Novel coronavirus pneumonia is the first year of the 14th Five-Year plan in 2021, and the second year of the new crown pneumonia epidemic affecting the global economy. On the one hand, after entering the fourth quarter of this year, Chinas overseas political and economic situation is still grim. The second outbreak of epidemic in Europe and the United States has seriously affected the pace of resumption of work and production and economic recovery in these countries, and also led to a relatively weak global economic recovery. On the other hand, the domestic effective demand is still insufficient, the recovery of manufacturing investment and household consumption is relatively weak, the growth of residents disposable income is relatively slow, and the foundation for sustained economic growth needs to be further consolidated.
Now, it is a very important time window to judge the economic situation of next year. How to coordinate the external and internal relations, how to develop the global epidemic situation, how to grasp the rhythm of vaccine research and vaccination, how to implement the political election and economic stimulus of major overseas economies, each of the above links has a great spillover impact on the domestic economy. Therefore, to judge how Chinas economy will start in 2021, we need to study and analyze from the outside to the inside, from the outside to the inside.
1u3001 U.S. policy Spillover: vaccine is coming soon, and the scale and sustainability of fiscal stimulus are uncertain
First, the effect of US fiscal stimulus is diminishing.
Since the outbreak of the U.S. epidemic, the fiscal stimulus bill has a very strong revenue effect, not only boosting the total domestic demand of the United States, but also strongly supporting the global demand, especially Chinas export.
In the fourth quarter, the U.S. fiscal stimulus fund is at the end of its tether, and its support for economic data is becoming weaker and weaker. Financial subsidies under the cares act and ppphcea act expired on July 31. Then, on August 8, 2020, President trump of the United States allocated $44 billion from the disaster relief fund, asking the federal government to provide $300 a week in unemployment benefits, which lasted until December 6.
Second, the game between the two parties determines the scale and intensity of the next round of stimulus.
This year is the general election year of the United States. Both the Republican Party and the Democratic Party of the United States should fully reflect the political demands and practical interests of their own parties on the fiscal stimulus bill to combat the epidemic. By analyzing the financial subsidy effect of cares and ppphcea, we find that the iron bill Cangzhou of the Democratic Party is more beneficial. Take the US Small Business relief loan (PPP) data as an example. The loans are mainly collected by several big democratic iron vote warehouses - California, Illinois, and New York, while the Republican iron warehouse is only received by Texas, which has a large scale, and the Republican iron ticket warehouse in the northwest is not widely benefited. Among the six core swing states, only Pennsylvania and Florida claim more.
This is why since May this year, the Democratic Party has been sticking to the high price strategy of a new round of fiscal stimulus bill, and passed the hero Act (Heroes) with a total amount of 3 trillion dollars on May 15. Moreover, since the end of September, with the voice of Democratic presidential candidate Biden becoming more and more popular, even if the Republican Party throws olive branches on the fiscal stimulus bill, hoping to reach a compromise plan, the Democratic Party has always insisted on the negotiation bottom line of the fiscal stimulus bill of no less than $2 trillion, insisting that local and state government assistance be added to the stimulus bill.
At present, judging from the latest election, Biden is almost certain to win. Trump team has launched lawsuits in several States, but the progress is not smooth, or it is rejected or forced to give up. However, the U.S. Congress may eventually form a pattern in which the Republican Party continues to control the Senate and the Democratic Party controls the house of Representatives. This means that the new round of fiscal stimulus bill needs to fully reflect the interests of both parties. In terms of scale, the bill proposed by the Republican Party was only $500 billion, while that of the Democratic Party was at least $2 trillion. The size of the final stimulus bill is estimated to be between $1-2 trillion. In terms of landing time, even if Biden is elected successfully, his power will be transferred by January 20, 2021. Therefore, the final passage and implementation of the stimulus bill may wait until the end of January to the beginning of February in 2021.
Third, vaccine research and development and rhythm are directly related to the pace of economic recovery.
At this time, the progress of vaccine research and development and the rhythm of vaccination play a decisive role in economic recovery.
At present, the progress of vaccine research and development in the United States is better than expected. On November 9, Pfizer, an American pharmaceutical company, and biontech, a German biotech company, said that according to preliminary results, the effectiveness of their experimental new crown vaccine was more than 90%. On November 16, Moderna, an American vaccine company, said its experimental vaccine, mrna-1273, was 94.5% effective in preventing new coronavirus, according to interim data from a phase III trial.
