2010, China&#39;s macroeconomic outlook and monetary policy With the further recovery of economic growth, accelerate the pace of capital inflows and credit activities have become more active this year, ample liquidity conditions will further develop in the future to further raise the reserve ratio is still possible, but the spatial and frequency but not with 2006 - comparable period in 2008. Nevertheless, the recent rise is an important signal of changes in monetary policy is tightening monetary policy direction towards an important step, that the monetary authorities to determine the future trends in economic performance. 2010, 2009, the credit would be very out of state, but to normal. However, the demand for the real economy is still strong, the contraction must be prudent, reasonable, or would seriously restrict the steady rise of just economic growth. 2010: the growth of beginning a new round of 2010, China&#39;s economy picking up sustainable? Future economic performance What is the main risk? What should the future of monetary policy to do what to choose? This series to be answered by discussing the issue, perhaps Glimpse of China&#39;s economic prospects for the future. From the troika of view, the economic recovery trend in 2010 is expected to continue in China, GDP growth is expected to reach 9.5%. As the world economy recovers, the international market and further recovery in exports would be improved, that in December last year, a sharp rebound in exports could be tip of an iceberg, is expected to achieve positive growth this year and export growth of 10% -15%. This year the government will increase efforts to stimulate consumption, coupled with improved employment situation, a result of rising asset prices, the income effect and the wealth effect, consumption this year is expected to maintain steady and rapid growth in total retail sales expected to grow by about 17%. From an investment point of view, a substantial investment in new projects last year, growth has inertia, this investment will continue to maintain relatively high growth rate. Investment in new projects with total fixed asset investment growth data showed the growth rate of new projects last year, more than 80%, these projects continue to run to ensure that future investment will help boost. In the new batch of decentralization of central government investment projects, to gradually increase the confidence of economic recovery, housing and automobile dealers to remain active under the impact of the real economy by 2010 is expected to remain strong credit demand. According to an annual increase of the public long-term loans accounted for a year plans to invest 20% of the total calculation, this new medium and long term loans to the public at about 3500 to 4000 billion yuan, added about a trillion of mortgage loans, and then Taking into account the gradual recovery in exports, private investment rebound and inflation and other factors, demand for loans this year will total 8 trillion. 2010, there are a series of credit supply constraints. On the one hand, the recent stock market by diverting deposits to residents effects, the slow growth of household deposits, bank deposits and loans has increased more than the next bank sources of funds may face some difficulties. On the other hand, rapid credit growth led to the first half of the overall capital adequacy ratio of banks declined, some of the low capital adequacy ratio of small bank loan growth will be limited. In addition, the CBRC recently issued the &quot;Supplementary capital of commercial banks on the complete mechanism of notification&quot; of bank credit will have a certain restraining effect. However, these constraints are not The great negative impact. Than be seen from the savings and loan, financial institutions currently total loan-to-deposit ratio of about 67% invested in this round of credit before the large-scale (by the end of 2008) the loan to deposit ratio was 61%, 67% from the control room ceiling is still relatively large . RMB deposits in accordance with the end of this year, an increase of 27%, loans up 33%, the assumption of 20% loan growth next year, deposits grew 15%, then the end of next year, the loan to deposit ratio of about 70%, 75% of the maximum from the control is still a far, of course, deposit growth is more conservative estimates. Therefore, in general, banks are credit constrained supply capacity has little effect. Speed is also of direct financing in 2010 will maintain a relatively comfortable liquidity conditions. Equity financing last year, about the size of about 500 billion. This year the stock market IPO, refinancing will significantly increase non-financial sector equity financing is expected to amount about 600 billion yuan. The year 2009, non-financial sector issuers may be about a trillion. With the bond market in 2010 to further develop and improve the expected amount of bond financing is expected to reach or more than 1.5 trillion yuan. Therefore, this year the total amount of direct financing of non-financial sector will be more than 2 trillion yuan, which will also finance the expansion of bank loans to some extent on the substitution. Foreign Exchange Reserves up to this year&#39;s ample liquidity is another factor. With the resumption of exports this year, the trade surplus increased appreciation of the renminbi is expected to increase, and international capital inflows, foreign exchange will continue to rise, which might see some &quot;hot money&quot; disappeared. Foreign Exchange Reserves increased significantly in the last quarter is a proof, while a sharp rise in import and export in December, which might see some &quot;hot money&quot; figure. This will lead to even slow the growth of domestic credit environment, this year&#39;s overall liquidity will continue to be more relaxed. The reason why 2010 will become a new economic growth cycle starting point, I think, a number of factors contributed to the following. From the industry point of view, the formation of future growth will be two rounds of the real estate industry and the automotive industry drives a good situation. Since 2003, with the strategy of continuing to promote urbanization, China&#39;s real estate industry is a significant development. 