With the further growth of economic growth, the acceleration of capital inflows and the active activity of credit activities, this year's liquidity situation will continue to develop. There is still the possibility of further raising the reserve ratio in the future, but its space and frequency cannot be compared with 2006- Compared with the period of 2008. In any case, the recent upward adjustment is an important signal for changes in monetary policy, and an important step in the direction of monetary policy in the direction of tightening, indicating the monetary authorities' judgment on the future economic trend. In 2010, the credit will get rid of the abnormal state of 2009 and go to normal. However, as the demand for the real economy is still strong, the contraction must be prudent and reasonable, otherwise it will seriously restrict the economic growth that has just stabilized and rebounded.
2010: The starting point for a new round of growth
Can China's economic recovery in 2010 be sustainable? What are the main risks facing future economic operations? What choices should be made for future monetary policy? By discussing this series of questions that need to be answered, it may be possible to look into the future of the Chinese economy.
Looking at the troika, China's economic recovery trend is expected to continue in 2010, GDP growth is expected to reach 9.5% or more. With the gradual recovery of the world economy and the further recovery of the international market, exports will be significantly improved. This can be seen in the sharp rebound in exports in December last year. It is expected that this year's exports will achieve positive growth and the growth rate will reach 10%-15%. This year, the government will increase the intensity of consumption, coupled with the improvement of employment situation and the income effect and wealth effect brought by rising asset prices. This year, consumption is expected to maintain steady and rapid growth. The total retail sales of consumer goods is expected to increase by about 17%. From the perspective of investment, the substantial increase in investment in newly started projects last year has an inertia effect, and this year's investment will still maintain a relatively high growth rate. The data on the planned investment amount of newly-started projects and the cumulative growth of fixed-asset investment show that the growth rate of newly-started projects last year was over 80%, and the continued operation of these projects can guarantee a greater pulling effect on investment in the future.
Under the influence of the decentralization of a new batch of central investment projects, the gradual increase in confidence in economic recovery, and the active activity of housing and auto transactions, it is expected that the demand for credit in the real economy will remain strong in 2010. According to the annual increase of 20% of the total investment in the medium and long-term loans in the previous year, this year's new medium- and long-term loans will be about 3.5 trillion yuan to 4 trillion yuan, and the new mortgage loans will be about 1 trillion yuan. Taking into account the gradual recovery of exports, the recovery of private investment and rising prices, the total loan demand this year will be more than 8 trillion yuan.
There are a number of constraints on credit supply in 2010. On the one hand, recently, due to the impact of the stock market on the diversion of household deposits, the growth rate of household deposits has slowed down, and the bank deposit-to-deposit ratio has increased. In the future, bank funding sources may face certain difficulties. On the other hand, the rapid growth of credit in the first half of the year led to a decline in the overall capital adequacy ratio of the banking industry, and the growth of small and medium-sized banks with low capital adequacy ratios will be limited. In addition, the China Banking Regulatory Commission recently issued the "Notice on Improving the Capital Replenishment Mechanism of Commercial Banks", which will also have certain restrictive effects on bank credit. However, the above constraints do not cause a large negative impact. From the loan-to-deposit ratio, the current loan-to-deposit ratio of financial institutions is about 67%. Before this large-scale launch of credit (end of 2008), the loan-to-deposit ratio was 61%, and 67% still had a large space from the regulatory ceiling. . According to the growth of RMB deposits by 27% and the loan growth of 33% at the end of this year, assuming a 20% increase in loans next year and a 15% increase in deposits, the loan-to-deposit ratio will be about 70% at the end of next year, and there is still a distance from the upper limit of 75%. The calculation of deposit growth is more conservative. Therefore, in general, the bank’s credit supply capacity is not affected much.
The speed of direct financing in 2010 will also keep liquidity relatively plentiful. The scale of equity financing last year was about 500 billion. This year's stock market IPO and refinancing will increase substantially, and the non-financial sector stock financing is expected to be around 600 billion yuan. In 2009, the non-financial sector's annual bond issuance may be about one trillion. With the further development and improvement of the bond market in 2010, the bond financing amount is expected to reach or exceed 1.5 trillion yuan. Therefore, the total direct financing of the non-financial sector will exceed 2 trillion yuan this year, which will also have a certain substitution effect on bank loans while expanding financing.