On November 20, Pfizer submitted an application to the U.S. Food and Drug Administration (FDA) to approve the emergency use authorization of its new crown candidate vaccine. The FDA Vaccine Advisory Committee is scheduled to meet on December 10. Pfizer said that if FDA Approves the vaccine, it is expected to provide 50 million doses by the end of 2020 and 1.3 billion doses by the end of 2021.
The head of the U.S. federal governments rapid vaccine research and development program told CNN that on December 11 or 12, it is hoped that the first batch of people involved in the whole United States, states and regions will be vaccinated. It is estimated that another milestone will be reached around may 2021, with 70% vaccination in the United States, so as to achieve real mass immunization.
If the pace of vaccination in the United States is in line with expectations and everything goes well, the impetus for the recovery of the US economy can be smoothly transferred from fiscal stimulus to the recovery of aggregate demand after mass immunization. At present, the overall inventory of the United States is at a relatively low level, and structural replenishment of the US economy may become an important driving force for the recovery of the U.S. economy.
2u3001 Chinas economic rhythm: the first quarter of 2021 is a high point, with an inverted V trend, and the export is expected to remain stable
For Chinas economy in 2020 under the impact of the epidemic, the most unexpected economic variable is export. At the beginning of 2020, the market was worried that the epidemic would impact on global aggregate demand, which would significantly drag down Chinas exports, as happened in previous economic crises. However, thanks to the rapid response of major economies in Europe and the United States to the impact of the epidemic, the fiscal stimulus bill not only has a fast landing speed, but also has a very strong transfer payment attribute, which significantly improves the short-term purchasing power of residents, and also benefits Chinas exports.
First, the export of epidemic prevention materials decreased slightly with the recovery of the epidemic situation.
Since the fourth quarter of this year, the contribution margin of epidemic prevention materials in Chinas export has declined, while the contribution of non epidemic prevention materials has increased. We split Chinas exports into epidemic prevention materials and non epidemic prevention materials according to the HS2 code. From January to September this year, epidemic prevention materials accounted for about 15.3% of the total exports, up from 12% in early 2020, 2018 and 2019. In the second quarter of this year, the overseas epidemic situation was rampant, the supply chain was suspended, and Chinas export of epidemic prevention materials increased rapidly. However, in the third quarter, although the epidemic situation once again hit European and American countries, because European countries have been actively promoting the resumption of work, European demand for Chinas epidemic prevention materials began to decline marginally. In September this year, Chinas export growth rate of epidemic prevention materials fell to 27% from the peak of 52% in June.
Chinas epidemic prevention materials are mainly exported to Europe and the United States, accounting for 41%; exports to Southeast Asia, Japan and South Korea account for about 24%; exports to India and Brazil account for about 3%. Therefore, Chinas export of epidemic prevention materials is mainly affected by the epidemic situation in developed countries in Europe and America. As of September 2020, the growth rate of Chinas export of epidemic prevention materials to the United States remains at a high level, with a sharp rebound in India and Brazil, and a drop in the EU and other countries.
Second, non epidemic prevention materials benefited from the global economic recovery and maintained a high growth rate.
According to the HS2 code, we split the terminal export products, and found that China has recovered strongly in furniture, entertainment, electromechanical and high-end equipment manufacturing products.
In the fourth quarter of this year, according to the export data of 25 subdivision products released by the General Administration of Customs of China in October, the growth rate of home appliances, toys, mechanical and electrical products still maintained a high growth rate, while the export growth rate of chemical products and automobile products continued to pick up, indicating that Chinas logic of making up for the gap in the global industrial chain is continuing.
Looking forward to 2021, the driving force of the gradual recovery of the global economy on Chinas export should offset the negative impact of the reduction of overseas dependence on Chinas supply chain after the epidemic situation has been recovered, so as to promote the overall stability of Chinas exports of non epidemic prevention materials in 2021.
From the growth rate of the total amount of the products listed in the list related to exports to the United States, the impact of trade friction on Chinas exports to the United States mainly occurs in 2019. The tariff of 34 billion, 16 billion and 200 billion list products will be increased by 25% in June 2018, August 2018 and may 2019, respectively, so the overall amount will be impacted the most. The impact on the overall amount of 300 billion products is relatively small due to the late time and low proportion of additional levy.
