Review of China's economic performance in 2009 and outlook for 2010
Steady economic growth: China's economy will grow more steadily and balancedly in 2010, and the role of exports in stimulating the economy will be better than in 2009 In 2018, the investment contribution rate will fall back, and domestic consumption will basically remain stable. Although it is clear that the export rebound will be more obvious, compared with the previous expansion cycle, export growth is still relatively weak. The relevant government policies to promote consumption will still play a role, and consumption will remain stable. Investment growth may slow down from highs, but the rebound in real estate investment and exports will support overall investment growth, and private sector investment will become the main force for investment growth. Overall, external demand and domestic demand will be more balanced in 2010, but domestic demand is still stronger than external demand. Prices will gradually rise as the economy recovers, but the increase will be relatively moderate.
Policy Outlook: China’s economic recovery momentum and abundant liquidity make it necessary for the government to adjust monetary policy in 2010. Historical experience shows that the tightening of monetary policy starts with increasing liquidity hedging, then increases bank deposit reserve ratios, and finally raises interest rates and initiates a gradual appreciation of the RMB. However, if the government still focuses on changes in two indicators when considering the timing of "exit": exports and inflation, then the "exit" of monetary policy may be relatively lagging. Until then, the government still tends to adopt milder administrative measures, which may create favorable conditions for asset price increases. In addition, the relative weakness of exports and the escalation of trade frictions will further strengthen the need to expand domestic demand and expand the domestic market as the next policy focus of our country, which will allow fiscal policy to continue to remain active.
Review of 2009
The external environment has improved, but still faces risks
In 2009, the world economy began to gradually recover under the influence of the stimulus policies of various governments. The United States , Europe's GDP returned to positive growth in the third quarter, Japan's economy emerged from recession in the second quarter, and its economic growth increased further in the third quarter. The recovery momentum of emerging market countries and developing countries is relatively strong, so that some countries have begun to tighten Monetary policy (Australia and Norway raised interest rates in the fourth quarter, and India also increased its liquidity ratio).
The GDP growth rate of the United States, Europe and Japan returned to positive growth month-on-month
Although the economies of the world's major economies have begun to recover, the leading force driving economic recovery-the countries that everyone is familiar with The government's unprecedented economic stimulus policy will gradually be "exited" in 2010, and the private sector must once again assume the important task of supporting economic growth. However, some key factors will restrict the growth of private consumption in developed countries, especially in developed countries, thereby dragging down the pace of world economic recovery.
The first is the U.S. fiscal deficit constraint. The reduction in tax revenue and the increase in government spending during the economic recession caused the U.S. fiscal deficit to reach a record level of more than 1.4 trillion US dollars in 2009. The huge fiscal deficit limited the space for the United States to continue to use expansionary fiscal policies to stimulate consumption growth.
Secondly, the unemployment rate and savings rate are rising. When the stimulus effect of fiscal policy on consumption gradually disappears, the growth of consumption will depend on the level of personal disposable income. As the U.S. unemployment rate has reached a 26-year high (rising to 10.2% in October), and the market generally expects that the job market will not improve soon, the high unemployment rate will restrict the growth of residents' income levels and thus drag down consumption. In addition, the recovery in the savings rate is also not conducive to the growth of consumption.
Domestic demand is strong and my country's economy is recovering rapidly
In 2009, China's economic recovery was significantly stronger than other major economies in the world. Since the fourth quarter of 2008, a series of policies to expand domestic demand introduced to "maintain growth" have achieved better-than-expected results. This year, China's economy has shown a "V"-shaped trend. Looking at quarters, GDP growth bottomed out in the first quarter (6.1%), rebounded strongly in the second quarter (7.9%), continued to rise in the third quarter (8.9%), and may reach a peak during the year (>9%) in the fourth quarter. Along with this, investment has grown rapidly, the added value of industrial production has continued to rebound year-on-year, consumption has remained strong, exports have stabilized and rebounded, and prices have gradually emerged from deflation.
The driving role of the Troika in GDP growth
This year, China’s economy has generally shown a trend of accelerating recovery. From the perspective of the Troika—investment, consumption and exports—the contribution rate to economic growth Look, investment was the main driving force behind the strong economic recovery in 2009. From January to October this year, investment growth reached 33.1% year-on-year, setting a record in the past 14 years. In terms of industries, it mainly comes from three types of investment: infrastructure investment and investment in upstream industries (such as general equipment, special equipment), investment in people's livelihood (such as education, scientific research, health and social security and culture), and investment in consumer industries (such as agricultural and sideline products). food processing industry, tobacco, pharmaceuticals). Of course, there are also some industries where the investment growth rate is relatively sluggish compared to previous expansion cycles. For example, the investment growth in the real estate industry has shifted from sluggishness to expansion. The cumulative growth rate is not higher than the historical average for the same period (the average growth rate from 2004 to 2008 is 28%) (1 -October growth rate was 23.4%), investment growth in foreign trade (such as textile industry, communication equipment, textile and clothing) has just improved, while the petroleum, steel, and chemical fiber manufacturing industries continue to reduce expenditures.
