Several Misunderstandings of China’s Economic Analysis and Why the Economy Is Better Than Pessimistic 南京夜生活网 Expectations
Several Misunderstandings in China’s Economic Analysis-Also on Why the Economy Is Better Than Pessimistic Expectations!
(Haitong Macro Weekly Communication and Thinking No. 347, Jiang Chao, etc.) Summary In the past long period, the trend of China’s economy has become the focus of market attention.
In the end, is China’s economy continuing to gradually progress or is it building a bottom and stabilizing?
To accurately analyze China’s economic trends, you need to understand several common misunderstandings in economic analysis.
First, the use of period indicators to judge the economy In the recently released indicators, the main causes of economic transformation are two data: first, the rate of GDP growth, which changed to 6% in the third quarter, hitting a new low of nearly 30 years; the other is industrial added valueTen-year growth rate, replacing 4 in October.
7%, the second lowest value in the year, and the second lowest value since March 2009.
Based on the new low GDP growth rate in the third quarter and the replacement of the industrial growth rate in October, a natural measure is that the Chinese economy is still continuing to replace, and it is difficult to bottom out in the fourth quarter.
China looks at half a year, the United States looks at the chain.
However, at present, several important indicators that we are used to judge China’s economic situation, whether it is GDP growth or industrial growth, are actually data.
In the analysis of the US economy, indicators such as GDP growth rate are also used, but the United States announced the quarter-on-quarter growth rate after seasonal adjustment.
For example, in the third quarter of this year, US GDP increased by 2 from the previous year.
1%, US retail sales in October this year increased by 0.
3%.
The US market is also paying more attention to the quarter-on-quarter growth rate, and is less concerned about the multi-year growth rate.
The past is reflected in advance, and the present is reflected sequentially.
The reason why mature markets care more about MoM is that MoM is more accurate.
Theoretically, the annual growth rate is the ratio of the same period of this year to the same period of last year, and the sequential growth rate is the ratio of the current period to the previous period, resulting in data equal to the occupants of multiple previous sequential growth rates.
For example, China ‘s GDP growth rate in the third quarter was 6%, while the GDP growth rates in the four quarters from the fourth quarter of 2018 to the third quarter of 19 were 1 quarter-on-quarter.
5%, 1.
4%, 1.
6%, 1.
5%, the product of the next four items of ring growth is actually equal to the previous multiple growth.
It can be found that the previous data contains too much past information.
Behind the 6% drop in China ‘s GDP growth rate in the third quarter of this year, both the contribution from the third quarter of this year ‘s GDP growth rate and the past three quarters ‘GDP growth rate may have contributed, and the contributions from the last three may increase.
In fact, this can explain why in the US market everyone cares more about the MoM data, because only MoM growth is the latest change and is the best description of the status quo.
The MoM data is not bad.
In China, since the Bureau of Statistics has been publishing GDP and industrial growth rates for many years in the past, everyone is also used to using them to represent the current state of the economy.
But in fact, since 2011, the Bureau of Statistics has announced the four-month data of GDP, industrial added value, fixed asset investment, and retail packaging of social consumer goods, but everyone is not used to it.
Looking at the current MoM data, the economy is not as bad as the previous data.
First, from the point of view of the quarter-on-quarter growth rate of GDP, the growth rate in the third quarter of this year was 1.
5%, although it was slightly lower than 1 in the second quarter.
6%, but better than 1 in the first quarter.
4%, compared with 1 in 4Q18.
5% was basically flat.
In other words, from the point of view of the chain, the worst time of the year is the first quarter, not the third quarter.
In essence, the quarter-on-quarter growth rate of the three indicators of industry, consumption, and investment is observed. Although all three have declined in October this year, only the quarter-on-quarter growth rate has replaced 0.
The lowest point of the year was 17%; the growth rate of consumption was zero.
46%, investment growth rate is 0.4%, both of which are not too badly ranked in each month of the year.
And just announced in November, the manufacturing PMI rose to 50.
2%, the second highest value during the year.
The manufacturing PMI is also a chain index, which is in the expansion range above 50%, which means that the industrial chain growth rate in November is also expected to improve significantly.
Therefore, although the GDP growth rate in the third quarter hit a record low, and the 10-month growth rate of industry, consumption, and investment also replaced the lows near the year, it was not possible to transform the economy and replace it because of multiple economic indicators.The MoM indicator is not bad, and it has improved, which means that the worst short-term economy may have passed.
Second, the use of industrial data to represent economic industries cannot represent China.
The Bureau of Statistics releases economic data every month, but the most important GDP data is released quarterly. The economic data released every month is mainly the growth rate of industry, consumption, investment and import and export, of which the former is productionIndicators, the last three are demand indicators.