Of the 250 billion list, the $50 billion list has recovered significantly this year. In terms of the recovery of export volume, we can observe that the 50 billion list is the best. On the one hand, the reason is that most of the products listed in the US $50 billion list are covered by the exemption list. Although the tariff is increased by 25% in nominal terms, most of the tariff has been exempted. Secondly, since the products listed in the US $50 billion list are mainly mechanical and electrical products, exports to the United States have rebounded sharply since this year. At present, the 200 billion yuan list products are still under Tariff suppression, so once the tariff is cancelled, the benefit will be the highest. The list of 200 billion products is mainly low-tech products, mainly minerals, chemical industry, agriculture, forestry, animal husbandry and fishing, textile and clothing.
On the other hand, the formal signing of RCEP on November 15 is not only an important milestone in the process of economic and trade globalization, but also a strong proof of closer cooperation between China, ASEAN and regional partners. The agreement covers a market of 2.2 billion people (nearly 30% of the world), US $26.2 trillion of GDP (about 30% of the world) and nearly 28% of Global trade (based on 2019 data). By reaching an agreement on high-level reciprocity, countries will further strengthen economic ties and the flow of production factors in the region, further tap the economic potential of each country, and expand the overall market scale in the region, which will play an important role in promoting the economic recovery of countries after the epidemic.
For China, in the face of increasingly severe external situation, through a series of free trade arrangements such as RCEP, Chinas economic resilience and anti risk ability will be effectively improved, and the integration level of China with ASEAN and regional partners will be greatly enhanced, which can fully serve Chinas construction of a new development pattern of domestic and international dual circulation and mutual promotion.
3u3001 Under the thought of cross cycle regulation, macro policy will return to normalization
First, in terms of fiscal policy, the deficit ratio and special debt are expected to be reduced slightly.
The more active and promising fiscal policy in 2020 will provide strong support for the rapid economic recovery.
On the one hand, from January to August this year, the Ministry of finance has reduced taxes and fees by 1.87 trillion yuan. It is estimated that the social burden will be reduced by more than 2 trillion yuan in the whole year. In addition, with the implementation of large-scale tax reduction and fee reduction in 2019, the amount of tax reduction and fee reduction this year will be about 500 billion yuan. It is expected that the scale of new tax reduction and fee reduction will exceed 2.5 trillion yuan, which will relieve the difficulties of enterprises, stabilize market players, support the resumption of work and production, and stabilize the economy Operation plays an important role.
On the other hand, from January to October this year, infrastructure investment increased by 0.7% year-on-year, 0.5 percentage points faster than that in January September. This year, the expenditure progress of infrastructure investment projects is slightly slower than the issuing speed of special line bonds, and the funds for special bonds are detained to a certain extent. This part of funds may be used smoothly in the first quarter of 2021, providing support for subsequent infrastructure investment.
Second, in terms of monetary policy, the growth rate of social finance and M2 is expected to decline.
In 2020, a more flexible and moderate monetary policy will keep the money supply and the scale of social financing significantly higher than the growth rate of nominal GDP, and add reasonable and sufficient liquidity, which will effectively promote the recovery of the overall economy and the stable development of the financial market. By the end of October this year, the growth rates of broad money supply (M2) and social financing scale were 10.5% and 13.7%, respectively, 2.1 and 3 percentage points higher than the same period of last year, significantly higher than that of 2019. Due to the rapid recovery of Chinas economy after the epidemic, the yield of 10-year Treasury bonds first fell and then rose. It is expected that the high volatility pattern will remain until the first quarter of 2021.
Looking forward to 2021, with the gradual weakening of the impact of the epidemic and the moderate decline in the scale of government bond issuance, it is expected that the growth rate of broad money supply and social financing scale will also slightly decrease, but still maintain a rapid growth rate. The downward window of 10-year Treasury bond yield will gradually open in the second quarter. At the same time, with regard to the general tone of monetary policy in the next stage, just as the peoples Bank of Chinas policy briefing recently said, the prudent monetary policy will be more flexible, moderate and precise oriented, and adjust the policy strength, rhythm and focus in time according to the changes of the situation and market demand. On the one hand, the policies issued in the special period will be adjusted in a timely manner, and on the other hand, the policies that need long-term support will be adjusted Further increase policy support.
Third, in the aspect of real estate policy, we should continue to stabilize land price, house price and expectation.
The rapid real estate investment in 2020 is an important starting point to expand the total demand. In order to implement the positioning of no speculation in housing and promote the stable and healthy development of the real estate market, the Ministry of housing and urban rural development, in conjunction with the peoples Bank of China, strengthened the fund monitoring of real estate enterprises and established the three red lines financing management rules.
