Summary of the current state of China's economy if we talked about the official document, is "determined to hold the bottom line systemic financial risk does not occur." When Premier Li Keqiang recently had a word to visit in Germany, called the "stability of the world economy is expected to China" Carefully understand, the future macro policy...
If the current state of the Chinese economy is said in official documents, it is "resolutely to hold the bottom line of systemic financial risks." When Premier Li Keqiang visited Germany recently, he had a saying, "Stabilizing the world's expectations of the Chinese economy." It is realized that in the future macro policy, the government is unlikely to adopt a more radical way to squeeze the economic bubble, and it is largely maintained. Many people are confused by the PPI that has been in decline for more than a year and the CPI that has not yet felt a definite decline. According to the author's point of view, this is a precursor to shrinking, and there is pressure for deflation in the Chinese economy. The current pressure for price increases mainly comes from factor prices, which is the inevitable result of not allowing inefficient economies to clear.
Local governments and banks will not let troubled enterprises go bankrupt; excess capacity will still start against the trend, without starting work, cash flow will be broken, stock debts may not survive; funds are still going to the dead part in order to maintain the existence of stock debt; Inefficient economy occupies a large number of factors. Labor, capital, and raw materials are largely in an inefficient state of consumption, making these factor prices have a false “tight balance.†The expansion of this stage is very sensitive, but the real economy’s ability to generate income is actually It is already experiencing rapid exhaustion.
Perhaps because of the stability of the world's expectations of the Chinese economy, it is the top priority in 2013 to resolutely defend against the occurrence of systemic and regional financial risks. The prevention of the bursting of the economic bubble is currently dominated by two means.
Maintain the strength of the exchange rate to stabilize the balance of payments
The central bank's intervention in the RMB actually contains two meanings: one is to directly buy and sell foreign exchange, and the other is to manage the middle price. After the fundamentals of the appreciation of the renminbi disappear (the real current account surplus shrinks), the management of the middle price may become the main means of central bank intervention. In particular, it is focused on creating a strong middle price of the renminbi to guide market expectations. Keep the middle price "into two retreats" strong, and inject the expected guidance into the market at key points.
For example, on November 12, 2012, the central parity of the RMB against the US dollar opened up 92 points from the previous opening mid-price. On the last trading day of the previous week, the US dollar index rose. If strictly priced according to a basket of currencies, the renminbi against the dollar should be down instead of rising. The central bank’s actions at critical points often give the market a strong signal of direction.
In particular, after December 2012, the RMB exchange rate and the US dollar index began to show a clear relationship (before both of them were obviously reversed). If the basket of currencies pegged by the renminbi is stable, the strong trend of the renminbi against the US dollar since December 2012 suggests that there must be one or several non-US dollar currencies in this basket that are strongly appreciated against the US dollar, but you think about it. Who are they? If not, it can only happen in another situation: the basket can be changed, or the central parity of the RMB in the last six months is not referenced to the previous basket of currencies.
Although the accumulated foreign exchange holdings from January to April 2013 increased by 1.2 trillion yuan (only 500 billion yuan in 2012), the composition of new foreign exchange accounts has changed significantly, mainly from the real economy. More from the financial level, active external liabilities. The central bank’s intention to maintain a strong exchange rate has “guaranteeed†cross-border arbitrage behavior to some extent.
The author has done a simple calculation. If the export growth rate of China's re-exports to Hong Kong in the first quarter of 2013 only maintains a growth rate of 20% in 2012 (the mainland's exports to Hong Kong increased by 74% in the first quarter of 2013), then the first quarter. China's current account surplus may be only $22.3 billion, accounting for only 14% of the total balance of payments surplus. From 2005 to 2008, this proportion was as high as 75%. In 2009, it began to decline step by step. In 2012, the asset project showed a huge deficit of 110 billion US dollars. In 2013, the balance of payments structure deteriorated severely. The source is no longer an economic surplus, but external. Liabilities. This highlights the fragility of the current state of liquidity.