The GDP data released by China is actually based on the production law, so everyone is accustomed to using industrial growth to represent monthly economic performance.
Among the indicators on industrial operation announced in November, the growth rate of industrial added value reached 4 in October.
The second lowest value of the year was 7%, and the decline in profit growth of industrial enterprises in October also expanded to 9.
9%, the second largest drop in the year.
As many indicators have achieved the high degree of industrial growth, many people naturally interpret it as a noticeable slowdown in China’s economy in October.
But think about it carefully. Traditionally, industry is actually steel, coal, cement and other products. Can these still represent our current life?
For example, everyone usually uses mobile phones, but the chips of mobile phones are all nano-level, so there is no need for so much steel.
We use mobile phones to chat, estimate classes online, read books, shop, shop online information, and increase express delivery in our lives. Both network services and express delivery belong to the service industry.
The data actually proves this. As early as 2013, the proportion of China’s service industry has officially exceeded that of the secondary industry.
According to the latest revised GDP data for 2018, China’s service sector accounted for 53.
3%, while the secondary industry accounted for 39.
7%, of which industry accounted for only 33.
2%.
It can be seen that, as the proportion of industry is far lower than that of the service industry, and industrial indicators have become increasingly unrepresentative, using industrial deceleration to promote the deceleration of China’s economic growth actually has serious deviations.
Power data is more comprehensive.
Why don’t you use data from the service industry?
Because in the past China’s service industry only had quarterly data and lacked monthly high-frequency data indicators, everyone used to use industrial growth to represent everything.
But in fact, since 17 years, the Bureau of Statistics has started to release monthly service industry production indexes.
The production of the service industry in October 19 increased by 6 per year.
6%, down by 0 from September.
1%, but higher than 6 in July and August.
3% and 6.
4%.
But whether it is the growth rate of the industry or the growth rate of the service industry, any one used to represent the economy has considerable problems.
In fact, there is a very comprehensive data, that is, electricity data, including power generation and power consumption.
And because the power is difficult to store, the growth rate of electricity consumption is actually very close to the growth rate of power generation.
Since the above industrial production requires electricity and the service industry also needs electricity, the electricity data reflects the economic situation much more accurately than the industrial or service industry data.
The growth rate of power consumption in September and October of this year was 4 respectively.
4% and 5%, and the average growth rate of electricity consumption this year is 4.
4%, which means that the electricity consumption in the past two months should be flat or even slightly better than the integrated average.
In fact, judging from the growth rate of electricity consumption, the worst this year is May and July.
Judging from the growth rate of power generation, September and October this year were 4 respectively.
7% and 4%, both higher than the average growth rate of power generation since this year3.1%, which indicates that the power generation situation in the past two months is also better than the ten-year average.
From the perspective of the growth rate of coal consumption that we monitor, November’s performance is also very good, which means that there is a good probability that the growth rate of power generation in November is also good.
The growth rate of power generation reflects that the worst time of the year is also in May and July, and there have been significant improvements for three consecutive months since September. This is actually the same as the economic duration shown by the industrial growth rate.completely different.
Third, replacing financial financing with financial indicators affects the future economy.
After all the data released in October, another factor that triggered market growth was the substitution of social finance growth.
The total amount of supplementary social financing in October was only 618.9 billion yuan, a decrease of more than 118.5 billion yuan; the overall growth rate of total social financing in October increased from 10.
8% interest rate 10.
7%.
Some people worry that the decrease in financing growth also confirms the downward pressure on the economy from the side.
It is true that the economy cannot operate without money, so the replacement of the growth rate of money financing is certainly not good news for the economy.
But after all, money financing is not the same as the economy itself, so the growth rate of money financing cannot be directly replaced by economic replacement.
An important reason is that due to the time lag from financing from residential enterprises to consumption and investment behavior, the growth rate of currency financing often leads economic changes.
Observing from China’s past data, the growth rate of social financing is ahead of economic changes by about two to three quarters.
As financial deleveraging started in 17 years, the growth rate of social financing began to deviate sharply from the fourth quarter of 2017, and the economic growth rate began to decline significantly in the second quarter of 2018.
The decline in the growth rate of social financing continued until the 4th quarter of 2018. According to the lag of 2 to 3 quarters, this means that the economic fluctuations up to the 3rd quarter of this year are the lagging effects of the previous round of deleveraging.
But from 19 years onwards, as the deleveraging turned into a stable lever, the growth rate of the social financing has stabilized and picked up, and it has picked up for two consecutive quarters.
