In the first three quarters of this year, China's GDP grew by 5% year-on-year2%, the fourth quarter is also coming to an end, and the annual growth rate is expected to exceed 5%. In view of the fact that the real estate data still needs to stabilize and the external demand is still uncertain, efforts are still needed to stabilize economic growth next year.
During the 2023 China-EU Finance and Investment Forum and CLF50 Annual Conference held on December 3, Sheng Songcheng, professor of economics and finance in China and Europe and former director of the Survey and Statistics Department of the Central Bank, said that with the continuous implementation of the steady growth policy and the low base last year, China's main economic indicators will be better than expected in the fourth quarter. "But if the economic growth rate is to reach about 5% next year, there is still work to be done. He believes that next year will still be a proactive fiscal policy, if next year's economic growth reaches about 5%, and the size of the deficit (488 trillion yuan) is the same as this year, and the target deficit rate in 2024 will reach 3Around 6% (about 3 this year.)8%）；Structural monetary policy supports weak links in the economy and promotes high-quality development, which is also in line with the spirit of the first financial work conference. At present, China's policy space for RRR reduction is relatively large.
Sheng Songcheng also believes that the interest rate differential between China and the United States will enter a stable period, and the RMB may maintain a moderate appreciation trend, but the appreciation will be limited.
Fiscal policy still needs to be strengthened under the slow recovery.
The support policies in the fourth quarter boosted market confidence, but the economy is still in the process of bottoming out. Recent high-frequency data shows that it will take time for property sales data to stabilize;China's official manufacturing PMI for November was released on Thursday from 49 in October5% down to 494%, below expectations of 497%；The official non-manufacturing PMI fell to 50 in November2%, down 04 percentage points, falling for two consecutive months, and hitting a new low in the year, but still maintained in the expansion area.
Sheng Songcheng said that the current round of recovery will be relatively slow. One reason is that investment has not yet stabilized. 1 In October, investment in fixed assets increased by 2 percent year-on-year9%, the growth rate decreased by 0 from 1 September2 percentage points. The recovery of consumption has slowed down. In October, China's total retail sales of consumer goods increased by 7% year-on-year6%, 2 percent faster than the previous month1 percentage point, but only 007%。The slowdown in the recovery of consumption can also be seen in prices. The year-on-year growth rate of CPI in October was -02%, -01%。In addition, there is still uncertainty about external demand. In dollar terms, in October this year, China's total exports fell by 6 percent year-on-year4%, a decrease of 02 percentage points.
If the economic growth rate is to reach about 5% next year, efforts are still needed. He believes that the active fiscal policy will continue next year. If the economic growth rate reaches about 5% next year, and the size of the deficit (4.88 trillion yuan) is the same as this year, and the target deficit rate in 2024 will reach 3Around 6%.
The issue of fiscal sustainability is often raised, but in the early years, Sheng Songcheng mentioned that there is no fixed and uniform warning line for the fiscal deficit ratio. The 3% warning line of the 1991 Maastricht Treaty is mainly due to the fact that the fiscal deficit ratios of EU countries are basically the same, but this does not correspond to the actual situation in China. For a long time to come, we can appropriately raise China's fiscal deficit ratio and create conditions for a proactive fiscal policy.
The probability of a RRR cut is greater than that of an interest rate cut.
In terms of monetary policy, the market capital tends to tighten in the fourth quarter, and the increase in bond supply (trillions of government bonds and special refinancing bonds) also increases liquidity pressure. In this context, the call for RRR and interest rate cuts in the market is getting stronger.
However, Sheng Songcheng believes that the probability of a RRR cut is greater than that of an interest rate cut. At present, the excess reserve ratio of China's financial institutions is at a low level, and the RRR cut is more effective in regulating market liquidity. According to the data, the weighted reserve ratio of China's financial institutions is 74%, while interest rates are already at historic lows. At present, the LPR (loan market ** interest rate) has hit a new low since the reform in 2019, which shows that the room for RRR cuts is greater than interest rate cuts.
