Depth report

　　

2018 is a relatively difficult year for the Chinese economy. The superposition of many internal and external unfavorable factors has led to increased downward pressure on the economy and lack of confidence. The current market is generally pessimistic about China's economic situation in 2019. The author also believes that the continued downward trend of China’s economy in the short term will not change, and that China’s economy will still face difficulties in the first half of 2019; how to deal with the downward pressure on the economy, how China-US economic and trade relations will be deduced, and what will be the effects of active policies? The evolution of issues such as whether the real estate policy is relaxed will be crucial to China's economy in 2019.

Conjecture 1: Can the Sino-US trade truce agreement be reached?

    How China-US economic and trade relations evolve is an important risk that currently affects the global and Chinese economy. Although the Sino-US trade relationship was very tense in 2018, at the end of November last year, the leaders of the two countries agreed to a temporary truce and promote trade negotiations at the G20 summit, which temporarily eased the trade war and brought hope for risk mitigation.

    Looking ahead to 2019, considering that China and the United States both have an agreement to reach an agreement, the once-tensed trade relationship is expected to be somewhat eased. From a realistic point of view, the vice-ministerial consultations between the Sino-US economic and trade teams are underway from January 7 to 8, and the current Sino-US negotiations are mostly positive. China has restarted the import of US soybeans and oil, expressed its position to further open the market, emphasize the principle of neutrality of competition, and step up the process of economic and trade consultations, sending positive signals.

    The author predicts that in 2019, it is more likely that China and the United States will reach an agreement within 90 days. However, it should also be recognized that economic and trade relations are the ballast stone of Sino-US relations. Avoiding further aggravation of economic and trade frictions will help avoid them in the short term. There are conflicts between China and the United States in political systems, ideologies, and economic systems. However, considering the complexity and long-term nature of the Sino-US game, it is necessary to fully understand and prepare for the escalation of trade wars to technological wars.

Conjecture 2: Will the RMB exchange rate break through 7?

    With the appreciation of the U.S. dollar in 2018, the renminbi was once bearish. Many expected that the renminbi would fall below 7. However, as the Fed's interest rate hikes tended to be dovish and the risk of the Sino-US trade war decreased, the renminbi exchange rate rose instead of depreciation at the end of the year. Looking forward to 2019, the author believes that with the decline of tax reform dividends, the U.S. economy is more likely to be at a cyclical peak. In 2019, the U.S. economic growth is likely to slow down. In addition, the long-term structural problems in the U.S. economy, currency The impact of austerity, the uncertainty of Sino-US trade disputes, and the increase in political risks after the mid-term elections have cast a shadow on the US economic growth prospects in 2019.

    At the same time, the pace of the Fed’s interest rate hike in 2019 will also slow down. The current market is mostly expected to be 1-2 times. This is likely to reverse the trend of the US dollar. The author predicts that the US dollar will likely be flat in 2019. It is good for emerging market countries. In addition to the above factors, the suspension of the Sino-US trade war has brought good news to the global market. The expectation that a truce agreement is likely to be reached in the future will also ease the pressure on the devaluation of the renminbi, and there is still no pressure to break in the short term.

Conjecture 3: Will China's GDP growth rate continue to decline?

    The internal and external risks of China's economy this year have exceeded expectations. The escalation of the Sino-US trade war, weak domestic consumer consumption, declining infrastructure investment, instability in the private economy, and lack of confidence in the capital market have resulted in the emergence of many new situations, resulting in huge downward pressure on the current economy. The Central Economic Work Conference directly faces the reality of "increasing downward pressure on the economy" and regards "six stability", namely "stabilizing employment, stabilizing finance, stabilizing investment, stabilizing foreign investment, stabilizing foreign trade, and stabilizing expectations" as an important decision-making arrangement for the current and future periods. In recent days, the policy area has been blowing frequently, and various departments have exerted their efforts. Nevertheless, from a short-term perspective, policy effects often have a time lag of several months, and the economic downturn will continue in the short term. As the policy effects gradually appear, the situation may improve. The author predicts that the GDP growth rate in 2019 is likely to show a trend of low before and high afterwards.

Conjecture 4: Will the labor market be under pressure?

    Stable employment ranks first in the "six stability". The current official unemployment statistics, such as the urban survey unemployment rate, still perform well, which does not seem to be inconsistent with reality. Since the fourth quarter, news about the layoffs and downsizing of major companies has been heard. A previous report released by a recruitment platform pointed out that the number of recruitment needs in the third quarter of 2018 dropped significantly from the previous quarter, and for the first time there was a year-on-year decline, which was a 27% decrease from the same period in 2017. . The employment boom index also points to the labor market may be under pressure. The BCI business recruitment prospective index fell from 78.85 in December 2017 to 54.7 in December last year, and the PMI service industry employment index fell from 49.7 in August last year to December. Of 47.7.

