Liu Qiao's interpretation of the first quarter data: the introduction of a stronger economic recovery policy as soon as possible
As the economic data in the first quarter shows, the impact of the epidemic on the economy is 100 years old, and we have indeed come to a time when a more robust economic recovery and reconstruction plan is introduced; and this time the macro policy mix should directly target the hardest hit by the real economy. Areas—Small, medium and small enterprises, consumption and employment.
The essence of the impact of the new coronary pneumonia epidemic is that natural disasters directly cause economic and social activities based on social contacts to enter a state of shock. How big is the impact of the "Great Lockdown" on the real economy? Although the January and February data released earlier by the National Bureau of Statistics and the deteriorating employment data after the United States entered social isolation have made the market generally believe that the global economy may face the biggest recession after the Great Depression of 1929, far exceeding the 2008 global financial crisis However, the market still hopes to obtain a relatively accurate assessment through China ’s first quarter economic data. It can be said that the world has never been as eager to find answers to questions through China ’s first quarter data.
The first quarter data verified people's understanding of the nature of the economic impact of the epidemic
On April 17, the Bureau of Statistics released the data. In the first quarter, China's GDP fell by 6.8% year-on-year. Although it far exceeded the level of economic downturn during the SARS period in 2003 and the global financial crisis in 2008, it met or even exceeded people's expectations of the degree of economic deflation that might occur. Uncertainty was partially eliminated, and the Shanghai Composite Index and Hang Seng Index rose slightly. Because China has always been ahead of the world in responding to the epidemic and restarting the economy, leading by about a month and a half to two months, China ’s data has a correct understanding of the impact of the real economy on the total volume and structure, and the progress of the recovery after the gradual restart of the economy As well as the strength of the macro-policy and the focus on the application of force are of great significance.
The year-on-year GDP decline of 6.8% confirms our established understanding of the nature of the impact of the epidemic—unlike the Great Recession and the 2008 Great Recession, the epidemic is not a crisis inherent in the economy or the financial system due to various structural problems. It is a natural disaster that affects the whole world, directly impacting the real economy and causing huge economic and social losses. The economic policy against the epidemic is more accurately called the economic recovery plan. The starting point of the economic policy is "recovery" rather than "stimulation".
The data shows that the epidemic has the biggest impact on consumption, employment, small and medium-sized enterprises
The epidemic impacted the real economy and directly caused a significant decline in corporate cash flow, which led to a significant deterioration in the balance sheets of businesses, households and governments. The impact of the epidemic is particularly severe on small, medium and micro enterprises, which ultimately affect consumption and employment. In the first quarter, among the above-scale enterprises, the added value of state-owned enterprises decreased by 6.0% year-on-year, but the decline of private enterprises was 11.3%. The above-scale enterprises were still under such heavy pressure, and the extent of the impact of small and medium-sized enterprises could be imagined.
In terms of consumption, the total retail sales of consumer goods in the first quarter fell by 19.0% year-on-year, and the generally expected consumption rebound did not occur. As of the end of the first quarter, the savings of our residents reached 87.8 trillion, and the new savings of residents in the first quarter of this year were significantly higher than the same period last year. Obviously, the impact of the decline in residents' income on the consumption caused by the epidemic has not yet appeared. The main reason for the sharp decline in consumption in the first quarter was also the lack of consumer confidence due to the impact of social isolation and uncertainty.
In addition, the unemployment rate in the urban survey in the first quarter was 5.9%, although it was 0.3 percentage points lower than that in February, but this figure did not take into account the large number of migrant workers who have not yet reworked and the hidden unemployment that cannot be resumed for various reasons after resumption. .
The data for the first quarter is already very clear-the focus of this round of macroeconomic policies must be on stabilizing employment, stabilizing consumption, and supporting small and medium-sized enterprises.