40-50 on the middle and lower real estate related industries, the development of the whole national economy has a strong stimulating role. With the urbanization measure to promote the further implementation of the real estate industry, the future is still good growth. Very similar with the real estate industry is also involved in automobile industry on the River about 50 industries, the automotive industry one unit of output can drive the overall increase in all sectors of national economy and 10 units of output. This is a huge multiplier effect of any other industry timers. Automobile production in 2009, is the proportion of GDP has achieved tremendous growth in the year, ended the past seven years has remained at around seven per cent of the situation. This is because the effect of the policy stimuli, on the other hand is more important is that in U.S. dollars per capita income level of GDP3500 conditions, a considerable number of families have access to a car has a consumption capacity of the phase. This is a milestone in China automobile industry development. Just a little look at the history of the world economy, we will know the United States and Japan last century, development of automobile industry and its tremendous economic engine for the role of stability. As population and income growth, the future auto industry in China will have huge growth potential. Real estate and automobile will become a new round of growth in our economy strong and the two drive wheels. From the demand point of view, the future stability of domestic demand will continue to vigorously promote economic growth. If exports to China since 2000 has a very important driving force of the economy, then after 2009, constituted by the investment and consumption, domestic demand will be the two main engines of economic growth. In response to the negative impact of the international financial crisis, the Government has a proactive fiscal policy and invest huge amounts of money to stimulate consumption, many of whom are long-term initiatives, which will have the continued growth in consumption have a positive effect. At the same time, the stimulus package, the large number of infrastructure projects came into being, the rapid injection of huge amounts of credit in 2009, investment has received a staggering growth. In view of a considerable portion of people&#39;s livelihood, must at the same time moderately easy monetary policy and more comfortable mobility for the future of these projects continue to run and create a favorable financial conditions. After all, China&#39;s per capita GDP at current low levels, while many of the infrastructure needs of the population are far higher than developed countries, so future investment growth will remain relatively high. In view of this, now say that investment is not sustainable high is too early to invest in our infrastructure is far from the stage can be reduced to lower levels. The new growth cycle is bound to investment and consumption based on domestic demands posed by the two-engine power. From a regional point of view, the acceleration of the rise of the central and western regions will promote a new round of economic growth. Since the last century, China gradually established a western development, central China and Northeast China&#39;s series of regional development strategies, and has continued into the types of resources. Vast central and western provinces continue to speed economic growth. Particularly in response to international financial crisis, substantial financial resources and bank credit into the central and western regions of the various infrastructure projects. There is no doubt that with the further implementation of the strategy and follow-up to run a large number of projects, there will be more money flowed into the central and western regions, to promote the central and western regions higher than the national average rate. In response to the crisis strategic direction taken will mean a strong move will inevitably bring about the growth of central and western regions of the inflection point appears speed, its stability and fast growth of national economy and the role of developing the western region and the United States that year with the same purpose. More than half the population, low per capita income in the future development of the central and western regions of China an important source of long-term economic growth. From the financial point of view, the rapid development of direct financing the future bring to improve the financing structure will boost a new round of economic growth. In the current round of international financial crisis in the health and stability of the banking sector contributed to strong credit capability. However, rapid growth in bank credit, while it did not much care about direct financing in particular has enjoyed rapid development of bond financing. To corporate bonds, corporate bonds, medium-term notes, short-term financing bonds based financing in 2009 the growth by leaps and bounds. With the GEM, the introduction of small businesses and improve debt collection and direct financing products to further innovation, coupled with the development of asset securitization and bond markets to further expand the direct financing of future products will be based on the existing substantial development . The credit-based bank will gradually decline in proportion of indirect financing, financing structure will further reasonable direction. Stable and healthy financial sector development and a reasonable structure optimization will effectively boost and protect a new round of economic growth. Operational risk: the increasing worries of three Overall, the future will be more relaxed financial environment, the real economy will be better run this year. Despite the rapid growth of credit in 2009 the potential risk to the banking sector will not become a reality in the short term, but run the risk of 2010 is likely to reproduce a series of worries. One worry is the price to rise rapidly. By the needs of the future, international, food, reform, a number of factors such as currency and is expected to promote this year&#39;s prices may appear a relatively rapid rise. Experience has shown that double-digit economic growth is likely to result in aggregate demand and aggregate supply a certain gap between, thus promoting inflation. December 2009 PMI index has increased by one percentage point, more than 56%, faster economic recovery will boost demand for various types of means of production, driving prices upward. M2 and M1 of the &quot;inverted scissors&quot; significantly expand and stable operation. Experience has shown, M1 and the PPI and CPI is more stable and there is simultaneous movement of the first relationship, which is about four quarters or so, last year&#39;s rapid monetary expansion is an important basis for future inflation factor. The recent rebound in the price of pork, and has gained access to re-enter, &quot;pig cycle&quot; has the possibility of reproduction. Enhanced by the expected depreciation of the dollar and other factors, international commodity price pressures, China imported inflationary pressures. Current and future stage, the international commodities cycle, internal &quot;pig cycle&quot;, cycle and food prices have touched a monetary cycle. Today, the price of domestic resources, reform ongoing, some local governments may also introduce new price increase initiatives. In a more relaxed state of mobility, people&#39;s