This year, domestic consumption growth has basically maintained a steady upward trend. Judging from the data from January to October, the actual consumption growth rate (16.4%) after excluding price factors exceeded the highest level in history (15.7%). Against the background of a sluggish economic environment, consumption growth is so strong, and the boost to demand from government stimulus policies may be the main reason. Stimulated by policies, the willingness and ability of residents to consume is really encouraging, especially the record-breaking car sales (car sales have exceeded 10 million units in the first 10 months of this year), surpassing the United States to become the world's largest car market market. In terms of types, in addition to the rapid growth in sales of passenger cars with a capacity of 1.6 liters and below that benefited from the government's purchase tax reduction and exemption policy, the sales of passenger cars with a capacity of 1.6 liters and above that did not enjoy this preferential policy also grew rapidly. This is from one aspect This reflects that policy stimulus is not the entire reason for strong consumption performance. Separately, real estate sales were stronger than expected. From January to October, the cumulative sales area of ??real estate nationwide grew by 48.4%, setting another record high. Booming real estate sales have driven substantial growth in consumption in building materials, home furnishing and other industries.
Weak exports are a key factor in the unstable foundation of my country's economic recovery so far. As the pace of economic recovery in the world's major developed economies is relatively slow and weak, the improvement of my country's exports will also lag behind. Judging from this year's monthly data, exports have improved month-on-month since March, but it was not until recently that export growth began to rebound significantly. The main reason is that overseas companies began to restock, and my country's exports of mechanical and electrical products narrowed significantly this year. Taking into account the recovery of the global economy and the base effect (the base of exports from November last year to the first half of this year is low), it is expected that the rebound in exports in the first half of 2010 will be very obvious.
my country's exports recovered slowly in 2009
With the recovery of the economy and the rebound in prices, the moderately loose monetary policy has gradually converged since the third quarter, mainly reflected in the following two aspects: Aspects: First, bank credit began to normalize, and there were major changes in the loan structure. Although medium and long-term loans continue to grow to ensure the supply of funds for major projects in the economic stimulus, the growth rate of bill financing, which contributed most of the new loans from January to April, began to slow down significantly in the second half of the year. This is partly due to the central bank. Window guidance and the China Banking Regulatory Commission have intensified the review of credit capital flows, requiring banks to strictly implement the results of capital adequacy ratios and provision coverage ratios. Second, on July 9, the central bank restarted the issuance of one-year central bank bills that had been suspended for seven months, and began to continue to withdraw funds from the open market in the second week of October to hedge liquidity. This may This is the beginning of the central bank absorbing liquidity.
Outlook for 2010
The economy will maintain steady growth
In 2010, China's economy will grow more steadily and balancedly, and exports will play a better role in driving the economy. This year, the investment contribution rate will fall and consumption will basically remain stable.
Although the rebound in exports in 2010 will be more obvious, it is still weak compared to other expansion cycles. The world's major economies have begun to emerge from recession, which means that my country's exports will further improve. However, in the longer term (such as six months from now), exports will still face the slowdown in the growth rate of developed countries (such as the United States) after the effects of government economic stimulus policies gradually disappear. risk of slowing down.
The government's policies to promote consumption will still have an effect next year, and consumption will continue to maintain steady growth. The two key factors supporting consumption growth this year will still play a role next year. First, in the context of my country's gradual shift of economic growth momentum to private consumption, the preferential policies related to automobiles and real estate that expired at the end of this year have been extended. At the same time, the government has increased its stimulus efforts for home appliance consumption and rural consumption. It is not ruled out that next year There are more “pro-consumption” policies being introduced. Second, the high growth in commercial housing sales in recent months will also continue to drive consumption of building materials, home furnishings and home appliances in the coming months. In addition, as the economic growth trend further stabilizes, corporate profits increase and personal income expectations increase, the growth rate of food, daily necessities, entertainment and other consumption will further rebound. Therefore, domestic consumption will continue to maintain steady growth in 2010.
