Author: Tan Yaling, Independent Economist of China Foreign Exchange Investment Research Institute
At the end of the year and the beginning of the year, there was a strange argument in the market, one of which was that China's economy was improving and the growth rate was raisedThe second is the strength of the U.S. economy and the strengthening of the Federal Reserve's interest rate cuts. Whether these two situations are completely different from the facts are natural phenomena or deliberately hyped and inflammatory by man, it is worth guarding against, and future risk assessment will be a critical period for identifying the true and false.
On the one hand, there is external speculation that China's economy is strategic, and it is worth being vigilant against interference. In 2023, China's economy will be extremely complex and difficult, and various internal and external situations will have a significant impact on China's economy and checks and balances. As stated at the China's ** Economic Work Conference in December 2023, in 2023, China needs to overcome some difficulties and challenges to further promote the economic recovery, mainly due to insufficient effective demand, overcapacity in some industries, weak social expectations, and still many risks and hidden dangers. We need to enhance our sense of distress and effectively deal with and resolve these problems. On the whole, the favorable conditions facing China's development are stronger than the unfavorable factors, the basic trend of economic rebound and long-term improvement has not changed, and confidence and confidence should be strengthened in the future, and China's foreign trade status has not changed and downgraded. However, in 2023, China's economic pressure and bad performance have not fundamentally improved, but foreign investors are optimistic about China's economic extreme, upward to 2023 is expected to be more than 5% is generally strong, including the IMF, some foreign investment banks generally raised China's economic growth, but the actual reality is that the outflow of foreign capital is obvious, China's A shares fell below 3000 points twice to break the barrier, this asymmetrical rhetoric expectations and the implementation of measures make people puzzled whether China's economy is good or unfavorableThis situation is contrary to the good performance of China's economy, and there is a risk of speculation or layout, which is worthy of vigilance. Therefore, in 2024, China's economy will still face a severe, complex and uncertain external situation, and China will make it more clear that in 2024, it will adhere to the principle of seeking progress while maintaining stability, promoting stability with progress, establishing first and then breaking down, and more policies that are conducive to stabilizing expectations, stabilizing growth and stabilizing employment. In particular, it is necessary to strengthen the counter-cyclical and cross-cyclical adjustment of macroeconomic policies, continue to implement a proactive fiscal policy and a prudent monetary policy, and especially strengthen the innovation and coordination of policy tools. In fact, the rhythm and logic of China's economy are facing a bad situation in 2023 and a good situation in 2024, but foreign capital is generally expected to be contrary to China's form reality, that is, optimistic about raising economic expectations in 2023 and not optimistic about lowering economic expectations in 2024. Compared with China's national conditions, the economic recovery in 2023 is not yet normal, and it is expected that the gradual recovery in 2024 may have a favorable trend, especially as the finale of the 14th Five-Year Plan. We should be vigilant and think about the current first-class benchmarking interference and emotional mobilization methods, which may need to be vigilant against the inappropriate or exacerbated risks of China's economic judgment, and the subjective rationality of national conditions is the key to controlling risks, and the reference of foreign capital needs to be rational and vigilant.
On the other hand, overseas, the Fed has cut interest rates, hyped out of balance, and there are strategic risks in the economy. Looking back at the pace and magnitude of the Fed's interest rate hikes in 2022-2023, the US economy has not damaged the US economic prosperity, and the US economy has been growing with the Fed's interest rate hikes for two years, telling the market that the Fed's interest rate hikes will not damage the economy, because the structure and logic of the new US economy are elusive and have no parameters, which is the reason and background for the current market to speculate on the Fed's interest rate cuts. In particular, the international oil market has stimulated inflation to fall back and ease the illusion, the prerogative of the United States operation lies in the dollar factor, and the truth is that the United States' wages, housing and services are still the same, and the market is completely worried about the fact that the emotional speculation of the Fed's interest rate cut is completely disregarded. However, market expectations have fueled the turmoil to an unprecedented degree, and even some international investment banks have participated in increasing the Fed's interest rate cut of 100-150 points in 2024. Including the U.S. federal interest rate**, the market is betting on the Fed's interest rate cut prospects, and the probability of a 25 basis point rate cut in March 2024 is expected to remain above 70%, and the room for interest rate cuts for the whole year is expected to be more than 150 basis points. In comparison, this is similar to the market speculation of the US recession in 2022**, the market hype of the US recession even reached 75%, and in the end, the US economy not only did not have a recession, but on the contrary, the strong economic growth is becoming more and more obviousIn fact, at present, the general inflation in the United States is higher than the 2% monetary policy benchmark defined by the Federal Reserve, and the core inflation PCE and even the special core inflation PCE have more reform planning and the possibility of adjusting the parameters at any time in the future. At present, the market and policy difficulties are: the international oil ** controlled by the US dollar is still sluggish, and then forms a decline in inflation, in which the United States is obviously in opposition to the OPEC production reduction plan, the US oil production increase has set a historical record, coupled with the US Energy Administration's plan to increase the increase in oil purchases, the maximization and minimization of US interests is the possibility of international oil ** ultra-low or brewing rapid ** or even skyrocketing. It is only a matter of time before the general CPI** and core inflation PCE rise in the United States, and the essence of inflation in the United States is still in the form of high inflation. The Federal Reserve's interest rate hike is the biggest risk to the market in the future, which is the driving force and driving force of monetary tightening in developed countries, and the cost of capital in emerging markets is the core parameter of the US interest rate position, and the cost of capital in emerging markets is the core parameter. The U.S. interest rate and exchange rate strategy is worth being wary of, not simplifying the expectation that the Fed will cut interest rates, but rather giving the Fed further interest rate hikes or providing a better environment and supporting indicators is the weight of global risks, especially emerging market risks will be more severe and the crisis will intensify.
Risk is a buzzword in the current market, but the focus of risk is identification, the market does not have accurate risk identification, especially can not distinguish between true and false facts, risk control has become an illusion, and may even be used to understand and guide, risk is not the best drum to pass the fancy response and prevention of risk, the market does not have risk identification to make risk response and prevention become a kind of emotion to be used or guide risk intentions and purposes.