This week, the two sessions of the country were held and the closing ceremony was held today ( March 10 ). During the two sessions, there are the following important information worthy of attention.
Government Work Report : 5 % Growth Target and Treasury Bonds
The first is the government work report of the State Council in 2024. The report reviews in detail the progress of government work in 2023 and explains the economic macro-control and industrial policies in 2024. We look ahead in the ‘ two sessions : finally, we only have the word ‘ trust ‘ to express the incremental confidence of the two sessions compared with the central working meeting, and more importantly, the government ‘s policy and how to combine long-term and short-term issues. After the publication of the government work report, we carefully compared its incremental information with the Central Working Economic Conference. In general, the government ‘s governance framework in 2024 has maintained consistency with the Central Economic Conference, and it is consistent with many industrial issues and scientific and technological progress issues. There is no turning point, and the overall macro-policy continuity is maintained.
In addition to continuity, the government work report added three more clear digital information :
1 ) The economic growth target in 2024 is about 5 % ;
2 ) In 2024, the deficit rate will be 3 % in nominal terms, and 3.9 trillion yuan of special debt will be issued ;
3 ) Permanent special national debt instruments, issued one trillion yuan this year.
First, achieve the 5 % economic growth target. After our calculation, the benchmark situation is that the social zero growth is 6 %, which is 1 percentage point lower than that in 2023, the total fixed asset investment is 3.9 %, which is 1 percentage point higher than that in 2023, and the total net export of goods is 7 %, which is 6 percentage points higher than that in 2023. The basic replacement relationship is that the growth rate of 1 percentage point is equivalent to the growth rate of fixed asset investment of 1.06 percentage points. The two-year average growth rate of social zero in 2023 is 3 %. Its better performance is in July-September, of which the two-year average growth rate in August reached 5 %. August is mainly due to the greater monetary policy support and CPI also shows an upward trend in the third quarter. In order to infer that in the first half of 2024, it is possible to require monetary policy support to reach the level of August last year and maintain a 6 % growth rate on the basis of a two-year average growth rate of 5 %.
From the recent economic point of view, since January 25, February 5 structural cuts in interest rates, RRR cuts, February 20 five-year LPR history of the largest cut in interest rates, February CPI data improved significantly, although the PMI data by the long-term expected impact is weak, but the first quarter of the zero 6 % growth rate should be similar. If the data does not meet expectations, then monetary policy will continue in the second quarter. For the growth rate of fixed assets, the additional ( incremental ) financial funds in 2024 are as follows : the deficit increases by 180 billion, the special debt increases by 100 billion, the special national debt in 2023 is calculated at 300-400 billion ( the estimate of the unused special national debt in 2023 ), and the 100 billion PSL ( estimate ) has an overall increase of about 700 billion, and the financial funds are still quite sufficient. However, for the permanent one trillion special treasury bond instrument, we can not count it all into infrastructure. It can play a role between consumption and infrastructure. On the consumption side, it can participate in equipment renewal and consumer goods renewal programs to stimulate the economy through financial subsidies.According to the previous parameters, the substitution ratio of consumption and infrastructure investment can reach 1 : 1.06, and spending more of a trillion special national debt on people ‘s livelihood construction may be a more conducive way to the long-term development of China ‘s economy.
In general, the government work report better answers the relationship between short-term 5 % economic growth and long-term economic growth through financial arrangements, especially the permanent one trillion special national debt instrument. It is expected that the vast majority of the next few years of special national debt instruments should be spent on the construction of people ‘s livelihood. China ‘s stock market has also shown that furniture consumption ( Gree, Haier, etc. ) continues to rise, and it is expected that enterprises that can participate in old-age care and childrearing will also have growth value in the future. Of course, we still have to constantly assess the 5 % growth rate based on the progress of the economy. Intuitively speaking, when the consumer goods hit 7-8 discounts, the probability of non-consumption in the residential sector is relatively small. Another long-term problem is that once the standing special treasury bond is opened, its impact on inflation and deficit rates may be apparent for some time to come. Therefore, it is quite irresponsible to not develop the habit of calling for the issuance of large-scale special treasury bonds when it is found that there is a problem. In particular, whether this special national debt is used to subsidize the consumer side ( consumer goods ), the production side or the resident side is worthy of attention and discussion.
The Ministry answered the reporter 's question : capital market and real estate
In addition to the government work report, the incremental information is the answer to journalists ‘ questions from the main ministries. There are two press conferences that have a greater impact on the domestic economy. One is the country ‘s major macro-control departments, including the central bank, the Ministry of Finance, the China Securities Regulatory Commission, the National Development and Reform Commission, and the Ministry of Commerce. The other is the country ‘s major industrial policy departments, including the Ministry of Housing and Urban-Rural Development. The content of the first conference is mainly to answer the questions of the above three numbers. Among them, the CSRC gives a working framework for the construction of China ‘s capital market in the next few years. We believe that the following points are more important :
1 ) Promote dividends of listed companies ;
2 ) Declaration is responsibility ;
3 ) Investor-centered.