Post-epidemic economic recovery faces uncertainty
China ’s economic and social operating data began to recover in March. The value added of industrial enterprises above designated size in March decreased by 1.1% year-on-year, a decrease of 12.4 percentage points from January to February, and an increase of 32.13% from the previous month. low. Against the backdrop of a high degree of global interconnection, our post-epidemic economic recovery is largely constrained by external demand and the overall operation of the global supply chain.
The epidemic in Europe and the United States is still very serious. Other major economies such as India and Brazil and African countries are still in the early stages of the outbreak. If global economic and social activities have been suspended for a period of time, and the length of time depends entirely on the situation of epidemic control, it is difficult for China to be alone. It is evident that the export in the first quarter fell by 11.4% year-on-year.
Although the global industrial chain restructuring or relocation from China will not happen in the short term, China ’s participation in the global value chain is high (export components in exports plus intermediate products account for 62% of total exports), and the upstream level is low (ie, dependent on foreign Intermediate goods imports) are generally still in the middle and downstream positions of the global value chain. If the global economy falls into a major recession (the IMF report on April 14 estimated that the global economy will grow at -3% for the whole year), it will inevitably affect the pace and effect of China's economic recovery after the epidemic; in addition, we are still unable to know when the new crown epidemic will end. To make an assessment, for a long time this year we will have to face the difficult balance of preventing the epidemic and recovering the economy. Based on the data analysis in the first quarter, especially in March, it can be preliminarily judged that if there is no greater effort, the rapid introduction of a precise and accurate macro-policy combination will not occur in the second quarter.
Need to make clear that the starting point of macro policy is recovery and reconstruction, not stimulus
As shown in the first quarter data, the New Coronavirus epidemic is essentially a natural disaster. We cannot use traditional thinking to underestimate the impact of the epidemic on the real economy (especially small and medium-sized enterprises, consumption, and employment) before it is completely controlled. Under such circumstances, we must introduce a stronger economic recovery policy combination as soon as possible.
At the same time, we must also be clear that the starting point of the macro policy should be to mitigate harm and reserve the foundation for economic recovery after the epidemic. All macroeconomic policies, whether fiscal or monetary, cannot solve long-term structural problems. What we need at this time is economic recovery policies, not stimulus policies. The specific economic growth goals should not be entangled, but the policy should be put in the areas directly affected by the epidemic. In the short-term, with recovery and reconstruction as the policy objective; from the medium and long-term considerations, we will not hesitate to introduce long-delayed structural reform measures-the structural problems of China's economy and society can only be solved by more thorough reform and opening up.
Need for stronger economic recovery and reconstruction plans
After the outbreak, we have issued a series of monetary and fiscal policies to control the spread of the outbreak on a larger scale and stabilize the normal operation of the economy and society in abnormal periods. However, compared with the post-epidemic economic recovery and reconstruction goal, these policies are smaller in scale, weaker in strength, less focused, and appear fragmented. This aspect is related to a gradual recognition process of our judgment on the impact of the epidemic. On the other hand, building a balance between strict control of the epidemic and economic recovery is indeed an unprecedented challenge facing China's economy and society. Need to constantly adjust dynamically.
After the epidemic spread rapidly in Europe and the United States, several major economies in the world such as the United States, Germany, and Japan have already launched economic recovery and reconstruction plans equivalent to 10% to 25% of GDP. The impact of the epidemic on China's economy and society is no less than the impact on major global economies such as the United States. Although the Chinese economy has strong resilience, it is reflected in the rapid control of the epidemic and the relatively high resident savings rate 7%, and we are close to 30%), ample room for macro policy, and the first to restart the economy, but as the first quarter economic data shows, the impact of the epidemic on the economy is 100 years old, and we have indeed arrived at a more powerful Economic recovery and reconstruction plans; and this time the macro policy mix should directly target the real economy's hardest hit areas-small and medium-sized enterprises, consumption, and employment.
Macro policy should be based on fiscal policy
Our macro policy should be led by fiscal policy, and the starting point of monetary policy is to ensure the liquidity of the real economy and financial system, implement it flexibly, and cooperate with fiscal policy to support small, medium and micro enterprises, employment and consumption.
