Text / Zhong Zhengsheng Zhang Lu
In the first quarter of 2022, China's GDP growth rate recorded 4.8%, and the Chinese economy is still in the bottoming stage.
In addition, the main economic indicators generally declined in March. Under the situation that the internal and external environment has become more complex and severe, the policy of stabilizing growth needs to be built up.
It is expected that the vigorous implementation of the fiscal policy, the city-specific policy, marginal adjustment of the real estate regulatory policy, and the appropriate adjustment of the monetary policy will support the stabilization of the Chinese economy in the second quarter of this year.
Exports slow down, infrastructure develops
In the first quarter of 2022, China's economy grew by 4.8% year-on-year, which was a rebound from 4% in the fourth quarter of last year. However, considering the low base factor in the first quarter of last year, China's economy still faces greater downward pressure at the beginning.
Specifically, industry and construction played a pivotal role in economic growth in the first quarter; the service industry recovered slowly and remained a weak link in economic growth.
From the perspective of GDP by expenditure method, the formation of fixed capital accelerated in the first quarter of 2022, while the pull of net exports to China's economy declined, and economic growth became more dependent on domestic demand.
In March 2022, the year-on-year growth rate of major economic indicators in that month generally fell compared to January-February, except that the growth rate of infrastructure investment continued to increase.
Under the influence of the epidemic, the recovery of China's service industry and consumption has suffered periodic setbacks; the outbreak of the Russian-Ukrainian conflict has had a negative impact on China's export growth; the real estate industry is still under the influence of "weaker expectations", and real estate investment is under downward pressure highlight.
Infrastructure investment plays a counter-cyclical adjustment role and is expected to become a driving force for economic stabilization along with the manufacturing industry.
Among the economic indicators that fell sharply in March, the year-on-year growth rate of the service industry production index fell from 4.2% in January to February to -0.9%, and the year-on-year growth rate of total retail sales of consumer goods dropped from 6.7% to -3.5. %, the month-on-year growth rate of real estate development investment dropped from 3.7% to -2.4%, and the year-on-year growth rate of export delivery value dropped from 16.9% to 10.8%.
The relatively stable economic indicators in March include: industrial added value increased by 5% year-on-year in the month, high-tech industrial added value increased by 13.8% year-on-year in the month, and manufacturing investment increased by 11.9% year-on-year in the month.
Although the growth rate is not as high as the peak in January and February, it is still stronger than the level in December last year to a certain extent.
Infrastructure investment outperformed, with a year-on-year increase of 11.8% in the month.
The rebound of the epidemic has significantly impacted consumption and employment
In March 2022, due to the severe rebound of the domestic epidemic (especially the logistics in the Yangtze River Delta and the Pearl River Delta region, which were seriously affected), commodity consumption with a higher degree of recovery before will weaken more than catering consumption month-on-month.
In March, the total retail sales of consumer goods increased by -3.5% year-on-year, a sharp drop from January to February.
Among them, retail sales of goods increased by -2.1%, and catering consumption increased by -16.4%.
Judging from the total retail sales of enterprises above designated size, the growth rate of retail sales of optional consumer goods turned negative in March, and the growth rate of retail sales of mandatory consumer goods accelerated.
In terms of sub-categories, only the growth rate of retail sales of food and beverages and Chinese and Western medicines accelerated in March compared with January to February. Gold and silver jewelry, textiles and clothing, furniture, automobiles, cosmetics, home appliances and audio all showed significant negative growth year-on-year, while 1 From January to February, the year-on-year growth rate of the month was mostly positive.
Among them, optional consumer goods such as furniture, home appliances and audio have strong post-real estate cycle attributes, and are currently subject to the downturn in commercial housing sales.
After the epidemic, the restrictions on automobile purchases were relaxed in many places, which better released the demand for automobile consumption.
However, in the first quarter of this year, auto-related consumption tended to fall under dual pressures: first, international crude oil pushed up the travel cost of traditional passenger cars, and second, the rise in upstream lithium resource prices drove many new energy vehicle companies to increase prices.
Under the sluggish demand for optional consumption, the National Standing Committee on April 13 proposed "to encourage large-scale consumption such as automobiles and home appliances, and no new measures to limit the purchase of automobiles should be added in various places. The incremental automobile incremental indicators that have implemented purchase restrictions have been gradually increased. Support the consumption of new energy vehicles. and the construction of charging piles”, and relevant policies are already accumulating.
Under the impact of the epidemic in March, China's employment pressure surfaced.
The urban surveyed unemployment rate in March 2022 was 5.8%, 0.5 percentage points higher than the same period last year and only 0.1 percentage points lower than the same period in 2020.
The rise in China's unemployment rate in March was a temporary factor due to the impact of the epidemic, but it is even more important to be vigilant that the increasing downward pressure on the economy has weakened the ability to absorb employment.
The surveyed unemployment rate in 31 large cities reached 6%, 0.7 and 0.3 percentage points higher than the same period in 2021 and 2020, respectively. The outbreak and strict control of the epidemic in Shanghai, Guangdong and other places have led to a rapid increase in employment pressure; 16 to 24 years old The unemployment rate of the population has further increased to 16%, compared with 13.6% in 2021 and 13.3% in 2020, respectively. It is still a big challenge to solve the employment of the young population.
The current pressure of "stabilizing employment" is mainly reflected in: firstly, solving the employment challenges faced by colleges and universities, especially college graduates; secondly, the service industry continues to be affected by the epidemic. The ability to absorb employment is weakening.
The apparent increase in employment pressure in March may be one of the important reasons for the State Council's recent RRR cut.
