The Trend Of China'S Economy And The Pattern Of Financial Reform In 2016

2016 China's economic trend ten big conjectures

In 2015, China's economic growth rate was about 6.9%. From the price trend, it was in a more severe deflation after the East Asian crisis and the subprime crisis.

Unrest and trouble in the external situation.

What are the possible trends of China's economy in 2016?

1. the downward pressure on the economy may be eased slightly.

In 2015 9~10, the difference between CPI and PPI reached more than 7.2 percentage points, indicating that China's economy has been deepening since the second half of 2011.

At present, the downside of CPI is the price of agricultural products and the price of food. The reason for the rise of CPI lies in the base effect and the rising cost of employment in the service sector.

The downside of PPI is the continued strength of the US dollar index. The key to PPI improvement is the cardinal effect.

On the whole, the discrepancy between China's CPI and PPI from November 2015 is likely to be mildly reduced.

From the perspective of price matching, it may be hinted that the downward pressure on China's economy will ease slightly in 2016.

At the same time, in the remaining two months of 2015, the possibility of the central bank lowering interest rates and lowering interest rates will also weaken.

2. investment growth will fall below 10%.

In 2014 and 2015, China's fixed asset investment growth rate was 20% and 17% respectively, and is expected to be in 2016 China.

It may fall below 10%.

Among the three factors that support investment, the possibility of improving industrial investment is very weak. Real estate investment growth will be only between 0~3%. The key factor lies in government led infrastructure investment.

In 2015, the scale of infrastructure investment may be 13 trillion and 500 billion yuan. Even if we want to maintain the growth rate of infrastructure investment of 12%, it means that the scale of infrastructure investment in 2016 should be maintained at over 15 trillion yuan. This is a challenge.

Even if fiscal policy relaxes the deficit rate to 3% or even 3.5%, it will be difficult to sustain the expansion of capital investment. What's more, the main way of fiscal effort may be the reduction of the supply side policy rather than infrastructure.

3. the profit margin of the real economy will be slightly improved.

In 2016, from the total indicators of industrial investment, added value and total profit, it is difficult to observe the improvement of China's real economy.

However, the net profit margin of the main business of Industrial Enterprises above Designated Size will be improved. The net profit margin will be 5.5% and 5.2% respectively in 2014 and 2015. By 2016, the profit rate of industrial enterprises will probably rise slightly to the level of 2014.

There are two reasons: first, market interest rates remain at a stable low level, which improves the financial cost of enterprises, and the replacement pricing of corporate debt costs may last for more than 3 years; two, there may be improvement in PPI.

Therefore, there may be a divergence of opinion on the situation of the real economy in 2016. Those who are concerned about aggregate indicators tend to think that the real economy is still deteriorating, and those who are concerned about marginal indicators may think that there are signs of improvement.

4. China's banking profit growth will enter zero era.

It is not surprising that the marketization of interest rates is close to completion, the shadow banking has shrunk again, the demand for physical loans is sluggish, and the revenue channel of intermediate business has dried up. All these have forced the Chinese banking industry to enter the era of zero profit growth since 2016.

In 2015, the banking industry may have about 3% of the book.

After that, the general pattern of the Bank of China in 2~3 was that the overall profit growth was zero, the division of performance was aggravated, the bad assets rose by two litre, capital replenishment was difficult, the industry mergers and acquisitions were speeded up, and bank holding became mainstream gradually.

If the industry with excess capacity is mostly government intervention in the three years after the subprime crisis, the banks that are in line with government intervention and rapid expansion are mainly small and medium-sized businesses.

5. RMB exchange rate is becoming more flexible.

At present, the possibility of RMB joining the SDR currency basket is very great. In 2016, it may be a year of accelerated internationalization of RMB internationalization. The central bank's possible posture is to reduce foreign exchange intervention, expand exchange rate volatility and guide the RMB exchange rate to a balanced and sustainable level.

Therefore, in 2016, even if the US dollar remained strong, the biggest characteristic of the RMB exchange rate was not depreciation, but the flexible expansion of the fluctuation range, and the market self-regulation ability continued to increase.

If the exchange rate of the RMB against the US dollar finally reached around 4% above the 6.35 level, it would not be surprising.

6., the growth rate of consumption may increase to 11% or even higher.

There are two factors that lead to continuous consumption: first, housing.