Conjecture 5: Is the easing of monetary policy effective?

    Under the downward pressure of the economy, the current monetary policy has gradually increased its counter-cyclical control. Compared with last year's stable and neutral statement, the 2018 Central Economic Work Conference has cancelled the statement of "neutral" monetary policy. On the evening of January 4th, the central bank announced that a comprehensive RRR cut had already fired the first shot of monetary policy easing in the beginning of the year, combined with the previous central bank’s adjustments to inclusive finance’s targeted RRR cuts for small and micro enterprise loan assessment standards, targeted interest rate cuts by TMLF, targeted RRR cuts and other support From the perspective of financing of small and micro enterprises and private enterprises, the current trend of loose monetary policy is very obvious. The author believes that in 2019, to stabilize the real economy, there is still a lot of room for monetary relaxation, and the subsequent monetary policy relaxation may once again exceed expectations. .

Conjecture 6: With a proactive fiscal policy, how much space is there for infrastructure?

    The proactive fiscal policy in 2019 will play a greater role and truly reflect "proactiveness." Tax cuts will become a key direction. The Central Economic Work Conference has emphasized that the fiscal policy has mentioned the need to increase efficiency, implement larger tax cuts and fee reductions, and reduce the tax burden of residents and enterprises. This is important for stimulating consumption and improving cash flow of private enterprises. It is helpful to boost the capital market and so on.

    In terms of infrastructure construction, it can be observed that the transportation expenditure in the recent public financial expenditure has been significantly accelerated; in the last month, the National Development and Reform Commission has intensively approved a number of rail transit construction plans and high-speed rail construction projects, involving a total investment of more than 930 billion yuan. It shows that infrastructure is already working hard. However, the development of infrastructure is facing the dual constraints of economic efficiency and fiscal budget. Under the current situation, the author believes that the space for development of infrastructure is still limited, and more attention should be paid to making up for shortcomings.

Conjecture 7: Will real estate regulation be relaxed?

    In recent years, China's real estate cycle has always been closely related to China's economic cycle, and each round of "steady growth" policies is almost inseparable from the relaxation of real estate policies. The Central Economic Work Conference still followed the real estate policy statement of "housing to live without speculation" and "building a long-term mechanism for the healthy development of the real estate market", which means that the current decision-makers will not initiate a comprehensive relaxation of real estate to achieve the goal of "steady growth".

    However, the early real estate regulation has stepped on the brakes to curb the real estate bubble, and recent fundamental data has shown a clear downward trend in the industry; in addition, due to stringent policies, the demand for just-needed home purchases has also been suppressed. In the balance between risk prevention and "steady growth", considering that the previous real estate control policies were too tight, in order to avoid the negative impact of real estate on the economy, the author believes that the future real estate policy will be fine-tuned to change the previous too tight real estate policy and reduce the real estate policy. The return of the policy to neutrality and the effect of economic underpinning is also very likely to happen. Recently, some cities have seen real estate regulation and adjustment actions, such as the removal of sales restrictions in Heze, the reduction of mortgage interest rates in Guangzhou and Shenzhen, and the relaxation of purchase restrictions in Zhuhai, indicating that marginal adjustments have occurred.

Conjecture 8: Where is the breakthrough point for deepening reform?

    The fundamental way to solve the current dilemma of China's economic weakness is to continue to deepen reform and opening up. How to further deepen reforms and stimulate the endogenous development momentum of China's economy has become an important proposition. The author believes that land, one of the three major elements, may be an important breakthrough for the next step of deepening reform.

    The benefits of the recent rural land system reform have frequently appeared. On December 23, 2018, the "Land Management Law" and "Real Estate Management Law" amendments (drafts) were submitted to the National People's Congress for deliberation, deleting "the land used for non-agricultural construction must use state-owned land or requisitioned as state-owned original collective land Once the regulations are reviewed and passed, the legal barriers to the entry of collective land into the market will be removed; the pilot work of entering the market for collective land is also speeding up. Daxing District in Beijing and Songjiang District in Shanghai have explored the use of collective land to build shared property housing and leased housing. The plot enters the market.

    The reform of the rural land system will give farmers more property rights. The greatest significance may be to store wealth in the people. The reform dividends it releases will be difficult to reflect in statistics. In addition, the central economic work conference emphasized the promotion of economic system reform. State-owned enterprises, private economy, capital market and other fields are also worth looking forward to.