Helping huge stock debts survive in a very wide monetary environment
From 2009 to 2012, the overall debt ratio of the Chinese economy increased by nearly 60 percentage points. In 2012, China’s non-financial sector debt reached 2.21 times of GDP. From the perspective of credit expansion in the first quarter of 2013, leverage may still rise rapidly, as the growth rate of total social financing in the first quarter significantly exceeded the nominal GDP growth rate of 12 Percentage points). In the premise of “in the basic non-moving stockâ€, we are afraid that we can only use a wide monetary environment to prevent the risk of capital chain breakage. The central bank is still very cooperative in this respect, so that stock debts will roll and survive as much as possible. Go on. From January to April 2013, the net financing of the society was 7.9 trillion yuan, an increase of 3 trillion yuan year-on-year. The broad money growth rate rebounded significantly to 16%, but the economy was extremely weak. This may be because there is a lot of money that may not be able to enter the entity and stay in the debt service. In the non-financial sector's stock debt scale, it is assumed that the interest rate will be 5.5% to 6% per annum, and the one-year interest expense will be 6.3 trillion to 6.9 trillion yuan. There will be a repayment of the principal during the year. Assuming that China's principal payment is very lenient, all debts due will be renewed, and the proportion of light interest expenses to social net financing will exceed one-third.
In view of the deflationary state of production and circulation, the actual cost of general loans is now close to 10%, and the debt burden of enterprises is significantly deepening. The author speculates that the central bank will not actively exclude interest on loans and reduce the burden of stock debt.
But how long can the policy of maintaining stability last? External risks may escalate. On the one hand, the signs of US real estate recovery are already very obvious. The discussion on the normalization of monetary policy has gradually escalated. On the other hand, Abenomics has encountered difficulties, and Japanese bonds have entered high volatility and induced the entire Asia-Pacific asset market. Violent turmoil. These are all likely to become the "thorn" of the Chinese economic bubble.
The crux of the current Chinese economy is that there are a large number of mismatched resources to projects that are not economically justifiable and inefficient sectors, so that many companies are unable to generate sufficient return on assets that cover interest, and these zombie companies are hard to perish, and Surviving a large amount of credit resources, resulting in a significant decline in productivity.
Successful de-leverage is to find and overcome the causes of income decline, so that income growth can regain momentum, making income growth faster than the cost of debt. Without "bombing up", income growth is hard to come back, and it is difficult to transition to the deleveraging stage without pain. The so-called "solving problems in development" is not in reality.
There are only two paths in the history of debt distress: one is to pay the price of money to pay a depression (actively squeeze the bubble, let the damn die, to some extent means "creative destruction"), Chen Yun, Zhu Rongji, Paul Wall Ke has done it. The second is "more water and more noodles", called the deepening of the currency, the release of government-controlled resources to the market, called property rights reform in China.
Although the slowdown in the active implementation of the economy will be painful, there are still many supplementary policies to alleviate the pain: to strengthen the capital account control, we can consider the introduction of the “Tobabin tax†policy to prevent short-term capital from entering and exiting; Loosing the exchange rate control and enhancing the flexible currency will provide a very competitive new foundation for the growth of the Chinese trade sector that has established a complete industrial chain; to be passive and active, we must adopt a comprehensive set of comprehensive treatment solutions for stock debts. It does not even rule out the necessary financial assistance measures to carry out asset swaps, similar to the mode in which Premier Zhu Rongji passed the bad debts of asset management companies in the past, such as issuing long-term low-interest special bonds to purchase existing bank claims, actively promoting debt restructuring, and a large number of bad debts. In the banking system is a very dangerous state, so that banks will become "zombie banks", capital and liquidity are tight, when the external external risks impact, the bank has no ability to operate counter-cyclically, it will amplify the risk of economic "hard landing" . The technical details of the specific implementation can be further explored. For example, this time the central government may have to talk to the local and the bank about a price, and cannot fully pay the bill, and it is necessary to force the establishment of a hardening constraint mechanism.
The policy logic that breaks through the current stalemate depends on the determination and courage of the government to slow down the initiative and release the systemic risks of the economy ahead of time.
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