The rise in foreign exchange holdings will be another factor in the liquidity this year. With the recovery of exports, the increase in trade surplus, the expected increase in the appreciation of the renminbi and the increase in international capital inflows this year, foreign exchange holdings will continue to climb, and some “hot money†may be seen. The obvious increase in foreign exchange holdings in the fourth quarter of last year is a testimony. At the same time, the import and export volume in February has risen sharply, and some "hot money" seems to be visible. This will lead to a more accommodative overall liquidity this year even in the context of declining domestic credit growth.
The reason why 2010 will become the starting point of a new round of growth in China's economy is that I believe it is driven by the following factors. From the perspective of the industry, the future growth will form a good situation for the two-wheel drive of the real estate industry and the automotive industry. Since 2003, with the continuous advancement of urbanization strategy, China's real estate industry has achieved considerable development. The middle and lower reaches of the real estate industry involve 40-50 industries, and its development has a strong pulling effect on the entire national economy. With the further implementation of the urbanization initiative, there is still room for growth in the real estate industry in the future. Much like the real estate industry, the automobile industry also involves about 50 industries in the middle and lower reaches. The output of one unit of the automobile industry can drive an overall increase of 10 units of output in all sectors of the national economy. This huge multiplier effect is beyond the reach of any other industry. The year 2009 is a year in which the proportion of the output value of the automobile industry has grown across the GDP, ending the situation that has been hovering around 7 percent in the past seven years. This is because the policy stimulus has produced results. On the other hand, more importantly, under the condition of income level of more than 3,500 US dollars per capita, a considerable number of families have entered the stage of having the ability to consume cars. This is a landmark development of the automotive industry in China. Just a little review of the history of world economic development, we will know the huge and stable engine effect of the development of the automobile industry in the United States and Japan in the last century on its national economy. Due to the large population and income growth, the future automotive industry will have tremendous growth potential in China. Real estate and automobiles will surely become two powerful driving wheels for the new round of growth of China's economy.
From the perspective of demand, domestic demand will continue to be stable and powerful in driving economic growth in the future. If exports are a very important driving force for China's economy after 2000, domestic demand consisting of investment and consumption after 2009 will become the two main engines of economic growth. In response to the negative impact of the international financial crisis, the government has used a proactive fiscal policy and invested huge sums of money to stimulate consumption. There are many long-term measures that will have a positive effect on the continued growth of consumption. At the same time, under the stimulus package, a large number of infrastructure projects came into being, and huge amounts of credit were quickly injected. In 2009, investment gained a staggering rapid growth. In view of the fact that a considerable part of it is necessary for the national economy and the people's livelihood, moderately loose monetary policy and relatively abundant liquidity have created good financial conditions for the future operation of these projects. At present, China's per capita GDP is at a low level, and the demand for infrastructure for many people is much higher than that of developed countries. Therefore, investment in the future will maintain a relatively high growth rate. In view of this, it is premature to say that high investment is not sustainable. China's capital construction is still far from the stage where investment can be lowered to a lower level. The new round of growth cycle will be based on the dual-engine power of domestic demand based on investment and consumption.
From a regional perspective, the accelerated rise of the central and western regions will strongly promote a new round of economic growth. Since the last century, China has successively established a series of regional development strategies for the development of the western region, the rise of the central region, and the revitalization of the Northeast, and has continued to invest various resources for this purpose. The economic growth of the vast provinces in the central and western regions has continued to accelerate. In particular, in response to the international financial crisis, a large amount of financial funds and bank credit have been invested in various infrastructure projects in the central and western regions. Undoubtedly, with the further implementation of the strategy and the follow-up operation of a large number of projects, more funds will continue to flow into the central and western regions, and the central and western regions will be promoted at a faster rate than the national average. The strategic orientation and the powerful measures taken in response to the crisis will inevitably bring about a turning point in the growth of the central and western regions. Its role in the stable and rapid growth of the national economy is similar to that in the United States. The development of the central and western regions with a population of more than half and low per capita income is an important source of long-term economic growth in the future.
