The key question at the moment isIt is necessary to have a general environment for innovation and entrepreneurship. This environment requires open-mindedness first, followed by the capital market, whether there is real venture capital institutions involved and a reasonable way to exit, and then the corporate governance system. The greatest confidence in economic growth is formed through continuous practice and feedback, and this is not something that can be accomplished with a few slogans.
In 2023, as of December 16, all economic data for January-November have been released. At present, several important economic indicators are concerned, and the cumulative industrial added value from January to November increased by 4 percent year-on-year3%, and the production index of the service industry increased by 8 percent year-on-year0%, the year-on-year GDP growth in 2023 is likely to remain at about 5%, to achieve the expected economic work target, in our last year's economic **, the resilience of exports is much higher than our expectations. The growth rate of exports denominated in RMB is still positive, and the export situation is obviously improving after entering November. In mid-2023, although the total export volume denominated in RMB will remain at about 0%, the pattern has changed greatly, and China's share in the Belt and Road Initiative and Southeast Asian countries is rising. The overall investment from January to November increased by 2 percent year-on-year9%, 2-3 percentage points higher than our last year, mainly because manufacturing investment is very strong. The consumption data was also lower than our expectations, with a cumulative year-on-year increase of 72%, which is about 1-3 percentage points lower than our expectation of 8-10%.
According to the work tone of the ** Economic Work Conference of "seeking progress while maintaining stability, promoting stability with progress, and establishing first and then breaking", the economic growth rate is likely to show an upward trend on the basis of 2023 and remain at about 5%. This target will be expanded again from this year, and the fiscal deficit ratio will be increased to 3.0% this year8%。In 2024, the fiscal deficit ratio is likely to remain at this level. In order to achieve the economic growth target of about 5%, at present, imports and exports are relatively optimistic, infrastructure investment in investment is guaranteed, and consumption has become the key. Under the effect of a low base for two consecutive years, whether the year-on-year growth rate of real estate can stabilize is also very critical. Whether it is 2021, 2022 or 2023, the key to real estate growth is whether the collection of real estate sales is smooth. However, even if the bank adds credit to the real estate in the form of a mortgage, the real estate has no subject matter that can be used as collateral at all. Due to the credit contraction of the economy as a whole brought about by the deep adjustment of real estate**, the growth rate of M2 will continue to be higher than the growth rate of M1 in 2023, and the gap will reach 87 percentage points, the high-energy currencies in the economy continue to decrease, corresponding to the weakness of **assets** and the Hang Seng Index**. Especially in 2023, when the global market as a whole is in the background, the highly liquid assets** in China's capital market will continue to shrink. Since the beginning of this year, the NASDAQ has grown by more than 40%, the Nikkei has grown by about 15%, the China A-share index has grown by about 5%, and the Hang Seng index has grown by about 15%. Judging by the low growth rate of M1, households and businesses are still keen to increase savings. If the economic stimulus package in 2024 is still carried out in the form of issuing consumption vouchers, it will definitely not work, and the consumption voucher model adopted by some cities in 2023 has not changed the trend of weakening M1, and it does not even reflect the appearance of pulse, which is very flat, indicating that this is still a long-term expectation problem in 1-2 years.
When we look back at 2023 and look forward to 2024, we will find that the overall problem is still real estate. The equilibrium of real estate is in the endSince the emergence of real estate debt risks, real estate debt defaults have gradually emerged in the capital market, and the cumulative amount of debt owed by Evergrande has reached 1 trillion yuan. At present, the cash flow of major real estate companies is relatively dry, and the main asset is housing inventory. The current means of regulation and control are mainly reflected in the direction of stimulating demand, reducing the down payment ratio, reducing the mortgage interest rate, recognising the mortgage and not recognising the loan, relaxing the purchase restrictions, since entering October, the real estate purchase restrictions have been relaxed, and in the data of November, the real estate is still a downward trend month-on-month and year-on-year. At present, the overall situation of real estate is more complicated, and there is very little data available in third-tier cities, but from the perspective of Shenzhen data, the overall situation is still relatively severe, and the number of second-hand housing listings is still high. With the second-hand housing market so cold, it may be difficult for the residential sector to be interested in buying new houses or even off-plan properties, and the overall real estate liquidity and sales collection are still at the bottom. So the overall question is the equilibrium of real estateAt present, real estate ** has fallen for nearly 17 months, but the number of second-hand real estate listings is still rising, indicating that the overall supply and demand relationship has undergone fundamental changes. At present, the sale of major shareholders and second-hand real estate is selling, and this impulse pressure has put China's overall assets under huge pressure to reduce prices. There is a great deal of uncertainty as to whether these sellers will put liquidity into the productive sector after selling the asset. These assets will definitely not be reflected as a driving force for consumption. If long-term expectations are not good, and no more investment is made in production, then the overall credit cycle will be broken. If we take the second-hand housing to be sold and ** as the core growth point of the economy, the current overall market for this data is still relatively rich in information, several key cities of the data is more perfect, observe these data, the next 6 months in the real estate ** should continue to be under huge downward pressure. Buying a house is a long-term borrowing behavior, and if the economy is not expected to be good for the future, then even if the real estate ** falls, it will not increase the willingness to buy. If real estate continues to fall at a moving average, but still cannot reach the time node when residents choose to enter the market, it will be a very pessimistic expectation. From the perspective of regulatory policies, reducing the down payment ratio, interest rates, and relaxing the purchase restriction policy will not play a stimulating role, in contrast, it may be a better choice to open up the market's volatility.