If the social leadership of the economy is still established, it means that the economy is expected to stabilize and improve in the short term in the two quarters starting in the fourth quarter of 1919.
From the third quarter of 19th, the growth rate of social financing fluctuated again, and the transition to economic replacement should be after the second quarter of 2020.
That is to say, the economic performance is derived from the growth rate of social finance, and the replacement will continue in the future, even for a short period of at least half a year or so, and then it will shift again.
Also, consider the current 10.
The growth rate of 7% of social financing is still higher than 9 at the end of last year.
9%, assuming that the relationship between social finance and economic growth remains stable, it means that unless the economic growth rate is replaced again after the second quarter of next year, it may not be lower than the 6% in the third quarter of this year.
Financing structure is more important than scale.
In fact, all financing can be divided into two categories, one is short-term financing, and the other is medium- and long-term financing.
Short-term financing is usually related to liquidity needs, while medium- and long-term financing is related to real needs such as investment and consumption.
This means that the impact of medium and long-term financing on the economy may be more important than social finance.
We find that the most important change in the growth rate of social financing in recent months is short-term financing, while the performance of medium- and long-term financing is stable.
In particular, corporate long-term loans have stabilized and recovered for three consecutive months since August, which means that the investment needs of the corporate sector may have started to improve.
Recently, the Ministry of Finance has issued a special debt quota of 1 trillion yuan for local governments in advance, which actually supplements the whole society’s medium- and long-term financing, leading to the underpinning of infrastructure investment and economic stabilization.
Fourth, using demographic indicators to forecast the economy An important reason for pessimistic expectations about the Chinese economy is the decline in birth rates.
In economics, people aged 15-65 are usually considered working age.
According to the 6 census data, China’s post-80s generation is about 2.
2 billion, about 1 after 90.
8 billion, and only 1 after 00.
5 billion.
In fact, around 2015, when the working-age population was reached, the labor force population in China experienced a negative growth.
According to statistics from the Bureau of Statistics, China ‘s birth rate is still declining. Does n’t that mean the future of China ‘s economy is bleak?
Modern growth stems from technological progress.
To understand the effect of population on economic growth, it does not prevent us from reviewing the history of human economic development.
In fact, until the beginning of the Industrial Revolution, the global population continued to grow slowly, and economic growth grew extremely slowly.The average annual GDP growth rate is vertical. From 1 AD to 1000 AD, the average annual global GDP growth rate was only about 0.
01%, from 1000 AD to 1700 AD, the average annual GDP growth rate was only 0.
2%.
And even the slightest slight increase is almost entirely due to population growth, and there is almost no big change in per capita GDP.
After the outbreak of the Industrial Revolution, the global economy began to accelerate significantly.
From 1700 to 1820, the average annual growth rate of GDP rose to zero.
5%, rose to 0 from 1820 to 1870.
9%, rising from 2870 to 2% from 1870 to 1900, and 3% after 1900.
And only after the Industrial Revolution did global per capita GDP increase significantly.
From 1700 to 1820, the average annual growth rate of per capita GDP rose to zero.
1%, rose to 0 from 1820 to 1870.
5%, rose from 1870 to 1900.
2%, and reached 1 after 1900.
5%.
That is to say, it is the emergence of the technological revolution that has brought about significant economic growth, and before that the global economy remained stagnant for a long time.
This actually tells us that population growth is helpful for economic growth, but it is not actually a decisive factor.
Judging from the history of China’s economic development, the growth from 1 AD to 1600 almost stagnated for a long time, and it started to appear zero after 1600.
The increase is about 5%, but almost all comes from population growth.
Only after the founding of New China did GDP growth reach a global average growth rate of more than 2%.
After the reform and opening up, GDP growth exceeded 8%.
The reason is that, whether in the feudal society or the semi-colonial era, China’s economy was mainly agricultural, and the efficiency of the population could not be improved.
Only after the founding of the People’s Republic of China and after the reform and opening up, through the vigorous development of industry, the introduction of advanced overseas technology, and the improvement of the population’s efficiency, did the economy develop rapidly.
Improve the quality of the population and embrace the bonus of engineers.
Going back to the original question, it is true that China’s birth rate has fallen sharply, but have you ever wondered why it has fallen?
Many people simply attribute it to the family planning policy and think that it is sufficient to fully liberalize the family planning policy.
However, in fact, the full second child was released as early as 2016. In fact, it is basically equivalent to the release of the family planning policy, but the birth rate is still falling, indicating that it is not a policy limitation and there are other reasons.
We have found that the initial cause of the decline in fertility is actually an increase in child support costs.
China’s per capita GDP has reached 10,000 US dollars, which is about to cross the 1 proposed by the World Bank.