From a financial point of view, the rapid development of direct financing in the future will lead to a new round of economic growth. In this round of the response to the international financial crisis, the banking industry's stable health and credit capacity are indispensable. However, at the same time as the rapid growth of bank credit, people are not very concerned about the rapid development of direct financing, especially bond financing. Financing based on corporate bonds, corporate bonds, medium-term notes, and short-term financing bills achieved leap-forward growth in 2009. With the launch and improvement of the GEM and small enterprise collective bonds and the further innovation of direct financing products, coupled with the development of asset securitization and the further expansion of the bond market, direct financing products in the future will surely achieve significant development on the existing basis. . The proportion of indirect financing based on bank credit will gradually decline, and the financing structure will further develop in a reasonable direction. The stable and healthy development of the financial industry and the rational optimization of its structure will strongly boost and guarantee a new round of economic growth.
Operational risk: three growing concerns
In general, the future financial environment will be more relaxed, and the real economy will run better than this year. Although the potential risks brought by the rapid credit growth in 2009 to the banking industry will not become a reality in the short term, the operational risk in 2010 is that a series of hidden concerns may reappear.
One of the hidden concerns is the rapid rise in prices. In the future, driven by a series of factors such as demand, international, food, reform, currency and expectations, this year's prices may show a sharp rise. Experience has shown that China's economic growth to double digits may lead to a certain gap between total demand and total supply, thus pushing up prices. In December 2009, the PMI index rose by another percentage point, reaching more than 56%. The rapid recovery of the economy will definitely drive demand for various types of production materials, and the price of animals will rise. The "reverse scissors difference" between M2 and M1 is obviously expanded and stable. Experience shows that M1 and PPI and CPI move synchronously and have a relatively stable leading relationship, which is about four quarters. The rapid monetary expansion last year is an important basic factor for future inflationary pressure. Recently, pork prices have rebounded and have re-entered the rising channel, and the “pig cycle†has the potential to reappear. Affected by factors such as the strengthening of the depreciation of the US dollar, the pressure on international commodity prices has increased, and domestic imported inflationary pressures have increased. At the current and future stages, the international commodity cycle, the domestic “pig cycleâ€, the food price cycle, and the currency cycle have all encountered one. Today, domestic resource price reforms are still advancing, and some local governments may also introduce new price increases. In the state of more liquidity, people's expectations for future inflation are continuing to increase. From the hikes, the price base in the first half of 2009 was lower.
In November last year, the CPI has turned positive, and it quickly reached 1.9% in December. The PPI in December has also turned positive earlier than the market expectation, which indicates that the pressure of rising prices is gradually released. As an economy with rapid economic growth, China's overcapacity has never really effectively restricted the price increase. During the period of 2007-2008, there has been a rapid increase in CPI, and at that stage, the production capacity is not enough? The rapid rise in prices will be one of the issues that must be paid seriously this year. There is no reason to take it lightly.
The second worry is the asset price bubble. As the economy rebounded faster, asset prices regained momentum in 2009, and some coastal first-tier cities saw a bubble in housing prices, while the stock market was based on a recovery. However, due to the further recovery of the economy, the influx of overseas capital, the volatility of liquidity, the improvement of corporate earnings and the expectation of inflation, asset prices, especially stock prices, may rise sharply in 2010, and the possibility of a significant bubble is not ruled out. The data on M1 and stock price and house price show that they have a very close relationship with each other. The rapid rise of M1 since the end of the year indicates that future asset prices will also move in this direction, possibly to a slightly different extent. If the appropriate intervention of the policy may have an impact on its changes, the trend of asset price changes is difficult to fundamentally reverse in the short term. The acceleration of the pace of urbanization, the improvement of national income and the improvement of the social security system will further promote the growth of demand in the real estate market. The current real estate market supply is subject to certain restrictions on land and investment, and growth cannot effectively keep up with demand growth. The purpose of the government's suppression of the bubble is to avoid the ups and downs of the real estate market, and not to completely defeat the real estate market. Therefore, the real estate market will remain relatively stable in 2010. Of course, the price of first-tier cities may be adjusted in stages.
