2016 Economy: 12 New Phenomena, 5 Big Problems, 9 Policy Adjustments

President Liu Yuanchun of the National Development and Strategy Research Institute at Renmin University lays out the realities of the Chinese economy in 2015.

First, the 12 new phenomena in China's economy:
1) "reduce overproduction" is still the layout stage, excess industry product prices began to appear fluctuations;

2) the third- and fourth-tier real estate "destocking" not yet begun, but first- and second-tier real estate prices see a general rise;

3) "zombie companies' high debt and corporate regulation has no substantial expansion, a large number of highly indebted state-owned enterprises to enter the land market, and there has been large-scale overseas M & a market and financial investment market;

4) "deleveraging" of various types of initiatives beginning to lay out, but the overall debt ratio continues to rise, some indicators have been much higher than the warning line;

5) "cost reduction" in full swing, but all kinds of macro tax burden index was in continued to increase, the overall profitability of enterprises continued to decline;

6) real estate investment growth better-than-expected rebound in all kinds of new projects rose sharply, but private investment growth was straight down;

7) M2 growth remained stable, but the growth rate of M1 but there continued to rise, M1-M2 gap continued to widen;

8) income growth continued to exceed GDP growth, but labor productivity and corporate profitability continued to decline;

9) a sharp rise in foreign investment growth, but export growth has downturn;

10) all kinds of technical indicators made rapid progress in new economic growth momentum began to appear, but the overall labor productivity continued to decline but still in range;

11) industry and other traditional industries have stabilized, but the service sector and emerging industry began showing signs of fatigue;

12) policy driven investment growth picked up, but consumption has continued to drop.

5 Big Problems:
1, the continuous improvement of infrastructure investment and real estate investment growth is not enough to offset the drop in private and manufacturing investment growth, after the rapid rise in Q1 urban fixed asset investment, a sustained slowdown followed, urban fixed asset investment growth was 9.9 percent, down 1.6 percentage points over the same period last year, a decrease of 0.1 percentage points from the 2015 full year rate. Estimated annual urban fixed asset investment growth of 9.8% in 2016, down 0.2 percentage points from 2015, if in the second half there is a continued rise in the price index of investment in fixed assets, the decline in real investment growth will be more obvious.

2, in the high-end consumer outflow, under the effect of weak income growth and the expected deterioration and other factors, the overall weakness in consumption in 2016 is quite obvious. The first half of 2016, the nominal growth rate of the whole society retail 10.1%, the actual growth rate of 8.0% over the same period last year fell by 0.3 percentage points and 1 percentage point respectively. 2016 annual nominal growth rate of 10.1%, the actual growth rate of 7.8% over last year's growth rate fell by 0.6 percentage points and 1.5 percentage points respectively.

3, under the effect of continued weakness in the world economy and the devaluation of the renminbi and other factors, the import and export presented "first low then stable," the trend in 2016, the first half of 2016, dollar-denominated export growth was -7.0%, annual the growth rate of about -2.3%, while the dollar-denominated first half of 2016, the import growth rate was -4.6%, -1.2% for the full year. In the first half trade surplus was $219.6 billion, the annual surplus is expected to reach $561.6 billion, the proportion of GDP of about 5%, slightly below last year's level.

4, in the economic downturn of 2016, the most prominent indicator is the price rebounded data. From the appearance point of view, various indicators of price rise of vegetables, pork and turns driven commodity product, but look deeper, relaxed, faster money supply growth and continued cost decline is driven round price recovery key. We expected 2016 full-year CPI growth rate of 2.3% over 2015, up 0.9 percentage points. At the same time, the phenomenon of deflation industry will be fully mitigated under "overcapacity reduction" The role of global commodity prices rebound, rebound in real estate prices and the base and other factors, the 2016 full-year PPI fell 1.2%, compared with 2015 narrowed 4.8 percentage points yoy at the end of a single month from negative to positive; 2016 GDP deflator from negative to positive, the annual growth rate of 0.85 percent year on year, compared with 2015, rebounded by 1.3 percentage points.

5, 2016, the overall loose monetary policy continues to sustained tone, but restrained by rising prices, the real estate market bubble and rising leverage and other factors, a more relaxed monetary policy by targeting the first half turned moderately stable; the same time, by the nature of funds within systolic pressure, broad money supply (M2) and the narrow money supply (M1), the whole society the difference between the growth rate of financing to expand further decline in the flow of the real economy aptitude penetration. Expected M2 growth rate remained at 13%, the total social financing growth of 13.4%.

9 policy adjustments:

First, to grasp the current Chinese economy continued to drop logic, attaches great importance to the current overall economic growth momentum continues to decline reality, pay close attention to the current labor productivity decline, business investment expected earnings decline in the real economy and the virtual economic benefits gap continued to expand, consumption investment and domestic demand continued to decline phenomenon synchronization, reform and regulation foothold into tangible return on investment is expected to be reversed, on the rise of labor productivity, and actively build a short-term policy to expand demand and medium-term package to enhance the growth potential of fit.

Second, the 12 categories distortions confirmed the urgency of the supply-side structural reforms fully implemented, on the one hand we must seize the opportunity to reform the current economy continues to dip brought about by the "big big break up"; on the other hand we must currently combing the supply-side structural reforms slow progress of key re-find the focal point of the supply-side structural reforms and implementation of the grip.

Third, the need to further strengthen the world economy from the perspective of in-depth understanding of the role of demand management policies and supply-side structural reforms, a clear leading role in the supply-side reform incremental adjustments and inventory adjustment.

Fourth, we must on the basis of incremental reform, comprehensive structural reforms to strengthen the supply side through the stock adjustment efforts to revitalize the stock, remove all kinds of cancer is the key to China's macroeconomic performance of the economy in transition and recovery. Use of supply-side structural reforms and demand management policies to block endogenous various strengthening mechanisms downturn, prevent the microscopic behavior of the main variation occurs integrity, strengthen supervision on the basis of concern that may arise "recession foam."

Fifth, recognize that from a strategic level to mobilize the enthusiasm of the elite levels of the current and future success of economies in transition to upgrade the core. To recognize that even a sustained decline over the recession has become China's largest political and social risks, and therefore made a major strategic victory in the fight against corruption should be followed by steady growth on the basis of, and actively build a new round of reform and adjustment of new impetus incentive mechanism compatible.

Sixth, the Chinese government should make full use the advantages of institutional and fiscal space, fiscal policy should be more active and effective in further expansion of the fiscal deficit, based on the orientation of the proactive fiscal policy to strengthen the loose, fully cooperate more proactive, more comprehensive supply side structural reforms.

Seven, monetary policy should be fully reconstructed according to the requirements of the new era.

Eight, sustained attention to the real estate market recovery trend, timely adjustment of the current real estate control policies. To change the simple loose policy guidance, to classify control for different regions and different types of real estate enterprises.

Nine, to sustained attention to capacity during the employment market pressure, prevent and resolve labor market risks. Although the yield to give the labor market and affect the overall impact controllable, but the economic downturn superimposed employment pressure adjustment itself is still risk of unemployment can not be ignored.

EO: 2016经济12个新现象和4大问题 下半年政策要做9方面调整

No comments:

Post a Comment