Under the background of tight regulation and control, it is expected that the real estate investment can maintain a rapid growth in the short term. First, the development investment is mainly composed of construction, with strong inertia; second, the land transaction scale in the first half of 2020 is relatively large, and the land purchase fee is formed after half a year, which supports the growth of real estate investment. However, the financing sources of developers are gradually affected by regulation and control, and the growth rate of residents house purchase funds is rising and falling, resulting in the negative growth rate of new construction in September. Third, the completion growth rate will continue to increase in 2021, which will provide strong support for real estate investment. The monthly growth rate of completion in October this year rebounded rapidly to 5.9% from - 17.7% in September, and it was also a rebound on the basis of strong monthly growth rate of completion in October 2019. With the real estate entering into the small cycle of deleveraging, it is expected that developers will have strong motivation to complete the settlement in 2021.
Looking forward to 2021, it is expected that the momentum of further upward real estate investment is not strong, and it will re-enter the channel of slight downward under the background of tightening regulation.
4u3001 Under the dual cycle pattern, opening and expanding the domestic market is inevitable
First, the domestic big cycle is the main body, and the domestic and international dual cycle promote each other.
On the one hand, for a large country, domestic supply and domestic demand play a major supporting role in the economic cycle. We should take expanding domestic demand as the strategic basis point, play a key variable role in scientific and technological innovation, and strengthen the key core technology research. On the other hand, after Chinas accession to the WTO, the source of our external competitiveness depends more and more on the super large domestic market. Through the strong domestic market, we can share higher R & D investment and fixed asset investment, so that the scale economy industry has more export advantages.
Second, medium and high-speed growth needs to focus on stimulating domestic demand.
It is an inevitable choice for Chinas economy to continue to maintain medium and high-speed growth by promoting dual circulation and expanding domestic market. China will basically realize one of the long-term goals of socialist modernization in 2035. It is clear that Chinas per capita GDP will reach the level of moderately developed countries.
The level of developed countries can be approximately replaced by the average level of OECD countries. If China reaches the level of moderately developed countries, it will be about half of the average level of OECD countries. There is a precedent for Chinese economic authorities to use the average level of OECD countries to represent the level of developed countries. For example, on March 23, 2019, Han Wenxiu, deputy director of the China finance office, said at the China development forum that Chinas per capita GDP was only about 23% of the average level of OECD countries.
At present, foreign trade plays an increasingly small role in promoting Chinas economy. The proportion of the current surplus in Chinas GDP has decreased from about 1% in 2007 to about 10% in 2019. The proportion of Chinas total import and export to GDP has also dropped from over 60% in the past to more than 30% at present. Therefore, Chinas economic growth in the future will depend more and more on domestic consumption and investment, especially on Chinas super large domestic market.
Third, relax the institutional constraints, reduce the debt burden of residents, and adopt a structured credit policy.
To promote the expansion of consumption, we should not only relax the institutional constraints, but also strive to reduce the burden of residents, so as to improve the consumption rate of residents.
On the one hand, in terms of relaxing institutional constraints, the proposal of the CPC Central Committee on the 14th five year plan and the long-term goal of 2035 has clearly put forward that we should strengthen the basic role of consumption in economic development, adhere to the strategic basis of expanding domestic demand, accelerate the cultivation of a complete domestic demand system, connect all links of production, distribution, circulation and consumption, and form a virtuous cycle of the national economy. On November 18, the national standing committee also clearly stressed that it was encouraged to adjust and optimize the purchase restriction measures, increase the number plate index, stabilize and expand the automobile consumption; through strengthening the construction of County town trade facilities and village logistics stations, the rural consumption was driven by expanding the County Township consumption.
On the other hand, the high housing price and high mortgage pressure have an obvious suppression on the consumption rate of residents. It can be considered that while adhering to the principle of no speculation on housing and housing, we should implement a structured and differentiated stock credit policy for residents, so as to release the consumption potential of residents. In addition, the impact of the epidemic on the consumption capacity of residents is greater. Although the national residents disposable income, after deducting price factors, has returned to normal in the third quarter, in the first three quarters, the per capita consumption expenditure of national residents was 14923 yuan, a nominal decrease of 3.5% compared with the same period of last year, and the actual decrease was 6.6% after deducting the price factor.
(chief Macro Analyst of Guotai Junan Securities Co., Ltd.)
Source: Economic Observer, editor in charge: Yang Bin_ NF4368