Excessive rise in asset prices requires forward-looking management, but care must be taken. From the recent situation, a reasonable rise in asset prices is also good for economic growth. According to the Tobin effect, wealth growth will increase future investment for individuals and businesses. Reasonable income growth will also help to expand investment and consumption, and a reasonable rise in real estate prices will also help promote the recovery of private real estate investment. The rapid rise in asset prices will further increase future inflationary pressures through the wealth effect in the short term, and the rapid bursting of its bubble will dampen investor enthusiasm, cause economic turmoil, bring capital flight and obvious systemic risks. In the long run, the excessive bubble has made the economy over-financial, leading to entrepreneurs not motivated to invest in the real economy.
The third aspect of the worry is the massive inflow of international capital. The data on the composition of foreign exchange reserves shows that the unexplained portion of the newly added foreign exchange reserves has increased, the foreign exchange account has increased significantly, and the inflow of overseas funds is more obvious. This may put new pressure on the entire economic and financial environment in 2010. The pressure on the monetary authorities in the more than a year since the end of 2008 has changed dramatically. The excessive inflow of international capital will lead to further increase in domestic liquidity, which will bring upward pressure on prices and asset prices. At the same time, the local currency will continue to suffer from the appreciation of the currency, which will damage the export competitiveness of the inflowing country. The rapid rise of reserves in the short term also brings Management pressure. From 2006 to 2007, China has experienced a similar process. With the current international liquidity very abundant, the Chinese economy has taken the lead in picking up faster and is likely to become the target of global capital chasing. The inflow of external capital has led to a sharp increase in the pressure on the appreciation of the renminbi, which will have an adverse impact on exports and foreign exchange reserves, and also increase the potential risk of future capital evasion on the economy. After entering 2010, the above scenarios are likely to reappear. People can't step into the same river twice, but history often has striking similarities.
From the recent operating situation, these three aspects of the hidden concerns seem to be increasing. This shows that the current Chinese economy has the possibility of becoming hot. This seems incredible in the past. Usually, the recovery after the economic downturn requires a process to gradually return to normal growth, and the process of overheating may be longer. I think there is a possibility of partial heat. From a big perspective, the main reasons are as follows. First, the total demand has expanded rapidly. The government-led policy of stimulating domestic demand, which is dominated by fiscal investment, has contributed to the economic recovery. However, the sustained rapid growth of investment and the accelerated pace of consumption development have led to a rapid expansion of domestic demand in a relatively short period of time. In the apparent recovery of the international market, external demand will also increase significantly, thereby driving the rapid expansion of aggregate demand. Second, the liquidity is very plentiful. I believe that the inflow of foreign capital is the main reason for the abundance of domestic liquidity. Before the reform of the exchange rate mechanism in 2005, international capital accelerated the pace of entering China. Most of China’s existing foreign exchange reserves of more than 2 trillion US dollars were accumulated in the past three years. This means that there is a corresponding currency release, and although a significant portion of it has been hedged, it has not been fully recovered. An important performance of the current liquidity is that the deposit reserve ratio is at a high level. In the third quarter of 2006, the reserve ratio began to increase by less than 8%. After nearly two years of frequent increases, it reached 17.5% in June 2008. From September to the fourth quarter of 2008, in order to stimulate the economic recovery, after repeated reductions, the rate was reduced to 15.5% for large banks and 13.5% for small and medium banks. This is also at a fairly high level in history, and this is precisely the key moment for the implementation of a strong stimulus policy. At present, China is facing a new round of international capital inflows. The liquidity is very plentiful and provides suitable financial conditions for the rapid expansion of aggregate demand. It can be seen that the above two aspects are hotbeds for the economy to become hot.
Monetary policy: flexible response direction tightens
This year's monetary policy tone is still positioned moderately loose. The tone of moderately loose monetary policy is a large framework. It is a space with a certain scope of operation. The connotation of monetary policy can be fine-tuned or adjusted to a certain extent within this framework. Continuity, stability, pertinence and flexibility are important principles for future monetary policy. When the economic operation is basically stable and there is not much change, the policy can be mainly continuous and stable; when the operating situation changes greatly, it should be targeted and flexible.