Investment growth may slow down from its high level in 2010, and the investment structure will change. The main reason for the high growth in investment this year is the rapid launch of major projects in the government's "4 trillion yuan" fiscal stimulus plan, and the huge amount of bank credit has fully guaranteed the funding supply for various government projects. But this situation will not repeat next year, and the high base of this year's investment and the government's policy of eliminating backward production capacity do not support the continued ultra-high growth rate of investment next year. At the same time, the investment structure will undergo significant changes. The proportion of infrastructure investment and other government-led investment in fixed asset investment will decline. Private sector investment will further improve with the support of growth in real estate investment and foreign trade sector investment, and its proportion in fixed asset investment will increase.
In summary, there are two main reasons to support the improvement of the real estate market in 2010: first, there is no oversupply problem in the real estate market as a whole, and demand remains strong; second, there will be no harm to the real estate market. Major policy adjustments for the industry. Based on the above two reasons, we are relatively optimistic about the development of the real estate industry in the short to medium term.
Since 2005, the completed area of ??real estate has continued to be lower than the sales area.
Despite this, we cannot deny that housing prices have risen too fast, and housing prices have attracted the attention of government departments. The market generally believes that the 2010 policy is still the biggest uncertainty facing the real estate market.
In this regard, the rise in house prices must be viewed differently. There are huge gaps between various regions in our country. As the overall housing sales price continues to rise, due to the different initial conditions and different housing price increases in each region, the purchasing ability of residents in various regions and the extent of their impact are also quite different. . If we use the indicator "ratio of residential sales price per square meter and urban per capita disposable income" to measure house purchasing ability, then the house purchasing ability of residents in most provinces and cities in the central and western regions is significantly stronger than that in the eastern region. For example, in 2008, the house purchasing ability of Hunan residents The capacity is more than three times that of Beijing. In addition, we compare the housing affordability indicators in 2008 and 2003-2005, and use the increasing gap as a yardstick to measure the extent to which housing affordability is reduced due to rising housing prices. The results show that the housing purchasing ability of two types of provinces and cities: coastal provinces and cities with relatively developed economies (such as Beijing, Zhejiang, Fujian, and Guangdong) and western provinces and cities with relatively rapid economic development in recent years (such as Sichuan and Chongqing) are relatively less affected. big. The former category of provinces and cities has a relatively large proportion of investment and speculation in the real estate market, while the latter category of provinces and cities is mainly related to relatively low housing prices in the past. Housing affordability has even improved in most other Midwestern cities.
Therefore, it is not appropriate for the government to adopt a one-size-fits-all tightening approach. The experience of previous years shows that a stable policy environment is crucial for the sustained and stable development of real estate. Every major policy adjustment by the government will be This will lead to a sharp decline in investment growth in the short term. In view of the important role of the real estate industry in supporting economic recovery and sustainable growth, it is expected that the government will not easily make any policy adjustments that will harm this industry in the short to medium term.
In this context, it is very necessary to strictly implement existing policies (such as second home loan policy, penalty system for real estate developers to hoard land) or to make partial adjustments to real estate policies to prevent excessive speculation. Doing so will not only not break the recovery momentum of the real estate industry, but will also contribute to the long-term healthy development of the industry.
In addition to infrastructure investment and real estate investment, exports are the third key factor driving investment growth. Judging from historical data, investment growth in foreign trade-related industries has a high correlation with exports. At present, affected by the sharp decline in exports in the early stage, investment growth in foreign trade-related industries such as textiles and garments and chemical fibers is still relatively sluggish. As the rebound in exports continues, investment in the foreign trade industry is expected to gradually recover in 2010, and its recovery trend will further extend to upstream industries (such as chemical fiber, petroleum, etc.).
Investment growth in foreign trade-related industries is relatively sluggish
In addition, although government investment is gradually fading out (government-led investment such as infrastructure investment declined to varying degrees in the second half of the year), in 2010 The central government still has ample funds so that government-led investment can make up for the lack of private sector investment at any time. According to the plan, the central government’s investment of 1.18 trillion yuan will be allocated in two years. Excluding the 591.5 billion yuan that has been allocated (according to the allocation progress, 104 billion yuan in the fourth quarter of last year and 487.5 billion yuan this year), the central government will still have 588.5 billion yuan in 2010. Investment funds. It can be seen that even if real estate investment and exports are not as optimistic as expected, the government still has sufficient ability to support investment growth. Therefore, there is no need to worry too much about the decline in fixed asset investment growth in 2010.
