Two reasons for S & P's downgrades in March 31st: China's economy The advance of rebalancing lags behind expectations, and the leverage ratio of government and enterprises will deteriorate, resulting in the accumulation of economic and financial risks. The reason why Fitch maintained its rating in April 5th: China's administrative and financial resources can avoid a sharp decline in economic growth, and in the long run, structural reform is crucial. The rating systems of the three Rating firm have different focuses, but they all emphasize the sustainability of government debt. economic growth Prospects and political stability.

Based on the background of the three Rating firm, the independence and objectivity of the company are evaluated: capital holdings in the US and Europe, Western value orientation, monopoly and lack of supervision. The rating system of the three Rating firm has great reference value for the objective and comprehensive analysis of the solvency and the degree of economic and financial health of the sovereign state or the company. But the three Rating firm themselves are also the main body of the profit nature. They are also restricted by the analysis ability, monopoly and lack of supervision caused by the US and European Capital Holdings, Western values, their own business interests and information asymmetry. Judging from its historical performance, Rating firm has a pro cyclical and failed early warning of financial crisis. Sense of worth It is biased towards Europe and the United States.

Moodie's S & P lowered the objective analysis of China's sovereign rating outlook. There is no consensus among Rating firm on China's ratings. The rise of China's government debt is a fact, but the debt rate is lower than the international 60% warning line and is at the middle and lower reaches of the international level. China's debt corresponds to assets rather than high welfare and credit driven consumption. The debt balance is mainly domestic debt rather than external debt. External risk is relatively small. Even if the risk is to erupt, it is not the risk of sovereign debt. It is more likely to be internal risks such as bad banks, credit default, P2P run and so on. As the domestic economy picks up, short-term capital controls are strengthened, the US dollar rate hike is expected to decrease, and the RMB exchange rate stabilizes, the downward trend of foreign exchange reserves is eased. Investment has a greater contribution to the economy, but China is still a developing country. Local debt replacement and debt to equity swap will reduce the debt ratio of enterprises. Reform is being pushed forward or ready for iron and steel to go to capacity, camp to increase, state enterprise reform, interest rate exchange rate marketization, and government decentralization.

Revelation: not blindly believe in international rating agencies, but should also work hard, reform is the greatest hope, stimulation is the biggest risk, the new 5% is better than the old 8%. Although China's government debt and social leverage ratio are not particularly high, the rapid rise is worth vigilance. Although the leverage ratio of residents and the central government is not high, the leverage of the two engines, the enterprises or local governments, is too high or too high to be solved. Although the top-level design of the CPC Central Committee and the State Council promotes reform, we should not underestimate the difficulty and resistance of the reform, especially from the period of preparation. In the past, public policy was constantly trial and error. In 2009, the 4 trillion fiscal stimulus left behind a pile of excess capacity; 2010-2013 years tight money, shadow banking rose, Pang's financing snowball; 2014-2015 years of currency drain led to bubbles in the stock market, housing market and bond market, and brewing financial risks. Now is the time to fight for reform.