Affected by a series of factors such as demand, currency, international, food, reform and expectations, there is a possibility of a rapid increase in prices in 2010; accelerated by economic growth, ample liquidity, accelerated inflow of overseas capital, and enterprises. The impact of improved earnings and inflation expectations, asset prices may also form a partial large bubble; this year's monetary policy will be guided by targeting and flexibility, and gradually tightened, from the end of 2008 and early 2009, substantially loose to the essence Steady or neutral.
In the process of gradually tightening monetary policy this year, quantitative tools will still play a leading role. Although the US economy has accelerated its recovery in the near future, it is still in the initial stage. In the short term, the possibility of a Fed rate hike is small. In view of the stimulus from 2008 to the beginning of 2009, US interest rates have fallen rapidly, and have remained relatively stable since the zero level. However, China’s interest rate decline is relatively small. So far, there is still a gap with US interest rates. If the interest rate is adjusted in the morning, the spread between China and the United States will be further expanded, and foreign capital will be further attracted to the territory, thus increasing the pressure to push up asset prices and price levels. The latter will in turn generate further tightening requirements for monetary policy. As China's economic recovery is good and relatively stable, the economic growth potential is large, and the renminbi has the expectation of appreciation, foreign capital has a strong entry motive. Once the interest rate rises, the spread of Sino-US spread will further enhance such motives. This makes it possible to form a non-benign cycle. Besides, China's economy is picking up faster, but the business conditions of the company are still recovering, especially the private economy and the profitability of the majority of SMEs are still weak. In this case, lower interest rates help them get a better financial environment for further recovery, which in turn boosts economic growth. Therefore, it is more cautious to use interest rate instruments. This point can be clearly seen from the previous round of regulation, with less interest rate adjustments and less fluctuations. This pattern will be basically the same in the future. In 2010, as prices rebound, the CPI may exceed 2% in the first quarter, so it is likely to form a negative interest rate state. If the US side has a clearer interest rate hike, then China will enter the interest rate hike after the second quarter. period.
In 2007-2008, there was a way of using the appreciation of the renminbi to curb the rapid rise in prices. However, the actual result that people have seen is that after the renminbi has appreciated sharply for more than three consecutive years, large amounts of foreign capital have flowed in, and asset prices have risen sharply. The prices have continued to rise in 2007-2008, and they have intensified. Although the factors affecting the sharp rise in prices are multi-faceted, including strong demand, cost-driven and liquidity, etc., it is an indisputable fact that the appreciation of the renminbi has pushed up capital inflows and brought about a significant increase in demand and liquidity. Therefore, there is a need to think about this trade-off: the monetary authorities have paid huge hedging costs, but because of the large appreciation of the renminbi, it has boosted capital inflows, asset price bubbles and sharp rises in prices, and monetary policy has thus undergone tremendous regulation. pressure. The other pattern is that the monetary authorities also pay huge hedging costs. However, as the RMB exchange rate has remained basically stable, the pressure on capital inflows, asset prices and price increases has been alleviated, and the monetary policy has been reduced accordingly. More likely, due to the elimination of expectations for appreciation, the momentum of foreign capital inflows will be weakened, and the monetary authorities' hedging costs may also decrease. In view of this, in addition to considering the actual needs of the export industry, this may be another reason for the RMB to maintain a stable exchange rate against the US dollar.
Recently, the central high-level and monetary authorities have once again reiterated the position of the renminbi to maintain basic stability at a reasonable and balanced level. Although no one has ever come up with a convincing certificate of a reasonable and balanced level of a country's currency exchange rate, the RMB exchange rate is undoubtedly the core interest of China. It is not only related to the export industry that directly and indirectly accommodates the employment of 150 million people, but also the effect of China's asset prices and prices and even the role of monetary policy. In fact, in the "impossible triangle" relationship, we can only pursue the results that are more favorable to all three, and it is difficult to discard any of them. The RMB exchange rate should still adhere to the principle of its controllability and autonomy. Therefore, it can be judged that the future exchange rate of the RMB against the US dollar will remain basically stable, but it does not rule out the possibility of a slight appreciation after mid-year. Only a firm and basically stable confidence and a reality that is basically stable for a period of time will make it possible to form a basically stable market expectation.
