Economic Observer reporter Ouyang Xiaohong
One. 2023 is about to pass, and everything from macro policies to micro markets is quietly changing.
The ** Politburo meeting held on December 8 pointed out that next year, it is necessary to adhere to the principle of seeking progress while maintaining stability, promoting stability with progress, establishing first and then breaking down, strengthening counter-cyclical and cross-cyclical adjustment of macro policies, and continuing to implement a proactive fiscal policy and a prudent monetary policy. The meeting emphasized that "the active fiscal policy should be moderately strengthened, improve quality and efficiency, and the prudent monetary policy should be flexible, moderate, precise and effective".
The expressions of "promoting stability" and "establishing first and then breaking" are understood by the market as development is the first priority, and it is necessary to grasp the order of "progress" and "stability" and "establishment" and "breaking". The meeting emphasized "effectively enhancing economic vitality, preventing and resolving risks, improving social expectations, consolidating and enhancing the positive trend of economic recovery, and continuing to promote the economy to achieve qualitative and effective improvement and reasonable quantitative growth". This meeting is often seen as a bellwether for economic meetings, providing forward-looking guidance on policy direction in 2024.
The challenge is that residents' economic life still seems to be engulfed by "economic inertia": the CPI (Consumer Consumption ** Index) data for November showed that prices weakened again.
The micro reality is that residents' income expectations are facing uncertainty, and spending tends to be budget-conscious. Comparing the gap between the cost of living of residents at home and abroad, it will be found that in terms of clothing, food, housing and transportation in the middle of the positioning, in addition to "clothing", the domestic ** is far lower than that of foreign countries, and the service and convenience of life are far beyond those of foreign countries. The subtext behind this may be that foreign countries are facing the difficulty of inflation, and there are hidden concerns about deflation at home.
According to the analysis of the Galaxy** research report, the downstream demand is not optimistic, and the downward pressure on prices has increased. The CPI fell 05%, and the core CPI increased by 06%,* mainly driven by food, oil prices, and travel-related services**, due to the combined effect of seasonal factors, weather, and international oil prices. The PPI (Industrial Producers' Producers** Index) fell 3% year-on-year in November0%, mainly driven by international oil prices and weak demand for some industrial products, and oil prices drove PPI down 013%。
Lu Ting, chief economist of Nomura** China, said that the further year-on-year decline in CPI was due to the sharp decline in the overall month-on-month decline, and the CPI month-on-month index in November fell from -0 in October2% down to -05%。"Inflation data suggests that the economy remained weak in November, with another downturn after a brief stabilisation at the end of the third quarter, and it is too early to call the economy bottomed. ”
Lu Ting expects that China may significantly adjust its policy measures sometime in the spring of 2024, with the goal of directly supporting the delivery of pre-sold but unfinished homes (guaranteed delivery). Looking ahead, CPI is expected to be modest** in December, up 03%, and then it will fall again in January next year, which is mainly caused by the difference in the dates of the Spring Festival holidays in 2023 and 2024.
The research report of the Galaxy ** believes that the downstream does not accept the upward movement of commodities, and the ** of household appliances, means of transportation, and communication tools will fall even if they rise in the early stage. This is also the case in the service category, where price increases are not sustainable. Lower energy** throughout the year also made imported inflation weaker. In addition, after the upward trend of PPI in the third quarter was broken in October, it still failed to reverse the upward trend in November, and the year-on-year decline expanded for two consecutive months, indicating that the PPI has insufficient upward momentum at this stage.
"Economic inertia" refers to the relatively "stable" state of the economy in a certain period of time, reflecting the inertia or inertial force in the operation of the economy, thus forming path dependence. Economic inertia can have a profound impact on financial logic, market behavior, etc.
For residents, the current situation is a matter of Xi inertia and careful calculation. A nail salon located in the bustling business district of Chaoyang District, Beijing*** obviously feels that the business volume and customer consumption grade are declining recently. She said: "Most of today's customers just choose ordinary models to meet their basic needs, and no longer focus on upgrading nail products. ”
Financial logic refers to the operating rules and principles of various financial products and transactions in the financial market, including the supply and demand relationship of the financial market, the formation mechanism, investment decision-making, capital flow, etc.
Two. The financial logic changed by economic inertia is like a falling sharp knife, pointing to market expectations and behavior. It is manifested in the form of lack of confidence, unstable expectations, and conservative consumption concepts.
In terms of return on investment, 2023 is a bad year in the eyes of professional investment institutions. When there is no bottom to copy, there are still people who choose the opportunity to enter the market. BlackRock Management*** The latest BlackRock Eversheds 30-day Holding Bond Investment** has been available for public sale from December 4, 2023. Liu Yang, chairman of the board of directors of Xijing Investment Management Co., Ltd., said that he has started again, and his goal is to start a new AI track, digital infrastructure and other fields.