Ranked $ 20,000 in high-income countries worldwide.
At that time, after Japan’s and South Korea’s per capita GDP reached 10,000 US dollars, its birth rate also dropped sharply to about 10 ‰, similar to what we have now.
However, after entering the 10,000-dollar door cloud, Japan and South Korea have maintained a medium-speed growth of about 4-5% for 10 years.In fact, it is not relying on more people, but the continuous improvement of population quality, which is reflected in per capitaImproved education.
Because the rising cost of support actually means an increase in the quality of the population.
This is actually a phenomenon that is currently happening in China.
Although China’s birth rate has fallen, the number of college graduates we graduate each year has reached 12 million, compared with less than 1 million 20 years ago.
At present, the average education period of all Chinese people is about 9 years, which is equivalent to a junior high school graduate.
However, if the number of graduates of 12 million college students is maintained each year, after 10 years, China’s per capita education period will be close to 12 years, which is equivalent to a high school graduate. The annual education level will increase by about 2%. This is the bonus for the improvement of population quality.That’s the engineer bonus.
It is just that the shift of the dividend from shifting the number of people to the dividend of engineers requires Chinese companies to change their development model, from simple labor-intensive to technology-intensive, and to relying on R & D, innovation and development.
This is exactly the change that is currently taking place. China ‘s R & D intensity has exceeded 2%. The growth rate of R & D expenditure of A-share companies has remained above 20% for three consecutive years, and the outbreak of trade frictions has exacerbated this trend. This shows thatChinese companies are transitioning to R & D and innovation, but they can actually take advantage of the engineer’s bonus.
To sum up, the current market has a view that based on the decline in China ‘s birth rate, linearly extrapolate the long-term accumulation of China ‘s economic growth, and then reduce the growth rate of financing and industrial growth, so that China ‘s economic growth continues to decline.evidence.
We believe that this simple logic ignores changes in China’s population quality and technology, as well as changes in financing structure and economic structure. The real Chinese economy is actually better than many people’s pessimistic expectations. I. Economy: PMI is back online 1) Manufacturing PMI is back online.
In November, the national manufacturing PMI returned to 50 online.
2%, an obvious rise in the earlier 10 months, a new high in 4 months, and for the first time in the year exceeded the level of the same period in 18 years.
In the main sub-items, demand and production both strengthened, prices fell, and inventory improved.
In terms of scale, the PMI of large, medium and small enterprises has rebounded, and the PMI of large enterprises is back online.
2) Demand and production both strengthened.
The new orders index rose to 51 in November.
3%, transferred from offline to online, hitting a new high since May and surpassing the level of the same period in 18 years, pointing to the expansion of domestic demand, the index of new export orders rose to 48 in November.
8%, a new high since May. Due to factors such as the increase in overseas orders for Christmas, external demand has improved simultaneously.
The production index rebounded to 52 in November.
6%, a new high since April, confirming a 16% increase in coal consumption in power generation in November.
6%, still at a high level during the year, points to the strengthening of industrial production.
3) Prices have fallen and inventory has improved.
The purchase price index in November was slightly higher than 49%, and the ex-factory price index fell to 47 at the same time.
3%. Since November, coal prices have fallen, steel prices have rebounded, and oil prices have risen slightly. It is predicted that the PPI will rise by 0 in November.
1%, the annual decline narrowed to 1.
3%.
The raw material inventory index rose to 47 in November.
8%, the finished goods inventory index fell to 46.
At 4%, both demand and production have strengthened, which has improved inventory conditions.
4) The foundation is stable and can be expected.
In November, the manufacturing PMI ended its 6-month offline operation and returned to the online market. The averages in October and November also significantly exceeded the third-quarter average, and the supply and demand indicators rebounded by item.
The recent Stability Committee meeting proposed greater counter-cyclical adjustments. The Ministry of Finance issued a 1 trillion new special debt limit ahead of schedule, reflecting the policy measures to support the economy, and the dawn of economic stability has now arrived!
Second, prices: fight against rising and fall 1) pig prices continue to fall.
Last week pork prices fell by 8 from the previous month.
6%, a sharp decline in two consecutive weeks, the price of eggs and poultry also fell, and the overall price of food fell by 3%.
2) CPI surged and fell.
Since November, pig prices have risen first and then decreased until the current November price of edible agricultural products increased by the Ministry of Commerce.
8%, CPI food prices are expected to increase 2% in November, CPI rose to 4 in November.
5%.
However, due to the decline in pig prices in recent weeks, the CPI is expected to replace 3 in 12 months.
9%.
3) PPI decline narrowed.
Since November, coal prices have fallen, steel prices have rebounded, and oil prices have risen slightly.
