Sentence / Shinmei High

　　Published in the 1028th issue of "China News Weekly" on January 10, 2022

　　2022 is likely to be the beginning of the post-pandemic era, and it may also be the closest global year to stagflation since the oil crisis of the 1970s and 1980s.

This year's stagflation is characterized by an obvious "decoupling", that is, "stagnation in emerging markets and inflation in developed countries".

When inflation forces developed countries to eliminate excess liquidity, emerging market economies may have to eliminate excess capacity. Relatively speaking, emerging market economies including China should pay more attention to the risk of economic slowdown. Developed economies should be more concerned about the risk of rising inflation.

　　The Central Economic Work Conference at the end of last year set the tone for steady growth this year. Different from the previous steady growth, this year's steady growth faces new challenges - including the Fed's tightening of liquidity conditions, the fall in export growth and the transformation of domestic real estate. The Central Economic Work Conference The pointed triple pressures of demand contraction, supply shocks and weakening expectations are closely related to these challenges.

Addressing these challenges is the driving force behind China’s new economic development. Macroeconomic policies must rely on traditional methods to support short-term growth, but also need to build a new growth pattern to tap long-term growth potential. Only the combination of long and short policies can continue to improve market expectations.

　　First of all, monetary policy should be loosened at an appropriate pace, striving to build a solid growth bottom before the Fed raises interest rates, and avoid the policy dislocation of “US interest rate hikes and China interest rate cuts”.

　　Compared with developed countries, China's monetary policy has normalized ahead of schedule, which helps to enhance policy autonomy.

However, we should be cautious about the reasoning that since the normalization of China's monetary policy comes first, there is enough room to deal with the possible economic downturn in the future.

Because, under the existing growth pattern, the United States is still the main driving force for global growth, and the Federal Reserve and other major developed country central banks are still the main providers of global liquidity. This has led to the return of global liquidity to developed economies, which has resulted in large fluctuations in the price of risk assets and a large depreciation of currencies in some emerging market countries, compressing the room for macro policy adjustment in emerging markets.

Only when a country's economy is relatively independent from developed countries led by the United States can its monetary policy have greater autonomy.

　　As China's monetary policy is constrained by the Fed's tightening, this year's macro policy is likely to put more emphasis on the combination of punches.

First, on the basis of the two RRR cuts last year, appropriate consideration should be given to lowering the actual loan interest rate; second, the fiscal deficit ratio should be increased, and local government debt arrangements should be given due consideration; The internal circular economy has been fully implemented.

　　Second, speed up the construction of a new pattern of "dual circulation" and slow down the hedging of external demand.

　　In 2022 and beyond, China's real estate industry growth and export growth will gradually return to normal.

Combined with the current global growth pattern and China's development stage, this means that single-digit growth is the norm, and double-digit growth is likely to be a special case. The possibility of negative growth in a few years or months cannot be ruled out.

　　Therefore, while implementing measures to stabilize growth, take practical measures to speed up the launch of the internal circular economy.

The core of the internal circular economy is to increase consumption from consumption and to require efficiency from investment, both of which have huge potential for development.

In 2020, China's consumption will account for 15.4% of the G20, and the population will account for about 30%. China's consumption expenditure is only half of the G20 average.

Calculated in cash, the per capita consumption expenditure of Chinese residents is only 9.3% of that of the United States.

At the same time, after long-term accumulation, the current per capita capital stock in China has reached US$17,000 at the constant price in 1990.

In the 1980s, China's GDP per unit of capital stock output was close to 1. By 2004, it was comparable to that of the United States. By 2020, it will further drop to 0.34, which is only 55.7% of the United States in the same period.

China's scale advantage can undoubtedly further empower consumption and manufacturing upgrades. A low base is superimposed on scale advantages, and the potential for development is on our side. The key is to accelerate the release of growth potential.

　　Finally, prepare for policy stimulus and growth without real estate involvement.

　　The real estate problem is not an industry case, it is related to the transformation of China's growth model. There should be a systematic risk resolution plan to achieve a soft landing in the real estate industry.

The transformation of the real estate policy, including the launch of the real estate tax pilot program, will change the market's expectations for the entire industry and industry chain, and we should be very cautious in policy promotion.

　　The real estate industry's transition from extraordinary development to normal development will have a significant impact on China's policy and growth environment.

First, in the past few policy relaxation cycles, the real estate industry and the market have exerted a stimulus multiplier effect. In the future, stimulus policies or policy relaxations without the full participation of real estate will greatly reduce the effect. Innovative policy tools, such as more active ones, will be needed. Central fiscal policy.

Second, even if the real estate industry can achieve a soft landing, a question still needs to be answered, that is, what will be the growth drivers of similar scale that can replace the real estate industry chain in the future?

The answer should be consumption.

Third, we must pay attention to the issue of time matching. Real estate adjustment is a fast variable, while cultivating new growth momentum is a slow variable. The policy should reserve space for the connection between the two.

The Central Economic Work Conference emphasized "establish first and then break", which is to constructively respond to the transformation of real estate and other policies.

Fourth, it is necessary to face the problems of survival of various subjects in the real estate chain, including local governments.

As far as local governments are concerned, future expenditure savings may be more important than revenue increases, because without the savage growth of the real estate market, the growth of local fiscal revenue will be difficult to meet the existing expenditure growth arrangements.

At the same time, a logical self-consistent "municipal bond" system should be established to realize the transition from local financing platforms to municipal bonds.

　　(The author is Global Chief Economist of GF Securities)

　　"China News Weekly" Issue 2, 2022

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