At the same time, in the era of AI intelligence, the unrealistic assumptions in traditional analysis frameworks are increasingly abandoned, because in order to discover the truth of things from massive data, it is necessary to discover the correlation between different things in order to explain the operation laws of the real world.
What is really happening in the real world under the influence of economic inertia? Focusing on the domestic market, it is worth paying attention to the changes in housing prices and the issue of "guaranteed delivery". The real estate problem can be described as the hard bone of financial prevention and risk resolution. Perhaps the real concern is not the "housing sales" in the first- and second-tier cities, but the "guaranteed delivery" in the third- and fourth-tier cities, but this requires in-depth first-tier research and detailed data to gain insight.
Since November 2022, real estate support policies have been introduced one after another, including requiring the financial system to provide financial support to real estate enterprises and loose loan support to home buyers, as well as holding seminars for real estate enterprises. However, the property market has had little effect, and sales in the real estate market are still declining. According to the latest report of CRIC Research Center, the TOP100 (top 100) real estate companies achieved sales of 3,901 in November900 million yuan, down 41%, down 296%, the year-on-year decline remains high. Judging from the cumulative performance from January to November, the top 100 real estate companies achieved sales of 49,536500 million yuan, down 14 percent year-on-year4%, the cumulative decline in performance during the year continued to expand. Limited by the low operation and repair of market sales, the willingness of real estate companies to invest has not improved.
A senior expert**, the start-up capital for revitalizing the "guaranteed delivery building" is about 3 trillion yuan to 4 trillion yuan. He believes that only when the financial gap of "guaranteed delivery of buildings" is clarified and an official professional disposal agency is established, it will be the time for consumers to regain confidence in buying houses.
As Wu Ge, chief economist of the Yangtze River, said, "It is still stretched to make up for the funding gap of the guaranteed delivery building only by relying on the sales proceeds." The progress of ensuring the delivery of the property, in turn, affects the confidence of home buyers. ”
According to the China Regional Financial Operation Report (2023), in 2022, the People's Bank of China launched a special loan of 350 billion yuan for guaranteed delivery of buildings, and set up a 200 billion yuan loan support plan for guaranteed delivery of buildings to guide commercial banks to provide supporting financing support to meet the reasonable financing needs of the industry.
Wu Ge believes that learning from the experience of countries such as Japan, maintaining the relative stability of real estate during the period of potential economic growth is crucial to economic transformation. Whether it is old kinetic energy such as infrastructure construction or new kinetic energy such as high-end manufacturing, it seems that it is difficult to replace the people's yearning for a better life in "clothing, food, housing and transportation" in the short term.
On November 28, 2023, Pan Gongsheng, Secretary of the Party Committee and Governor of the People's Bank of China, said at a high-level meeting jointly organized by the Hong Kong Monetary Authority and the Bank for International Settlements that China's economy continues to recover and the overall recovery trend is more obvious, and it is expected to successfully achieve the economic growth target of 5% for the whole year.
Pan Gongsheng said that the current Chinese real estate market has entered a period of transition, and it has indeed encountered some fluctuations, first, the demand for new homes is declining; Second, the real estate market is divided between cities; Third, the pace of urbanization continues, and the demand for rental is increasing from new homes to second-hand homes. In Pan Gongsheng's view, in the long run, the adjustment of the real estate market is conducive to China's economic growth and sustainable development, but in the short term, spillover risks should be prevented.
It can be seen that it is necessary to highly guard against the spillover effects and negative feedback of economic inertia caused by the adjustment of the traditional economic model, such as the adjustment of the real estate market, which may overwhelm the economic operation and household consumption. In the case that the construction of the new development model has not yet been perfected, the phenomenon that should not be underestimated is that the consistency between economic recovery and the recovery of the real estate industry is high.
In this context, the literal understanding of "first establish and then break", in addition to the development of debt and reform, may also mean that when the new economic growth model has not yet become a climate, the traditional growth model that has been overly dependent on infrastructure and real estate investment in the past cannot be broken, and must be "broken" when the high-quality economic growth model is established.
This is not just a matter of "technology", but also a directional choice of the "way" of economic repair.
Three. So, why "first establish and then break"? The top priority is to identify the pain points and symptomatic medications, and to break the policy to stabilize the bottom.
* The Politburo meeting proposed to "intensify macroeconomic regulation and control". Wen Bin, chief economist of Minsheng Bank, said that this is consistent with the proposal of "increasing macro policy regulation and control" at the Politburo meeting on July 24; It is required to "strengthen counter-cyclical and cross-cyclical adjustment", which is consistent with the "more attention to cross-cyclical and counter-cyclical adjustment" of the ** financial work conference.