Eventually, the port futures raw materials price increased by 0 in November.
1%, PPI is expected to rise 0 in November.
1%, the decline in PPI in November narrowed to 1.
3%, the decline in PPI in December is expected to continue to narrow to zero.
1%.
4) Inflation surged and fell.Since entering November, pig prices have dropped significantly after the surge, indicating that CPI is expected to decline significantly in December.
In general, the prices of industrial products in November and December continued to rise month-on-month, and with the low base effect of the same period last year, the decline in PPI continued to shrink significantly.
3. Liquidity: Currency remains stable 1) Monetary interest rates have picked up.
Currency interest rates picked up last week, with the average R007 rising 11bp to 2.
77%, R001 mean uplink 10bp to 2.
3%.
DR007 uplink 6bp to 2.
55%, DR001 upstream 9bp to 2.
twenty three%.
2) Anniversary withdraw currency.
Last week, the operation of the open market was temporarily suspended. The reverse repurchase expired and withdrew 300 billion yuan. This foreign deposit was due to withdraw 60 billion yuan, a total of 360 billion yuan.
3) The exchange rate remains stable.
The US dollar index was flat last week, the exchange rate of RMB against the US dollar remained stable, and the average value of onshore and offshore RMB stabilized at 7.
.
03 or so.
4) The currency remains stable.
Financial institutions exceeded interest rates in September 1.
8%, down by 0 from June.
2%.
In October, the reserve assets of financial institutions decreased by 800 billion yuan. We estimate that the over-reserve ratio of financial institutions dropped to 1 in October.
5%, at a low level this year.
The long-term growth since November has been basically balanced, meaning that the over-reserve ratio is still low.
Therefore, although the previous budget slightly reduced the reverse repurchase bidding interest rate by 5bp, the main purpose should be to prevent rising interest rates from hurting the economy by mistake, while expanding and maintaining austerity balance, which means that the overall monetary policy is still sound.
4. Policy: New special debts are issued 1).
The Ministry of Finance recently issued a limit of 1 trillion U.S. dollars on some new special debts in 2020, accounting for the new special debt liabilities for the year 20192.
15 trillion 47%.
Various localities will implement the special bond quota as soon as possible to specific projects, and do a good job of issuing and using special bonds, early issuance and early use, to ensure that the use can be effective early next year, ensure the formation of physical workload, and an effective economic pull as soon as possible.
2) State-owned enterprise supervision reform.
The State-owned Assets Supervision and Administration Commission (SASAC) has officially issued the “Implementation Opinions on Substantive Progress with the Goal of Managing Capital and Gradually Changing Asset Management Supervision Transformation” from key measures, main paths, support and guarantee dimensions to the basis of “capital management”.The work system for gradually transforming asset supervision.
This means that the reform of state-owned assets supervision is entering a new stage.
3) Consumption tax reform is imminent.
China Business News reporter learned that the draft consultation draft of the consumption tax law is proposed to be published before the end of the year.
In the new round of fiscal and taxation system reform, consumption tax has always been the highlight of tax system reform, which has consolidated the institutional foundation for consumption tax legislation.
V. Overseas: The US’s GDP rose to 2 in the third quarter.
1%.
On Wednesday, the U.S. Department of Commerce announced that the annualized rate of real GDP in the third quarter was revised up to 2.
1%, higher than the initial value of 1.
9%, and slightly higher than the second quarter growth rate2.
0%.
In the breakdown, consumption remains stable, but business investment remains weak.
2) The Federal Reserve issues the Beige Book of Economics.
On Wednesday, the Federal Reserve ‘s economic Beige Book showed that the U.S. economy grew moderately from October to mid-November, consumption was stable, manufacturing slightly improved, overall employment remained tight, and pressure gradually increased, or the Fed would not change the current interest ratePolicy position.
3) The core PCE in the United States was slightly affiliated in October.
On Wednesday, the United States announced that PCE increased 武汉夜生活网 by 1 in October.
3%, unchanged from the previous value, the core PCE has increased by 1 for many years.
6%, earlier value was 0.
1 average.
In addition, the US consumer personal spending rose by 0 in October from the previous month.
3%, higher than the previous value, but personal income increased zero from the previous month, less than the previous value and expectations.
4) The CPI in the Eurozone rebounded slightly in November.
On Friday, the Eurozone ‘s Eurozone CPI preliminary value released in November increased by 1 year-on-year in November.
0%, higher than expected 0.
9% and previous value of 0.
7%; the initial value of the core reconciliation CPI is two years.
3%, higher than expected 1.
2%, and continued to rise for 3 consecutive months.