In the follow-up, if the employment problem further deteriorates, it can be expected that more vigorous counter-cyclical control policies will be introduced.
Infrastructure and Manufacturing Investment
It is expected to help stabilize the economy
In March 2022, the cumulative investment in infrastructure construction increased by 10.48% year-on-year, which was significantly faster than the 8.61% in January-February.
The month-on-month of infrastructure investment from January to February was slightly stronger than the average of 2015 to 2019, and the month-on-month of March was further significantly higher than the average of the same period in previous years, and the growth of infrastructure investment has actually increased.
This is due to this year's fiscal advance and the strengthening of project reserves since the fourth quarter of last year.
It is expected that the local government will further accelerate the issuance and use of special bonds in the second quarter of this year, thus forming a strong support for infrastructure investment in the first half of the year.
As far as the use of stock is concerned, after the rapid issuance of special bonds in the fourth quarter of last year and the first quarter of this year, the funds for special bonds in the second quarter are expected to land at an accelerated pace, creating a "physical workload".
At the policy briefing held by the State Office on April 12, the relevant person in charge of the Ministry of Finance stated that "the special bonds issued in 2021 will be allocated and used before the end of May this year in principle", "as of the end of March 2022, the financial departments at all levels have accumulated 852.8 billion yuan of bond funds were allocated to project units, accounting for 68% of the newly issued special bonds.”
In terms of the issuance rhythm, the issuance of special bonds may further accelerate in the second quarter.
The National Standing Committee on March 30 proposed that "the quota issued in advance last year will be issued by the end of May, and the quota issued this year will be issued by the end of September."
In March 2022, the cumulative year-on-year growth rate of manufacturing investment dropped to 15.6%, and the month-on-month growth rate was still weaker than in previous years.
After the outbreak of the Russia-Ukraine conflict, the upward pressure on international commodity prices became more prominent (PPI changed from negative to positive month-on-month in February, and further expanded to 1.1% month-on-month in March), which made the cost pressure of the manufacturing industry increase instead of falling.
However, the 1.5 trillion yuan tax rebate policy of the financial department will take effect from April, and the 1 trillion yuan tax reduction policy will also be further strengthened; the balance of medium and long-term loans to the manufacturing industry in the first quarter increased by 29.5%, accounting for about 22.6% of medium and long-term corporate loans in the first quarter.
The force of fiscal and monetary policies is expected to effectively offset the negative impact of rising upstream costs, which will help the growth momentum of manufacturing investment to gradually increase.
New Challenges and Countermeasures Facing China's Economy
At present, the Chinese economy is mainly faced with internal and external risks and challenges in six areas:
First, the conflict between Russia and Ukraine has increased the risk of global "stagflation", and "inflation" has become a catalyst for "stagnation".
Second, the Fed may adopt a special combination of "quick rate hikes + sharply shrinking balance sheets" to constrain domestic monetary accommodation.
Third, the pressure of epidemic prevention and control has increased sharply, suppressing the recovery of consumption and service industries.
From the high-frequency data, since March, the number of trips in major cities has decreased, the degree of congestion has been significantly reduced, and the box office revenue of movies has fallen sharply, indicating that offline consumer demand is still weak.
Fourth, SMEs face the dual pressure of cost shocks and sluggish demand.
In 2022, the macro policy needs to increase support for small and medium-sized enterprises, focus on hedging cost pressures, and enhance the vitality of market players.
Fifth, the real estate control policy has been loosened, but the sales of commercial housing and land transactions have not yet stabilized, and the confidence of residents and real estate companies has yet to be restored.
Sixth, export resilience continued, but the impact of factors such as the recovery of overseas production capacity and the weakening of the demand for restocking in the United States on China's exports was looming.
The impact of the Russian-Ukrainian conflict on the global supply chain may, to a certain extent, support the continuation of China's export market share advantage.
But at the same time, attention should also be paid to the possible impact of strict domestic epidemic prevention and control on maintaining the stability of China's manufacturing supply chain.
In view of the above-mentioned new situation and new challenges, we propose the following suggestions on how to exert the force of monetary policy and fiscal policy in the next inter-cyclical and counter-cyclical regulation. The risk of sexual inflation has not been lifted, and the constraints faced by China's monetary policy easing have increased.
Therefore, the focus of monetary policy operations may shift to the use of structural tools and macro-prudential policies, but it is also necessary to pay attention to the positive signal significance of overall monetary easing, and there is still room for RRR cuts and interest rate cuts.
At the same time, fiscal policy needs to play a more active role in stabilizing growth.
The second is to take "new citizens" as the starting point to further strengthen financial support for regional strategies such as new-type urbanization, rural revitalization, and urban agglomeration and metropolitan area construction, and coordinate development with real estate and infrastructure construction.
Third, after the conflict between Russia and Ukraine, the geopolitical situation facing China has become more complex, which has put forward higher requirements for China's "autonomous and controllable" capabilities in core technology fields.
Fiscal policy should efficiently support "self-control" on the basis of fully utilizing market-oriented means.
Fourth, it is necessary to strengthen the construction of medical infrastructure and expand the choice of epidemic prevention policies.
Fifth, take the opportunity of building a unified national market to promote the free flow and optimal allocation of production factors, and promote the effective traction and positive interaction between the supply side and the demand side, so as to lay a solid foundation for the steady and long-term development of China's economy.
(Zhong Zhengsheng is the chief economist and research director of Ping An Securities, and Zhang Lu is a senior macro analyst at Ping An Securities Research Institute)
"China News Weekly" 2022 Issue 15
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