Statistics show that China’s recent macroeconomic situation is better than expected and the volatility is weakening. Domestic and foreign demand have remained strong and the whole year will be better than expected. There is a need for a slight tightening of macroeconomic policies, otherwise the economy will continue to expand and it will overheat. Under the influence of the “Eleventh Five-Year Plan†and the appreciation of the renminbi, the industries favored by the market mainly include: manufacturing industries that are still in a booming cycle, especially equipment manufacturing related to the bottleneck (coal, electricity, oil, and transport) industries. Industry; leading industries such as autos and real estate; and productive and consumer service industries such as finance and retail.
The weakening of the macro situation
Few people doubt the long-term growth potential of China's economy, but there is great disagreement about the understanding of short-term fluctuations. Unlike deflation, which emphasizes excess capacity from the supply side, the demand side is equally important. Under flexible demand-side management, aggregate demand does not fall back into deflation as quickly as it did in 1998.
Since 2002, the Chinese economy has experienced a good situation of high growth and low inflation. The cycle fluctuations have been greatly eased compared to history. The main reasons are:
First, on the demand side, this round of economic growth has obvious demand-pulling characteristics. In particular, the upgrading of the consumption structure after the per capita income level reaches US$1,000 has driven the rapid growth of the automobile and real estate industries and has driven the development of related industries. Investment needs.
Second, on the supply side, the growth in capital stock since 1993 has been maintained at more than 10%, which has increased the potential growth rate of the economy.
Third, the most critical is the successful macro-control policy. If we follow the pattern of previous cyclical changes, then the actual growth rate will continue to rise, and investment will continue to overheat, followed by a deep contraction.
Fourth, building a harmonious society and paying attention to the people’s livelihood is the core of the current government’s policy. Under the principle of building a new socialist countryside and promoting coordinated development of the region, the deep-seated social contradictions that have constrained total demand for a long time will gradually be resolved.
Some studies have shown that the weakening of the cyclical fluctuations will have a positive impact on economic growth. Repeated “big fluctuations†of the economy will cause great harm to the economy. Under the background that economic growth bid farewell to “big ups and downsâ€, short-term and mid- to long-term economic growth are organically integrated. In the next 10 years, China's economy will still be in the rising period of the medium and long-term economic cycle. This basic and potential growth trend will become the baseline for short-term economic fluctuations.
Both inside and outside demand remain strong
In the first two months of this year, the domestic macroeconomic conditions mainly had the following characteristics: the money supply remained loose, and credit increased steadily; industrial production and investment fell moderately; export growth fell at a high level; import growth steadily rebounded; domestic demand gradually increased; raw material prices rose Continued rebound, the annual inflation will be slightly higher than expected; corporate profitability will moderately decline, and the downstream industry will continue to improve.
In addition, world economic growth in 2006 remained strong, and the growth rate will be slightly higher than expected. Driven by the strong world economic growth, the prices of large commodities continued to rise. On April 4th, Zeng Wangda, head of Asia-Pacific Region of the International Monetary Fund (IMF), stated that the IMF may increase its expected growth rate for the global and Asian economies in 2006. He also stated that China’s economic growth momentum is strong, and China’s economic growth in 2006 The rate may be around 9.5%.
We believe that this year's domestic macroeconomic slowdown is still a big tone. As both domestic and foreign demand remain strong, the actual growth rate will be slightly higher than our previous 9.3% expectation.
Macroeconomic policy will be slightly tightened
Since the second half of last year, the low real interest rate is an important reason for the rapid growth of investment. At present, there is a general need for a slight tightening of macroeconomic policies. Otherwise, the economy will continue to expand and it will overheat.
In the situation where domestic demand does not need to be stimulated, the exchange rate will become an important macro-policy measure, and exchange rate adjustment will accelerate. However, there is limited space for adjustment of the exchange rate. The appreciation of the renminbi during the year may be only 3% to 5%. In addition, the limited appreciation of the space to suppress exports will be offset by strong external demand. Under such circumstances, simply relying on the exchange rate cannot achieve the effect of regulating the macro economy. If the central bank does not raise interest rates, raising the reserve ratio or the excess reserve interest rate will become a necessary choice.
The weakening of the macro situation
Few people doubt the long-term growth potential of China's economy, but there is great disagreement about the understanding of short-term fluctuations. Unlike deflation, which emphasizes excess capacity from the supply side, the demand side is equally important. Under flexible demand-side management, aggregate demand does not fall back into deflation as quickly as it did in 1998.
Since 2002, the Chinese economy has experienced a good situation of high growth and low inflation. The cycle fluctuations have been greatly eased compared to history. The main reasons are:
First, on the demand side, this round of economic growth has obvious demand-pulling characteristics. In particular, the upgrading of the consumption structure after the per capita income level reaches US$1,000 has driven the rapid growth of the automobile and real estate industries and has driven the development of related industries. Investment needs.
Second, on the supply side, the growth in capital stock since 1993 has been maintained at more than 10%, which has increased the potential growth rate of the economy.
Third, the most critical is the successful macro-control policy. If we follow the pattern of previous cyclical changes, then the actual growth rate will continue to rise, and investment will continue to overheat, followed by a deep contraction.
Fourth, building a harmonious society and paying attention to the people’s livelihood is the core of the current government’s policy. Under the principle of building a new socialist countryside and promoting coordinated development of the region, the deep-seated social contradictions that have constrained total demand for a long time will gradually be resolved.
Some studies have shown that the weakening of the cyclical fluctuations will have a positive impact on economic growth. Repeated “big fluctuations†of the economy will cause great harm to the economy. Under the background that economic growth bid farewell to “big ups and downsâ€, short-term and mid- to long-term economic growth are organically integrated. In the next 10 years, China's economy will still be in the rising period of the medium and long-term economic cycle. This basic and potential growth trend will become the baseline for short-term economic fluctuations.
Both inside and outside demand remain strong
In the first two months of this year, the domestic macroeconomic conditions mainly had the following characteristics: the money supply remained loose, and credit increased steadily; industrial production and investment fell moderately; export growth fell at a high level; import growth steadily rebounded; domestic demand gradually increased; raw material prices rose Continued rebound, the annual inflation will be slightly higher than expected; corporate profitability will moderately decline, and the downstream industry will continue to improve.
In addition, world economic growth in 2006 remained strong, and the growth rate will be slightly higher than expected. Driven by the strong world economic growth, the prices of large commodities continued to rise. On April 4th, Zeng Wangda, head of Asia-Pacific Region of the International Monetary Fund (IMF), stated that the IMF may increase its expected growth rate for the global and Asian economies in 2006. He also stated that China’s economic growth momentum is strong, and China’s economic growth in 2006 The rate may be around 9.5%.
We believe that this year's domestic macroeconomic slowdown is still a big tone. As both domestic and foreign demand remain strong, the actual growth rate will be slightly higher than our previous 9.3% expectation.
Macroeconomic policy will be slightly tightened
Since the second half of last year, the low real interest rate is an important reason for the rapid growth of investment. At present, there is a general need for a slight tightening of macroeconomic policies. Otherwise, the economy will continue to expand and it will overheat.
In the situation where domestic demand does not need to be stimulated, the exchange rate will become an important macro-policy measure, and exchange rate adjustment will accelerate. However, there is limited space for adjustment of the exchange rate. The appreciation of the renminbi during the year may be only 3% to 5%. In addition, the limited appreciation of the space to suppress exports will be offset by strong external demand. Under such circumstances, simply relying on the exchange rate cannot achieve the effect of regulating the macro economy. If the central bank does not raise interest rates, raising the reserve ratio or the excess reserve interest rate will become a necessary choice.
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