Price is rising, but the increase is relatively moderate
In November this year, the year-on-year CPI increase has turned from negative to positive, ending deflation. As the output gap gradually closes, the pressure on prices will increase, but there will be no obvious inflation in 2010. Through the analysis of the three main components of CPI (residential category accounts for 14.69% of CPI, and the other two account for about 1/3 each), it is found that in 2010, the above three categories Price increases may not even reach the level of 2007. Therefore, my country's inflation level may be relatively low next year.
By analyzing the historical data of various CPIs, it was found that from 2003 to 2007, when the economy and exports were growing rapidly at the same time, the price increase of industrial manufactured products did not exceed 2%. The reason was that the overall manufacturing industry showed an oversupply situation. , there is no driving force for the sharp increase in the price of manufacturing products, which can be basically reflected in the price trend of products in the electronics, electrical appliances and other industries in recent years. In 2010, my country's exports will be relatively weak compared to the expansion cycle from 2003 to 2007, and the problem of overcapacity will be difficult to alleviate in a short time, which will further restrict the rise in prices of industrial manufactured products.
Affected by policy adjustments and the increase in future housing supply, it is very unlikely that housing sales prices will continue to rise significantly, and the transmission effect on the rise in rental prices will also be weakened. Although the price reform of water, electricity, coal, steam and other resources will increase CPI, because the price adjustment adopts a relatively mild and gradual approach (for example, the electricity price adjustment first raises the national non-residential electricity price, and then increases the residential electricity price), it will have a short-term impact on commodity prices. The impact is also relatively limited.
The domestic frozen pork purchase and storage plan policy caused the downturn in pork prices not to last long. The pig grain ratio has been below the break-even point 6 for only 2 months this year, which is much shorter than the pork price in 2003. 19 consecutive months before the surge. The impact on farmers' enthusiasm was not as great as it was in 2003. In addition, although swine disease epidemics have occurred in some areas recently, the current situation shows that its impact is far less than that in 2007, and the government has experience in dealing with such problems. It can be inferred from this that it is unlikely that there will be a serious shortage of pork in 2010, and this round of pork price increases may not be similar to the "crazy rise" in 2003 and 2007.
In addition, my country has a bumper grain harvest this year, but the growth rate of developed countries in 2010 is still facing the risk of slowing down. It is difficult for international commodity prices to rise as rapidly as in 2007. Imported factors have a negative impact on the prices of China's grain and other agricultural products. The pulling effect may not be stronger than in 2007.
Future policy outlook
It is necessary to adjust monetary policy
Through the above analysis, China’s economic recovery momentum and liquidity abundance (based on M2-GDP- The degree of liquidity easing measured by CPI has far exceeded any period in history) making it necessary for the government to adjust monetary policy in 2010. Historical experience shows that the tightening of monetary policy starts with increasing liquidity hedging, then increases bank deposit reserve ratios, and finally raises interest rates and starts the gradual appreciation of the RMB. However, if the government still focuses on changes in two indicators when considering the timing of "exit": exports and inflation, then the "exit" of monetary policy may be relatively lagging behind. Until then, the government still prefers to adopt more moderate measures because the outlook for exports in 2010 is still uncertain, inflation may not pose a serious threat, and administrative measures can play a certain role in regulating asset prices. If the above happens, it will create favorable conditions for asset prices to rise in the medium term. In addition, the relative weakness of exports and trade frictions will further strengthen the need to expand domestic demand and expand the domestic market as China's next policy focus, which will allow fiscal policy to continue to remain active.
There are many conditions required for the central bank to adjust monetary policy. CPI inflation and changes in the external environment (such as capital inflows) are the most important determining factors.
From the perspective of CPI inflation, although the year-on-year CPI growth rate has emerged from the shadow of deflation, severe inflation is unlikely to occur in 2010, which will make the central bank less motivated to adjust monetary policy.
As we all know, the biggest impact on CPI is the output gap. If the average growth rate of industrial production added value in the previous cycle of 16% is used as the industrial output level when the economy returns to the potential economic growth level, then The performance of the added value of industrial production in recent months (16.1% in October and 19.2% in November, still lower than the potential industrial output level after excluding the impact of a low base) shows that the output gap is closing rapidly, which was the case in the previous round. The economic cycle means that the time for adjustment of monetary policy may not be too far away. Although the output gap may close soon, this round of economic recovery has different characteristics from previous cycles, that is, rapid expansion of government-led investment, while private sector investment and exports recover relatively slowly. Therefore, the central bank may be relatively late in adjusting monetary policy.
First, in the context that the export prospects are still uncertain and consumption is subject to long-term factors and it is difficult to make up for exports in the short term, it is necessary to maintain the growth of investment, especially private sector investment, in the short and medium term. Raising interest rates is not conducive to encouraging and promoting private capital investment as the next step in the "4 trillion yuan investment plan."