Wen Bin analysis, compared with the "counter-cyclical adjustment" that mainly focuses on ironing out short-term economic fluctuations, "cross-cyclical adjustment" obviously has more long-term and comprehensive considerations, it needs to take into account multiple economic cycles, mainly focusing on the long-term healthy operation and stable growth of the economy, and strive to resolve long-term problems such as industrial structure adjustment, population aging, and systemic risks, so it will inevitably involve the correlation and cooperation between various policy tools. Therefore, the meeting also emphasized that "it is necessary to enhance the consistency of macroeconomic policy orientation, strengthen economic propaganda and guidance".
In Wen Bin's view, "precise and effective" means that monetary policy will continue to increase support for major strategies, key areas and weak links such as scientific and technological innovation, advanced manufacturing, green development and small and medium-sized enterprises.
For example, the current monetary policy should be understood in the context of "different cross-cyclical and counter-cyclical", emphasizing the forward-looking, continuity and stability of macroeconomic policies.
It goes without saying that there has been a breakthrough in the current macroeconomic policy thinking, such as the fiscal deficit rate of 3% will undoubtedly bring more room for fiscal stimulus.
In terms of risk resolution, the Politburo meeting proposed that "we must continue to effectively prevent and resolve risks in key areas, and resolutely adhere to the bottom line of no systemic risks". Wen Bin believes that compared with the expression of "effectively preventing and resolving major economic and financial risks" at last year's meeting, one is to emphasize "continuity", and the other is to emphasize "key areas".
Obviously, as mentioned above, the real estate problem is the hard bone of financial prevention and risk resolution. What does this mean for the real estate industry, which is looking for a new balance?
If the problem of "guaranteed delivery" in third- and fourth-tier cities related to people's livelihood is an important pain point in China's real estate market, then the first thing that needs to be done is to seek truth from facts, go deep into the front line to collect data, find out the pulse, and then coordinate and integrate financial resources to support it.
Xu Gao, chief economist of Bank of China International, analyzed that in the past three years, while China's automobile industry has made historic breakthroughs, China's economic prosperity has weakened. Among them, the real estate industry, which has fallen into a vicious circle due to the tightening of financing policies, is the main source of downward pressure on the economy. This shows that although China has "established" quite well in cultivating new growth points, it is still difficult to make up for the gap left by the excessive "breaking" of the traditional growth engine. If the policy cannot be more prudent in "breaking", the effect of "establishment" will be greatly reduced.
Another "establishment" that is supported by this is that under the construction of a new development pattern in high-quality development, China's export products have gradually formed the "new three major pieces" based on high-tech content and high value-added new energy, new energy vehicles and electronic products, replacing the "old three major pieces" represented by textiles with low added value in the past.
From the "old three major pieces" to the "new three major pieces", it is not only export products that have been established, but also the transformation and upgrading of the economic structure. However, the premise is to stabilize the traditional growth engine and maintain the fundamentals of China's economy; Stabilizing people's livelihood is the foundation of economic development.
Xu Gao believes that the transformation of the economic structure is not an overnight effort, let alone an overnight achievement. Blindly "breaking" without looking at the actual situation will not only make it difficult to promote the transformation of the economic structure, but will put pressure on growth and bring risks to the economy.
Wen Bin noted that the Politburo meeting mentioned three aspects of social work: "We must make unremitting efforts to do a good job in the 'three rural' work, and promote urban-rural integration and regional coordinated development." It is necessary to further promote the construction of ecological civilization and green and low-carbon development, and accelerate the construction of a beautiful China. We must persist in doing our best and doing what we can to effectively protect and improve people's livelihood. ”
Wen Bin said that these tasks were not mentioned at last year's meeting, reflecting the importance that the top level attaches to issues such as urban and rural, regional, green, and people's livelihood, with the aim of "improving people's livelihood and well-being and maintaining social stability."
The macro background is Chinese-style modernization, and the internal demand for high-quality development cannot be ignored. Among them, the issue of "guaranteeing the delivery of buildings" related to people's livelihood, the issue of the money-making effect of A-shares related to "money bags", and the rare negative growth of CPI should not be underestimated.
On December 11, the three major A-share indexes opened low and dived, and northbound funds once sold 10 billion, but collectively rose in the afternoon. The Shanghai Composite Index closed at 299144，**0.74%；The Shenzhen Component Index closed at 963261，**0.82%；GEM index closed at 191574，**1.25%。
The expectations and behaviour of market participants, already affected by economic inertia, reflect the new challenges we are facing: how to stop the decline and stabilize assets**, how to prevent the risk of deflation, and how to prevent long-term negative export growth.