At present, the phase of sharp decline in the growth rate of industrial production caused by â€œde-inventoryâ€ has basically come to an end. Although it is still not confirmed that the first quarter is the bottom of Chinaâ€™s economic adjustment, it can at least be considered not far from the bottom.
After the economy has bottomed out, there are two possibilities of stable recovery and turbulence at the bottom. Looking at the domestic and foreign economic environment and its own structural contradictions currently facing China, it is unlikely that there will be a stable recovery and rapid recovery in the short term. Because "destocking" is only the initial stage of economic adjustment, starting from the second quarter, China's "de-capacity" process will begin. This task of digesting excess capacity has two characteristics: "heavily" and "complex".
Since the beginning of this year, China's policies and measures to deal with the international financial crisis have been well implemented. The investment in fixed assets and the consumer goods market in urban and rural areas have maintained rapid growth. The rate of deceleration in industrial production has been decreasing month by month, and some economic indicators have become stable and warmer. There are signs that the momentum of the rapid decline in macroeconomics has been curbed. However, the continuous deterioration of the external environment has led to a sharp decline in export demand. The adverse impact of the international financial crisis on China has further spread and deepened, and the economic operation has not yet achieved a stable upward trend.
I. The implementation of macroeconomic control policies and the overall performance of the economy is better than expected
A substantial increase in government spending is the most proactive, direct, and effective measure for expanding domestic demand. In the first quarter of this year, fiscal expenditure increased 34.8% year-on-year, an increase of 4.4 percentage points from the same period last year. From the perspective of sources of fixed assets investment funds, the growth of state budget funds was as high as 104.7%, an increase of 76.4 percentage points. The accelerated issuance of central government construction bonds and local construction bonds has created favorable conditions for the construction of capital bonds for state-owned bonds and the timely start of construction. Driven by government investment, total social fixed asset investment in the first quarter increased by 28.8% year-on-year, 4.2 percentage points higher than the same period of last year. Excluding the price of investment products, the actual growth rate has increased from less than 15% in the first quarter of the previous year to about 30% in the first quarter of this year, and the growth rate has doubled. The total planned investment for new projects started was 2,265.9 billion yuan, an increase of 87.7% year-on-year. The growth rate of investment in fixed assets has accelerated the demand for the production of investment products. It can use domestic demand to make up for external demand, alleviate the contradiction of overcapacity, and promote the recovery of heavy industry.
Under the guidance of successively lowering deposit and loan interest rates and bank deposit reserve ratios, abolishing credit size restrictions, flexibly adjusting open market operations, and strengthening window guidance, the broad money supply (M2) has been continuous since November last year. Accelerate growth in the month. At the end of March, the balance of broad money supply (M2) increased 25.51% year-on-year, an increase of 7.69 percentage points higher than at the end of the previous year and 5.11 percentage points higher than at the end of the previous month; the balance of RMB loans of financial institutions increased by 29.78% year-on-year, which was higher than the end of the previous year 11.05 percentage points, 5.6 percentage points higher than the end of the previous month. In the first quarter, RMB loans increased by 4.58 trillion yuan, a year-on-year increase of 3.25 trillion yuan.
The moderately loose monetary policy provides liquidity support for investment growth and corporate loan financing, the loosening of social capital facet, loosely funded banking system, structural improvement of the corporate financing environment, the gradual rebound of the securities market, and small trading volume in the commercial housing market. As a result, the currency activity increased, and the narrow money supply (M1) balance increased 17.04% year-on-year, an increase of 7.98 percentage points from the end of the previous year and 6.41 percentage points from the end of the previous month. It has basically returned to normal growth. Domestic loans from sources of fixed assets investment increased by 24.4% year-on-year. China's monetary and credit environment is developing in a moderately relaxed direction. According to the lagging period of the monetary policy effect measured by the econometric model, the growth rate of money supply (M1, M2) and credit scale has risen steadily for three consecutive months and maintained an expansionary trend. Industrial production is expected to rise steadily after 10 months.
Judging from the economic performance of the first quarter, the package of plans for the government to further expand domestic demand and promote stable and rapid economic development is being well implemented. Policy effects have gradually emerged and market confidence has rebounded, especially in March's industrial production and logistics transportation. Significantly better than the first two months, there are more signs of economic improvement.
Second, the economy is not far off, the possibility of a shock at the bottom is greater than a steady rise.