The volume of residential and commercial housing pactions are active. At present, China's real estate has not been able to pull the investment end of steel and cement, but it still has the pulling power to the consumer end of household appliances. In 2015, the area and amount of sales of commercial housing may increase by 8% and 15% respectively over the same period last year, creating a historical peak beyond 2013. Next year, the probability of real estate and this year's balance is relatively large. Two, it is the improvement of vehicle sales, especially the sales volume of refined oil products.

The generalization of the phenomenon of "gnawing old people" has slowed down the income growth of residents and caused difficulties in employment.

In 2016, the contribution rate of consumption to China's economic growth may rise to 60%, while the contribution rate of industry continues to shrink.

Seven

Accelerate normalization.

Looking back at China's A share market since 2013, the financing function is intermittent, the regulation is loose or tight, and the market fever is hot and cold. It is not a normal and multi-level market with financing, restructuring and investor protection.

After the unusual turbulence of 7~8 months in 2015, the A share market is returning to the new normal from the abnormal state of the rescue market.

The restart of IPO, the landing of registration system, the layering of new three boards and normalization of stock index futures are all just around the corner. Even strategic emerging boards and international boards are not far away.

After the RMB has joined the SDR, it is not surprising that the A shares returned to normal in 2016 should be included in the MSCI index.

So far, equity capital has less than 5% of Chinese residents' wealth allocation, which is 20% in the US.

In addition, the proportion of non residents investing in China's securities market is less than 3%.

The acceleration of normalization, marketization and internationalization of China's stock market in 2016 is inevitable.

8. low interest rates have come late.

China has been showing a sustained slowdown in growth since 2011, but interest rates are running counter to the slowdown in growth. There are two main factors: first, the continuous expansion of the shadow banking system, and the increase in the nominal interest rate of the shadow banks raised by leverage and risk, which has enriched the profits of banks. However, the shadow banking has shrunk in China, and the proportion of bank credit in total social financing has returned to a decisive position. Two, interest rate liberalization inevitably pushes interest rates up, narrowing spreads and forcing the Chinese economy to bear the pressure of deleveraging. At present, the marketization of interest rates is coming to an end.

Therefore, from the second half of 2015, China's interest rate level has been gradually consistent with the slowdown in economic growth.

If China's economic growth is unlikely to recover strongly in the next few years, low interest rates will continue.

There are three factors that affect China's interest rate in the future: first, the overall trend of domestic prices; two, the willingness and means for the central bank to continue to be relaxed, and the three is the change of US dollar index and US Treasury bond yields.

In general, at least until the first half of 2016, China's interest rate will be stable. The resetting of government and corporate debt will lead to heavy pressure on the supply side of bonds, and credit bonds will break the shadow of rigid exchange.

9. China's foreign trade will suffer.

The growth rate of China's foreign trade increased by 15% and 20% in the first 10 years of 90s and the new century, respectively. However, this high growth has gradually gone away. There are three factors: first, globalization is retrogression rather than acceleration.

Emerging countries can no longer rely on external demand growth. China's current account surplus has shrunk from 5% to 10% of GDP and is only slightly above 2%.

The two is the rise of regionalism and protectionism. The TPP/TTIP in the US has deviated from the WTO framework. The terrorist attacks in Paris will also force Europe to be more right-wing and conservative. China may try its best to promote free trade and investment agreements with related economies, but it is difficult to reverse the overall situation.

Three, the RMB exchange rate and export rebates are not likely to be used to stimulate trade. The growth of China's foreign trade will increasingly depend on the growth of China's ODI (outward FDI).

In 2016, China's foreign trade will still be in a state of torment with global trade.

10. China

A new pattern will emerge.

This new pattern has two characteristics, one is that the financial reform is faster than the pace of the pformation of the real economy, and the two is opening and internationalization of finance to the outside and the liberalization of the market.

The "13th Five-Year plan" gives a clear framework for China's financial reform. The pformation of regulatory framework, internationalization of RMB and the hard currency of RMB are the due fruits of financial reform during the "13th Five-Year" period.

But the real economy is still hard to achieve capacity development, strategic pfer and the rise of new industries.

At the same time, the financial layout with the core of Asia Investment Bank, the "one belt and one way" strategy and the internationalization of RMB, may be smaller than the resistance to marketization and privatization of domestic financial reform.

On the whole, the new pattern of financial reform is likely to be clear from 2016.

The history of Japan and the United States shows that a country's initiative to guide the overseas layout of savings and production capacity is the process of going out of money, industry and employment, which will bring long-term suppression to domestic asset prices.