In terms of fiscal policy, although we emphasize the introduction of more robust economic recovery and reconstruction plans, there is no need to compare the size of the plan with major economies such as the United States, Germany, and Japan-the underlying logic of economic growth in each country is different. The economic structure is different, and the thinking and execution of responding to the epidemic and restarting the economy are also different.
However, we must clarify that the post-epidemic economic recovery and reconstruction plan must focus on the correct place: support small and medium-sized enterprises and individual industrial and commercial households, subsidize the low-income groups that have been greatly affected by the epidemic, and expand consumption incentive programs Consumption is used to promote the rapid recovery of market activities, and to start investments led by new infrastructure, urban community renovation and rental housing construction, and construction of central cities and metropolitan areas.
It is the right time to introduce a package of top-level designs for economic recovery and reconstruction. Market players and policy analysts have discussed this. Combining the interpretation of the economic and social operating data in the first quarter, there are three further suggestions in terms of specific policy measures.
1. Establish the "Small, Medium, and Micro-Enterprise Stabilization Fund" to directly support small, medium, and micro-enterprises with fiscal policies.
Because the monetary policy transmission mechanism is not smooth, the liquidity released by the banking system is difficult to benefit a large number of small, medium and micro enterprises or individual industrial and commercial households. We recommend the establishment of a national-level “Small and Medium-Sized Micro Enterprise Stabilization Fund” to provide SMEs directly with supportive credit through financial institutions. Most of the credit risk is borne by the finance and a small portion is borne by financial institutions. This provides direct support to SMEs With funds, it can also avoid the moral hazard of financial institutions.
In terms of specific operations, it is possible to issue special government bonds of 10,000 to 2 trillion yuan, establish a “SME Stability Fund”, and entrust commercial banks to directly issue small and medium-sized enterprises through the form of central bank refinancing or the adjustment of deposit reserves. Finance assumes 70% of the credit risk, and commercial banks bear 30% of the risk; loans are divided into two levels, loans are free of interest within 500,000 yuan, and interest is paid at 500,000 to 10 million yuan at the benchmark loan interest rate, strictly monitoring the use of funds, and directly supporting small and medium-sized schools Micro enterprise.
2. A nationwide nationwide implementation of consumer incentive programs led by consumer vouchers.
In a report released on March 8th, I and Color suggested issuing coupons or cash. After a certain period of time, local governments in various regions have successively launched consumption vouchers, which have played a very good role in driving urban consumption. Based on the practice in various places, we suggest adopting a "double-layer" consumption stimulus plan in specific practice.
First of all, cash vouchers for consumption of 1,000 yuan were issued to low-income groups and those unemployed due to the epidemic, all together, about 250 billion yuan. The Engel coefficient of this group is very high, and their income is basically spent to maintain the functioning of daily life.
Second, the issuance of consumer vouchers totaling 500 billion yuan to other groups is coordinated by the state and allows local governments to explore "one city, one policy". According to preliminary estimates by Ant Financial, Hangzhou consumer vouchers have an obvious effect on offline consumption multipliers, and most of the consumption driven by small consumer vouchers are concentrated in industries such as restaurants that are most affected by the epidemic. China has the largest digital payment scale in the world. There are many innovations in the digital presentation of consumption scenarios. Taking advantage of this aspect, China encourages market institutions to actively participate, which can have a huge role in promoting the recovery of post-epidemic consumption.
3. Establish a special budget system and special accounts for "economic recovery and reconstruction" to strengthen pre-supervision and post-audit audits.
The plan for economic recovery and reconstruction needs top-level design, and it is pushed from top to bottom. In order to ensure that the financial support for small and medium-sized enterprises, low-income groups and people can be implemented and achieved results, it is necessary to establish a special budget system for the source and use of funds Carry out overall planning, supervision and auditing to enhance the credibility and transparency of the policy, so that the policy can really play a role.
Author: Liu Qiao
(The author is the dean of Guanghua School of Management, Peking University)