Second, while the RMB exchange rate against the US dollar continues to remain stable and the United States maintains a low interest rate policy, if China raises interest rates first, it will attract capital inflows, push up asset prices, and increase liquidity management. Difficulty.
Third, if the appreciation of the RMB is resumed, and a gradual approach is adopted rather than a one-time appreciation, it will attract a large inflow of hot money in the short term. However, after significant appreciation, it will build expectations that the RMB will begin to depreciate, thereby greatly reducing the Attraction to hot money. The disadvantage is that it is not conducive to the recovery of exports and employment, and it is not conducive to liquidity management in the short term.
The degree of loose liquidity is much higher than the historical record
From the perspective of the external environment, China’s capital inflows will accelerate in 2010, but compared with 2005-2007, the speed and scale of inflows are Probably still relatively small. First, with the further improvement of external demand, my country's exports will gradually recover in 2010 and the trade surplus will expand. However, the momentum of domestic demand will still be stronger than external demand, and the trade surplus may not be very large. Second, the rapid inflow of hot money is inevitable, but the scale of the inflow is not as large as before. Although various countries' "exit" strategies have been put on the agenda as the economy recovers, as there are still obvious differences in the economic recovery of various countries, the "exit" time of each government's policy will be greatly different. Generally speaking, the economies of developed countries are relatively weak, inflation remains low, and loose monetary policies have been maintained for a long time; emerging market countries have good recovery momentum, inflation has risen, and monetary policies need to be tightened earlier. In the process of successively tightening monetary policies, emerging market countries will attract more capital inflows due to expectations of interest rate spread expansion and currency appreciation.
As my country's economic recovery momentum is stronger, my country is more attractive to funds than emerging market countries, and more importantly, the RMB is pegged to the US dollar, which puts great pressure on the exchange rate system of most countries' currency depreciation. Against this background, the inflow of hot money is inevitable. However, the current effective exchange rate of the RMB (the value of the RMB against a basket of currencies) has only returned to the level in August 2008, and is still on an appreciation path compared with 2005-2007. At the same time, the pressure for RMB appreciation shown by non-deliverable forward foreign exchange is far less than that in 2007. Considering that the trade imbalance in 2010 may not be as serious as before, the expectation of RMB appreciation may not be as strong as before.
The effective exchange rate of the RMB has continued to depreciate since the beginning of this year
Based on the above-mentioned internal and external analysis, the timing of my country's use of interest rate means to adjust monetary policy may be relatively lagging, and interest rate increases may be delayed. After the United States. If the above situation occurs, then the more important thing in 2010 is to prevent asset prices from rising too quickly. In fact, since the second half of this year, our country has taken a number of measures, such as guiding banks to issue credit through window guidance, strictly reviewing loan flows to prevent funds from flowing into the stock market, restarting IPOs to increase stock supply, strictly implementing second-home loan policies, and increasing Strengthen the supervision of capital adequacy ratios of large banks, withdraw funds from the open market, combat speculative capital flows, maintain the stability of the RMB exchange rate, etc. In 2010, the central bank may still give priority to the above measures.
But the key question is whether the above measures can effectively deal with the risk of rising asset prices and keep them within a controllable range. If not, the rate hike will come sooner than expected.
Historical experience shows that government administrative measures have a greater regulatory effect on the capital market in the short term. On May 30, 2007, the Ministry of Finance increased the stamp duty, breaking the continuous rising momentum of the stock market, and the stock market fell sharply in the short term; on June 20, the China Securities Regulatory Commission promulgated the "Implementation Measures for the Management of Overseas Securities Investments by Qualified Domestic Institutional Investors", and QDII issued a The system was fully opened, and the stock market fell in response; on June 29, the Ministry of Finance was approved to issue 1.55 trillion yuan of special treasury bonds to purchase foreign exchange; on August 15, the applicable personal income tax rate on savings deposit interest income was reduced from 20% to 5%. The moves briefly affected the stock market. Despite this, the stock market continued its previous general direction after a sharp correction. This is basically a unique feature after the introduction of administrative measures. Even more stringent measures, such as raising the deposit reserve ratio, cannot stop this momentum in the short term.
Taken together, my country's monetary policy will face greater challenges in 2010, and the government will weigh the pros and cons between export recovery and rising asset prices. However, judging from past experience, monetary policy often gives priority to the former, while using administrative and regulatory measures to deal with rising asset prices. Since prices are likely to rise moderately in 2010 and exports are relatively weak, interest rate hikes may be delayed, which may be conducive to rising asset prices.