The industrial inventory accumulated during the last period of high growth in China was largely digested in the first quarter of this year. From the trend of changes in the growth rate of funds used by enterprises' finished goods, the peak value of the previous round of economic cycles (a growth of 28.5%) was recorded in August of last year. In November last year and February of this year, the growth rate of the use of finished goods funds was gradually reduced to 25 % and 11.7% indicate that the industrial enterprise "destocking" task was initially completed. The period of sharp decline in industrial production caused by â€œde-stockingâ€ has basically come to an end. Although it cannot be confirmed in the current period that the first quarter is the bottom of economic adjustment (the peaks and valleys of the economic cycle can generally only be confirmed afterwards), at least it can be considered as bottoming out. It is not too far away.
There are two possibilities for a stable recovery after the bottom of the economy and a turbulent operation at the bottom. Judging from the domestic and foreign economic environment currently facing China and the structural contradictions it has accumulated over the long term, it is unlikely that there will be a steady rise and a rapid rebound in the short term. From the recent data, the cumulative amount of electricity generated in the first quarter was 781.102 billion kWh, which was a year-on-year decrease of 1.89%. The countryâ€™s electricity generation in March totaled 286.729 billion kWh, a year-on-year decrease of 0.71%, indicating signs of improvement. However, from the comparison in late March, the average daily power generation in early March was 9.37 billion kWh, an increase of 1.44% year-on-year; in the middle of the year, it was 9.228 billion kWh, down 1.34% year-on-year; and in the latter half it was 9.158 billion kWh, down 2.08% year-on-year. Show signs of twists and turns in the rise in starting electricity. Similarly, the price and output of steel products also once rose back at the beginning of this year, but fell again in March. Steel output increased by 3.1% in January-February and only increased by 1.2% in March. At present, China's economy has not yet formed a stable upward trend. The process of economic recovery is full of twists and turns.
"Destocking" is only the initial stage of economic adjustment. Starting from the second quarter, the process of "de-capacity" will begin in China. This task of digesting excess capacity has two characteristics: "heavily" and "complex".
"Heavy" means that the excess capacity that needs to be digested is unprecedented. The last round of expansion in China lasted a record five years. Large-scale fixed asset investment has accumulated huge production capacity in recent years. Currently, the capacity utilization ratio of various industries is low. Based on the industrial growth rate of 8.3% in March, compared with the average growth rate (potential growth rate) of China's industry over the long term, it can be estimated that the overall capacity utilization rate of China's industry is currently only about 60%. From January to March, the cumulative average utilization of power generation equipment in the country was 1,009 hours, a decrease of 151 hours compared with the same period last year. Among them, the average utilization hours of thermal power equipment is 1,100 hours, which is 186 hours lower than the same period of last year. At present, it is necessary to expand demand on the one hand and eliminate outdated production capacity on the other hand so that the balance between supply and demand in various industries in China can be gradually restored, and the remaining production capacity can increase the actual utilization rate. Only when capacity utilization returns to a normal level will companies enter a new round of equipment investment, and the real economic recovery must be based on large-scale equipment upgrades. Eliminating large amounts of backward production capacity is a very cruel process that takes a long time. From the point of view of cycle symmetry, it takes several years for capacity utilization to return to normal levels.
"Complexity" means that this round of "de-capacity" is not a simple "elimination of backward production capacity." As the adjustment pressures of various industries in China first come from the shrinking of export demand, the most prominent production capacity currently is the production capacity that has been customized for export demand in recent years. This part of the production capacity is neither high energy consumption, high pollution, nor technological backwardness. Instead, it is relatively technical. Advanced, high value-added high-end production capabilities, such as ship-specific steel plates, electronic equipment, etc. In the first quarter, the only negative growth in value added in the industrial sector turned out to be the high-tech electronics industry, with a cumulative decrease of 5.3%. Since this part of the production capacity cannot be turned to domestic demand, the overcapacity is global. Solving this part of capacity idleness needs an improvement in the international economic environment, but international authoritative organizations are not optimistic about the world economy in the next two years.
In short, we must be mentally prepared for the economic ups and downs in the process of â€œde-capacity-building,â€ and do not assume that the economy will rebound steadily soon after the inventory is fully digested. In addition, the international financial crisis is still developing and spreading, and the international situation will still have ups and downs. The current situation requires us to, on the one hand, continue to implement the macro-control policies and measures that have already been issued and observe the effects. On the other hand, we should prepare early and prepare for the implementation of policy plans that deal with more complex and severe international situations, and guide our countryâ€™s economy to recover steadily.
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