- 2019-01-25
Exploring the reasons for China's economic optimism
Every year at the end of the year, forecasts and prospects for the economy in the coming year are highly anticipated. However, in recent years, whether it is the global economy or China's domestic economy, black swan incidents have often emerged in an endless stream. The short-term economic fluctuations have become more intense and the effect of policy implementation is difficult to control. The established policies at the beginning of the year have been reversed in the middle of the year. In order to make predictions Increased the difficulty.
Taking 2018 as an example, despite the current domestic and external difficulties in China’s economy, and policy easing, at the beginning of the year, the market was generally very optimistic about the economic prospects of 2018. The expectations of the capital market and the company’s profitability were generally very optimistic. We are optimistic about waiting and support many institutions in raising their expectations for China's economic growth at the beginning of 2018.
Looking back on the past three years, black swan incidents have also occurred one after another, making the forecast at the beginning of the year often differ from the actual economic operation. For example, overseas, Brexit and Trump’s victory in 2016 staged a black swan, which vividly demonstrated the social fragmentation behind the relief of the downward pressure on the economy since the crisis. The strong economic growth in the euro zone in 2017 shocked the world and helped the euro become the best-performing currency that year. In 2018, the European economy performed flat. Trump's tax cuts have given a significant boost to the U.S. economy. The monetary policy trend of developed countries has deviated, and the U.S. has provoked trade wars on a global scale, and international institutions have repeatedly adjusted downwards. Forecasts of global economic and trade conditions.
Looking forward to 2019, the current market's judgment on the domestic economic outlook is generally pessimistic. Questions about the effectiveness of macro policies and anxiety about the risks of trade wars continue to plague domestic investors and business people. But based on the situation in previous years, I believe that market sentiment usually magnifies, and the turning point often occurs when the market is unanimously bearish or bullish. Therefore, in the context of the current market downturn, we might as well look for reasons why China's economy may be better than expected in 2019.
From the perspective of overseas economy, the current US economy is still in a relatively good time. The tax reform has boosted economic growth in the United States, corporate profits have improved significantly, and residents' income has increased, which has boosted consumption. In addition, the current unemployment rate in the United States is also at a historically low level. Of course, the base effect of the U.S. tax cuts in 2019 will disappear. It is expected that the U.S. economy may fall from a high level in 2019, but overall, it will still be at a not low level.
Relatively speaking, the problems in Europe are not economic problems, but mainly political uncertainties. From an economic point of view, the current European economy is still in the expansion range, the unemployment rate has continued to decline, the German fiscal surplus has continued for four years, the profitability of the European banking industry has improved, and the financial situation has remained stable as a whole. Next, if the EU can achieve a smooth transition on matters such as Brexit and the budget debate with Italy, Europe's performance is also worth looking forward to.
Compared with 2018, the volatility of emerging markets in 2019 may be reduced. In fact, in recent years, capital outflows from emerging markets and sharp currency depreciation have a lot to do with the background of the strong appreciation of the U.S. dollar. Looking forward to 2019, if the U.S. economy declines, the Fed’s rate hike is expected to be cautious, even lower than the expected 3-4 times. Under this background, the U.S. dollar is expected to appreciate very limited space. On the contrary, the U.S. dollar will weaken. The situation may happen, which is good for the economies and currencies of emerging market countries.
The risks of trade wars that plague the world are expected to be lessened in 2019 than in 2018. Whether the trade war between China and the United States will continue is the biggest uncertainty affecting the global market, and international organizations have also lowered their forecasts for global economic growth accordingly. However, there have been positive signs recently. The leaders of China and the United States have called on the phone to emphasize the importance of Sino-US economic and trade relations, and China and the United States have restarted trade negotiations. In addition, the recent China International Import Expo, lowering tariffs in various industries such as automobiles, and restoring U.S. soybean imports have created a better atmosphere for the restart of Sino-U.S. trade negotiations. Concerns about the continued escalation of the trade war in 2019 are expected to ease. release.
From the perspective of the domestic economy, since 2018, China's consumption has been weak and investment has declined. However, in this context, the policy turning point has emerged. At the Politburo meeting on October 31, the statement on deleveraging was no longer mentioned. On the contrary, , Governor Yi Gang of the central bank has also stated that leverage has stabilized, and it is expected that the monetary policy will maintain an overall loose trend in the future. In addition, under the background of making up for shortcomings, it is expected that infrastructure investment will accelerate significantly compared with 2018. Of course, the main tone of the real estate market of "housing to live without speculation" has not changed, and it is expected that real estate investment will continue to fall.
In addition, it is expected that the tax reduction measures in 2019 will be significantly increased. On the one hand, it will be reflected in the tax reform. In 2019, more detailed rules will be issued on the five major deductions, which will help the tax reform to increase the tax threshold. In the context of economic and income decline, support for the stability of household consumption. In fact, at the just-concluded "Double Eleven" online shopping festival, online sales on JD.com and Tmall have reached record highs, and JD.com's overseas purchases have grown rapidly, highlighting the current residents' strong demand for high-end consumption. At the same time, in conjunction with the deepening of policies and measures to encourage imports, it is expected that the diversification of consumer products will also help support the improvement of individual consumption.
On the other hand, if larger-scale tax reduction measures can be introduced at the enterprise level and implemented in practice, it may also be an important means to restore the confidence of private enterprises. In fact, in recent years, the topic of insufficient confidence in the private economy has caused widespread concern. In my opinion, the lack of confidence in private enterprises is related to the deterioration of the financing environment and the strained capital chain on the one hand, and on the other hand, it is also related to the deleveraging, de-capacity, and de-leveraging in recent years. Standardization of environmental protection policies and social security policies are inseparable from the obvious negative impact on private enterprises. From the current point of view, the decision-making level has proposed improvement measures on the above issues, which is a positive sign. But it is only the beginning. In the future, strengthening the awareness of rules and focusing on the consistency of policy implementation is the key to regaining the confidence of private enterprises.
The Chinese economy is facing profound internal and external changes. The market is generally very pessimistic about the economic forecast for 2019. However, in the author's opinion, the more unanimously bearish, the more one can expect. There may be room for improvement in the real situation.
On the whole, the biggest risk in 2019 is whether the escalation of the trade war can be eased. If the Sino-US trade negotiations achieve positive results at the end of November, then the benchmark situation in 2019 is that the extent of China’s economic decline is limited. The economic growth rate is likely to be between 6% and 6.5%. However, if China and the United States cannot reach an agreement on trade issues, in 2019, the United States will increase tariffs on US$200 billion in goods from China from 10% to 25%. The blow to China's exports, employment, investment environment, entrepreneur confidence, and industrial chain will be huge, and will obviously drag down China's economic downturn.