The quantitative tools of monetary policy mainly include open market operations, deposit reserve ratio and credit management. Future open market operations will continue to be one of the most important players in quantitative tools. It is more flexible and has a strong target within a certain range. Although the two-way operation since the second quarter of 2009, it is actually based on tightening, and will continue to be implemented in this direction in 2010. In the monetary policy operation after 2010, the use of the deposit reserve ratio tool will increase, but it is difficult to use it as large and frequently as in 2006-2008. Due to the abundant liquidity of the banking system, the RRR cut will not be much lower when the economy is stimulated at the end of 2008. After the latest adjustment, the current rate of large banks is 16%, and that of small and medium banks is 14%. The continued good economic growth momentum in 2010 still requires a reasonable growth rate of bank credit, and if the stock market and property market activity may lead to a slowdown in bank deposit growth, the banking industry may not be able to withstand higher deposit reserve ratios. This year, as the pace of economic recovery accelerates and is relatively stable, the pace of capital inflows will accelerate, leading to a rapid increase in foreign exchange holdings. Bank deposits will increase rapidly, liquidity will be further plentiful, and the deposit reserve ratio will increase.
The increase in the deposit reserve ratio of 0.5% was the first adjustment since the fourth quarter of 2008. The current liquidity is obviously more phased and the main background of this upswing. Usually, the funds at the end of the year will be returned to the bank. The deposits of banks other than their peers will increase significantly. The number of central bank bills that have recently expired will be large, and a large amount of funds will be put into the financial system. Since the end of last year, the pace of capital inflows has accelerated, and foreign exchange accounts may be obvious. The increase in the amount of funds invested in the market, and so on. Coupled with the large amount of credit in the first week of the New Year, the parties are worried about the resurgence of future credit growth. But I think that the legendary figures in the market may not be able to explain the overall situation in January or the first quarter. The important reason for the more release in the first week was the concentrated placement of the accumulated projects at the end of last year. In fact, for big banks, the method of controlling credit is not just the reserve ratio. The window guidance of the regulatory authorities should be a very effective means. Of course, it should be more effective to adopt a reserve ratio for a large number of small and medium-sized commercial banks. Because the deposit-to-deposit ratio of small and medium-sized banks is relatively high, and the capital position is tighter, raising the reserve ratio will help curb the impulse of credit. With the further growth of economic growth, the acceleration of capital inflows and the active activity of credit activities, this year's liquidity situation will continue to develop. There is still the possibility of further raising the reserve ratio in the future, but its space and frequency cannot be compared with 2006- Compared with the period of 2008. In any case, the recent upward adjustment is an important signal for changes in monetary policy. It is an important step in the direction of monetary policy tightening. It shows the monetary authority’s judgment on the future economic trend, and monetary credit control has entered a new stage. .
Credit regulation is a very important aspect of quantitative tools, not only because the changes in deposits brought about by credit changes directly affect the supply of broad money, but also because China's financing structure is still dominated by indirect financing. In 2010, the credit will get rid of the abnormal state of 2009 and go to normal. However, as the demand for the real economy is still strong, the contraction must be prudent and reasonable, otherwise it will seriously restrict the economic growth that has just stabilized and rebounded. Therefore, the principle orientation of credit regulation in 2010 should be reasonable. In terms of the total amount, it should be more moderate, that is, it should be less than the supernormal state in 2009 but it cannot shrink rapidly. Because a large number of medium- and long-term infrastructure projects have begun, manufacturing has begun to recover and private investment has picked up, prices have risen from negative growth to positive, and economic growth may approach or reach double digits, all of which require credit growth to meet. From a structural point of view, it should be optimized, that is, while basically maintaining the demand for started projects, efforts should be made to invest in manufacturing, private economy, small and medium-sized enterprises, and high-tech energy industries to promote economic structural improvement. From a rhythm perspective, it should be relatively balanced, that is, to change the situation in the first half of the year, especially in the first quarter, to eliminate the impact of abnormal credit demand and achieve an appropriate and relative balance throughout the year. For example, in the first quarter, it is necessary to put 30%-40% of credit to meet the seasonal needs of economic operation, and 60% in the first half of the year should be reasonable and normal.
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