Subsequently, the performance of China ‘s A-share index was relatively stable. Under the support of major heavyweight stocks ( CNOOC, China Mobile ), the optimism of market stabilization was relatively positive. Looking forward to a period of time in the future, from a macro perspective, it is still necessary to substantively get out of deflation. Our view of getting out of deflation is that CPI reaches 2 % growth rate and maintains for a period of time, which is consistent with the perspective of international observation.
The second conference mainly answered a series of questions about China ‘s industrial policy, in which the Ministry of Housing and Urban-Rural Development focused on the future policy of China ‘s real estate industry. The Ministry of Housing and Urban-Rural Development said that insolvent real estate companies should go bankrupt. China ‘s real estate problem is more concerned by all parties in the market. So far, taking Beijing as an example, the price of the core area has fallen by 10 %, the old and broken assets have fallen by about 30 %, and Shenzhen is about 20 % and 35 %. In the face of the fall of asset prices, the real estate industry may not be able to be determined by the Ministry of Housing and Urban-Rural Development alone, especially the task of Baojiao Building is facing different adjustments in various places. We believe that in order to successfully solve China ‘s real estate problems, the real estate price should be adjusted in an orderly manner :
( 1 ) Releasing the purchase restriction in the core area, allowing real estate enterprises to withdraw funds, repay debts and guarantee buildings ;
2 ) the acquisition of existing commercial housing, as affordable housing use ;
3 ) The central government provides funds to transfer local use to solve the problem of Baojiao Building, and part of the 700 billion in the central budget can be used for this.
4 ) If the future development model of real estate is based on the existing house, then the company ‘s cash flow is required to be sufficient, which requires us to consider the stage of national development. This is mainly a relative cost problem. The rate of return on capital investment in various industries determines the future supply of existing housing in China. Considering the decline of China ‘s overall interest rate in the future, there is still room to mobilize large capital to convert the forward housing model into the current housing model.
5 ) Whether the commercialization of land transfer fees can be considered. Specifically, it is not a one-time delivery, but a multiple delivery as a financial product, reducing the capital pressure of housing developers. Financial instruments such as REITs are a good attempt.
In general, it is necessary to lower the production cost of the existing house and make it beneficial to the people.
International : the market is relatively stable, high optimism
Internationally, we pay attention to the new progress of the United States.Firstly, the stock price of New York community banks has plummeted recently in the United States.There have been rumors about the risk information market of commercial real estate in the United States.New York community banks are very exposed to commercial real estate. Its stock price crash is the fuse of its internal control problems, the follow-up fermentation will not cause the U.S. news of the financial crisis led to the collapse of the chain of banks, standing in the overall U.S. economic point of view, the U.S. residents of the run panic is not high. Since the price of collateral for commercial real estate loans has not fallen significantly, there is no major problem with the balance sheet of the New York Community Bank. The only problem is the high rate of commercial real estate idleness and low return on investment caused by home office after the epidemic. Therefore, the stock price fluctuation of the New York Community Bank will not cause fluctuations in the U.S. stock market, and the overall continues to see more.
Second, the recent sharp decline in Apple ‘s stock price and the sharp rise in Nvidia ‘s stock price mean the arrival of the AI era. For the US stock market in the past two weeks, Nvidia has excelled, and the stock prices of other companies have not been significantly raised. The overall rise of the Nasdaq has basically benefited from the rise of Nvidia. The decline in the stock prices of traditional star companies such as Apple shows that everyone is pessimistic about their earnings expectations. Everyone is reducing possible future risk exposure. We believe that technological innovation is always the best driving force for economic growth. In the era of AI, we are about to witness the rotation of star enterprises. AI will not only reshape software, but also reshape the entire manufacturing industry. Although there is no data, we can boldly guess that the profitability of Open AI individual employees may have exceeded that of Apple and Microsoft.
Third, the latest unemployment rate in the United States rose to 3.9 %. This may lead to early expectations for interest rate cuts. In the Fed ‘s mouth, the inflation rate from 3.1 % to 2 % is bumpy, and the unemployment rate may give you some clear answers. According to the Beveridge curve, the change in the unemployment rate will be drastic after the job vacancy rate has passed a certain zero point. Specifically, the Beveridge curve refers to the L-shaped relationship between the unemployment rate and the job vacancy rate. Due to the existence of the job vacancy rate as an intermediate buffer area, the rapid rise in the job vacancy rate will not cause a sharp rise in the short-term unemployment rate. As the job vacancy rate gradually shrinks, the unemployment rate will enter a rapid rise stage. Once it enters a rapid rise stage, the Fed may be on the road to inflation. The bump may be quite large. Powell also expressed at last week ‘s hearing that cutting interest rates too early or too late is a risk. Global investors will continue to see more as unemployment rises, interest rate cuts are expected sooner, and recent technological innovations advance significantly.