There may be a critical point in real estate, that is, the house that the previous home buyer is willing to continue to repay the mortgage p0,This is also the reason why the regulatory department is reluctant to let go of **. Before there is no risk in real estate, any price reduction of a real estate will cause the rights protection behavior of buyers in the early stage, which often becomes the focus of attention. Now that the real estate has fallen sharply, in fact, there are consumers who are defending their rights, but their demands are far overwhelmed by the demands of guaranteeing the delivery of the building, but we cannot ignore this aspect. When the real estate reaches a state of P0, the existing real estate is less than the loan repayable, then whether the buyer is willing to continue to repay the loan has become a new problem. In the case of China, it may not be easy to give up on repaying the loan, but there will be a huge amount of pressure. This P0's **in**, we can simply calculate: if the down payment is 40%, the first ** price falls below 6% off, and this node will definitely be triggered. At present, the overall market is about 80% off, and this node has not been triggered on a large scale, but the second-hand housing is about to arrive, which may be the place where the second-hand housing continues to sell pressure. For 2024, we believe that real estate** will continue to fall for 6 months, and in terms of moving averages, it will fall by about 7%, which is still a certain distance from triggering P0. However, from the purchase side, this kind of ** still can't stimulate everyone's desire to buy a house. At present, residents are very cautious about long-term loans.
There are several questions around real estate:
1) In 2024, the overall regulation policy will not lead to large-scale financial purchases of real estate. At present, it is not possible to save real estate through bank blood transfusions**.
2) After macroeconomic control, what is the long-term confidence of resident enterprises?
3) Can the Fed's pace of interest rate cuts starting next year help us stabilize financial assets to a certain extent**.
First: ** forward-looking indicators
* The tone of fiscal and monetary policy given by the Economic Work Conference is still that of active fiscal and prudent money, which has been maintained for three years.
Looking back, the Ministry of Finance has been very active in the implementation of policies such as special bonds, special refinancing bonds, debt packages, and supplementary budgets for the year, and the overall toolbox is getting bigger and bigger. Indeed, there has been no evasion of debts. Overall fiscal policy has two broad objectives:1) Infrastructure growth;2) Maintain a tight balance of local fiscal expenditures. In the state of tight balance of local ** expenditure, the annual funds payable are very high, and in the past three years, it is already stretched to deal with accounts payable, which requires the fiscal policy toolbox to continue to expand. In 2024, whether the fiscal policy will still have the capacity to support the real estate industry while maintaining a tight balance of local debt may require the policy toolbox to develop new tools. If special treasury bonds are issued in the name of *** to purchase real estate assets, then back to the very beginning of the problem, the equilibrium point of real estate ** is very important. If it is too early and does not return to the equilibrium point, then the overall fiscal situation is all reflected in the fixed assets of real estate. However, the fiscal situation is not cost-free, and once all of them are converted into fixed assets, it will still increase the pressure on liquidity this year, and the overall deficit level will increase.
In the past three years, monetary policy has mainly been reflected in liquidity support, mainly interbank liquidity. Judging from the actual data, the growth rate of M2 is still very high. Interbank liquidity is not particularly scarce, mainly due to the weak demand for credit. The process of monetary policy to the real economy through interbank delivery is too long. In terms of the monetary control policy of the United States, the United States adjusts the monetary liquidity in the overall market by adjusting the interest rate of the entire economy, which is transmitted to the bond market, so as to achieve control of the yield curve. China is also the path of transmission, but the issuance of corporate bonds and corporate bonds is decreasing significantly, even if there is capital, there is no demand side, and it is difficult to achieve the effect of interest rate stimulus only lowering the financing interest rate. This may be a bigger problem than in the United States, which means that China's financial marketization is in place. At present, China is still based on indirect financing, supplemented by direct financing. This year, the performance of Hang Seng and the domestic capital market is weak, the path to listing and financing in the United States has also been cut off, and the policy transmission path to IPO financing through interest rates has also been blocked.