Most of China's national bonds and local government bonds are purchased by commercial banks. At present, about 64% of China's national bonds are held by commercial banks, and about 86% of local government bonds are held by commercial banks. The RRR cut will increase the funds that commercial banks can use freely, so as to better support the issuance of national and local bonds, which is also the main means for China's monetary policy to cooperate with fiscal policy. ”
In addition, as of the end of September, the net interest margin of China's commercial banks was 173% (1. at the end of the first half.)74%), the lowest since statistics began in 2010;In the first three quarters of this year, commercial banks achieved a cumulative net profit of 19 trillion yuan, a year-on-year increase of 16%, the growth rate fell by 1 from the end of the first half of the year0 percentage points. In September, the weighted average interest rate on corporate loans was 38%, which is at an all-time low. Considering that the interest rate differential between China and the United States is still at a historically high level, this restricts the room for interest rate cuts in China.
In the future, he believes that structural monetary policy will play a key role in supporting weak links in the economy and promoting high-quality development. According to traditional theories and the operation of various countries, monetary policy is basically a tool for aggregate regulation and control, but in China, for a long time, monetary policy has actually mostly coordinated aggregate regulation and structural control. Especially in recent years, China's structural monetary policy tools have been continuously innovated and played an increasingly important role, which is an effective means to support weak links in the economy (such as small and micro enterprises, prevention and resolution of real estate risks, etc.) and key areas (such as scientific and technological innovation, advanced manufacturing, green development, etc.), and promote high-quality economic development.
In fact, structural monetary policy is also a coordination with fiscal policy, because structural adjustment is one of the tasks of fiscal policy. According to the data, at the end of September, the balance of various structural monetary policy instruments totaled 7 trillion yuan, accounting for about 408 trillion yuan) of 172%, an increase of 08 percentage points, an increase of 1 from the end of last year7 percentage points.
The RMB appreciated moderately as interest rate differentials between China and the United States stabilized.
As the Fed's interest rate hikes come to an end, and the market's expectations for China's stimulus policy are still high, the RMB has been appreciating recently, accumulating nearly 2,000 basis points from the weakest level in the previous two months.
Sheng Songcheng believes that the interest rate differential between China and the United States will enter a stable period, but China's monetary policy needs to consider the internal and external balance (the current interest rate differential between China and the United States is still nearly 200 basis points), which is one of the reasons why China is more cautious in cutting interest rates. In the future, the interest rate differential between China and the United States and its change trend is one of the important factors determining the exchange rate, so the RMB may maintain a moderate appreciation trend, but the appreciation is limited.
In his view, the Fed does not have a basis for cutting interest rates in the short term. On the one hand, inflation in the United States, even if it has declined, is still well above the Fed's 2% target. On November 30, the latest data from the U.S. Department of Commerce showed that the core PCE price index, which excludes food and energy, grew year-on-year in October from 3.0% in September7% fell back to 35%；On the other hand, the current US economy is still relatively strong, the job market is tight, and there is no need to cut interest rates.
Expectations for interest rate cuts have been rising recently. Christopher Waller, one of the Fed's governors, voting committee members, and hawkish representatives, mentioned this week that the current level of interest rates is enough to return inflation to the target level of 2%, and said that if the data continues to decline in the next 3 to 5 months, he will consider cutting interest rates, regardless of whether the economy is in recession or slowdown. As soon as the remarks came out, the interest rate market bet that there will be about 110bp, or up to 5 rate cuts, this is the most aggressive since SeptemberHowever, just on Friday, Fed Chairman Jerome Powell dismissed speculation of a rate cut in a speech at Spelman College in Atlanta. "It's too early to conclude that we've achieved enough restrictive stance, or to speculate on when policy might be eased," he said. ”
Powell added: "If the timing is right, we are prepared to tighten policy further. However, he also pointed out that monetary policy has entered restrictive territory.
Sheng Songcheng mentioned: "At least until the first quarter of next year, the Fed will not cut interest rates, and the rate cut may even be in the second half of the year, of course, the Fed will still rely on the latest economic data camera decision." ”