As we look ahead to 2024,The key anchor of fiscal and monetary policy should be real estate**。The Economic Work Conference is to express the monetary policy objectives in this way: "the amount of money is consistent with economic growth and the expected target", and the expectations are incorporated into the framework of the entire monetary policy. When real estate is expected to continue, there will be no one to leverage the asset, and it will be transmitted to the economy as a whole through the real estate debt problem, leading to a contraction of credit. In such an environment, it is difficult for the CPI system to stabilize and rebound. Without an overall environment, debt liquidity for fiscal policy is quite difficult. We need to consider what kind of indicators can be used as forward-looking indicators for expectations. The resident savings survey released by the central bank is quarterly data, which contains statements about residents' expectations for real estate, which has a certain reference value, but the time period is too long. Implied expected targets in China's financial markets, such as pork, etc.
Second: the emancipation of the mind
Under the loose macro-control policy, we assume that by June next year, the debt problem related to real estate can be alleviated to a certain extent, and the whole society is facing a process of re-expansion of production, and needs to find some new products and new directions. ** The economic work conference for next year's economy has arranged the technical work in the industry, and the new products created by scientific and technological progress are the most inspiring. **The economic work conference covered artificial intelligence, new energy, new infrastructure, etc. Factors other than technology are institutional factors. At present, the academic community is discussing the development of the private economy very actively, whether to put the early documents in place, a great breakthrough in the governance of China's corporate property rights, and effectively implement the modern corporate governance system of independent directors, shareholders' meetings, legal representatives, and senior management teams. These issues require a theoretical breakthrough at the Third Plenum. The Third Plenum is expected to be held in the second half of 2024.
Institutional factors are followed by whether the wealth effect of residents has improved。The reason for the weakness of China's capital market in 2023 is mainly due to the contraction of credit in the economy, and the precondition for the recovery of the capital market is the emergence of a complete set of debt resolution. Standing at this historical juncture, we may have to think about some more long-term issues. In the next five years, China's GDP growth rate will remain in the range of 4-5%, of which there is no pressure to maintain 5% in 2024, so it is difficult to maintain a 5% growth rate in the next step, and there is a lot of work to be done. The most important thing is to emancipate the mind. We need to review the efforts made to build a market economy since the reform and opening up, so as to stimulate everyone's ability to act. An intuitive feeling is that in the current surging wave of artificial intelligence, there is always a list of Chinese names in the list of founders of every famous company. At present, the key issue is to have an environment for innovation and entrepreneurship. This environment requires open-mindedness first, followed by the capital market, whether there is real venture capital institutions involved and a reasonable way to exit, and then the corporate governance system. The greatest confidence in economic growth is formed through continuous practice and feedback, and this is not something that can be accomplished with a few slogans. It can be difficult for a group of tired young people to boost the confidence of society as a whole.
Young people should not be in the anxiety of education and age, and young people should be a process of constantly pursuing and understanding the market. Taking financial enterprises as an example, in just a few years, urban investment companies have borrowed 60 trillion debts, which are the future of upstream and downstream young financial service providers. This is a core part of long-term economic growth. If we can maintain the same technological progress as the United States, then we can support economic growth by at least two percentage points, and the remaining two percentage points are the advantages of institutional transformation, then there is considerable confidence that we can maintain a long-term economic growth rate of 4% in the future.
Third: the Fed's dove-free
At the FOMC just held, the core issue of Powell's discussion with reporters was when to cut interest rates and the judgment of the rate cut node. After three consecutive rate cuts, the Fed's press releases and market expectations have completely changed. At the press conference, there were several questions:
1) The reporter asked how to view the risk of recession in the future and the risk of inflation continuing, Powell believes that this risk is balanced, that is, at this point today, he has advanced the risk of recession. Explained that Powell will consider the progress of the economy as a whole, pointing to the prospect of interest rate cutsThat is, the precursor to a possible recession, which would not have given such forward-looking signals at previous press conferences.
2) When asked by the reporter about his views on stickiness, Powell expressed some concern, especially that the core PCE is still at a high level, but he is more confident that the economy has not yet reflected the later impact of higher interest rates, which means that he believes that stickiness is not a big problem. After the press conference, market institutions discussed when and how much the Fed will cut interest rates next year, and on the whole, the second quarter of next year is the earliest node for the Fed to start cutting interest rates next year, and then the 75bp cut for the whole year is a median level of expectations.
After this interest rate cut signal, the global capital market moved, the dollar index fell sharply, the Dow Jones and Nasdaq hit new highs, and the global capital market basically followed the upward trend. The release of US dollar liquidity is relatively good news for the global capital market next year, which is beneficial to China's capital market, especially the appreciation of the renminbi has given considerable room for monetary and fiscal policies.
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