expectations of future inflation is continuing to increase. View from the hikes resulted in 2009 in the first half of the lower base price. From the above seven aspects together, can not rule out the first half of 2010, a rapid rise in prices appear likely. Last year in November, CPI has been regularized, in December to 1.9% immediately, in December PPI has also turned positive early than expected, which indicate that inflation pressures are gradually released obviously. As rapid economic growth economy, excess production capacity in China has never really effective control over prices ,2007-2008 period there have been a fairly rapid CPI increase, but not excess capacity at that stage it? Prices will rise faster this year, one of the concerns to be serious, have no reason to be complacent. The second worry is the asset price bubble. With faster economic recovery in asset prices to rise again in 2009, part of the coastal city line price bubble, the stock market Zeyi restorative up the keynote. But the further recovery of economic, foreign capital inflows accelerated, ample liquidity, improved corporate earnings and inflation expectations, driven in particular asset prices in 2010 may be substantially higher price, do not rule out the possibility of bubble formation significantly. M1 and stock prices, house price data shows the very close relationship with each other. M1 increased rapidly since the end of last year indicates that the future asset prices will move in this direction, to the extent possible a little bit different. If the policy likely to change the appropriate intervention will be affected, but the trend of changes in asset prices is unlikely to change soon. The acceleration of urbanization, increase national income and social insurance system will further promote the real estate market demand. Current real estate market supply is limited by certain constraints of land and investment, growth is still not effectively keep up with demand. The Government aims to suppress the bubble real estate market in order to avoid big ups and downs, but not to completely defeat the real estate market. Therefore, the real estate market in 2010 will be more stable, of course, housing prices in large cities may be first-line phase adjustment. Excessive increases in asset prices need to forward-looking management, but care must be taken. From the recent situation, a reasonable increase in asset prices on economic growth to benefit. In accordance with the Tobin effect, increasing wealth of individuals and businesses will increase their investment in the future, reasonable income growth will also help expand investment and consumption, and reasonable real estate prices also helped push up the recovery of private real estate investment growth. Asset prices rose too fast through the wealth effect will shortly be further increase future inflationary pressures, and its rapid burst the bubble will crack down on investor enthusiasm, economic disruption, bringing significant capital flight and the systemic risk. In the long term, the bubble over the General Assembly to make the economy over the financial trend, leading to the enthusiasm of entrepreneurs to invest without the real economy. The third aspect of worry is the large-scale international capital flows. Reserves constitute data, recent new parts can not be explained in more foreign exchange reserves, foreign exchange increased significantly, foreign capital inflows obvious. This may have economic and financial environment throughout 2010, generating new pressures. Monetary authorities in more than a year since the end of 2008 in the pressure has seen a dramatic change. Over international capital flows will lead to further increase domestic liquidity to commodity prices and upward pressure on asset prices; also cause the currency to remain under appreciation pressure, damage into the country&#39;s export competitiveness; the rapid rise in the short run reserves also brought management pressure. From 2006 to 2007, China has experienced a similar process. In the current international liquidity is abundant, the first rapid rise of China&#39;s economy is likely to become the global capital chasing the object. External capital inflows exerted pressure on the yuan appreciation, which will adversely affect exports and foreign exchange reserves also increased the focus on the future of capital flight if the economic potential risk of harm. Entered after 2010, these scenarios are likely to reproduce. Can not step into the same river twice, but the history they often have striking similarities. Run from the recent situation, in these three areas seem to worry all the time. This shows the existence of the Chinese economy into the possibility of partial heat. This view seems to be inconceivable in the past. Rebound after the economic downturn usually requires a process to gradually return to normal growth conditions, and to overheat the process may be longer. I think the reason there is the possibility of partial heat from the big perspective, the following two main reasons. First, the rapid expansion of aggregate demand. Government-led financial investment to stimulate domestic demand-oriented policies to promote economic recovery were outstanding. However, sustained high growth in investment and consumption significantly accelerate the pace of domestic demand will soon result in a relatively short period of time expansion; the international market has clearly picking up in external demand will increase dramatically, thus promoting the rapid expansion of aggregate demand. Second, liquidity is very comfortable, I think that within the flow of foreign capital inflows is the main reason of well-off. Exchange rate mechanism reform in 2005 before the international capital into China is accelerating the pace of China&#39;s existing foreign exchange reserves more than one trillion U.S. dollars 2 most of the past three years built up. This means that there is a corresponding money supply, although a considerable portion of which has been hedged, but not fully recovered. Current liquidity is an important performance in a comfortable reserve ratio is at a higher level. The third quarter of 2006, the reserve ratio began to rise when less than 8%, after nearly two years of frequent increases in June 2008 to 17.5%. September 2008 to the fourth quarter, in order to stimulate economic recovery, lower the rate after several big banks only reduced to 15.5%, 13.5% of small and medium banks. This is at historically high levels, which is a strong stimulus to implement precisely the critical moment. At present, China is facing a new round of international capital flows test. Liquidity is very comfortable to the rapid expansion of aggregate demand to provide the appropriate financial conditions. Can be seen, these two aspects is a hotbed of economic trends overheated. Monetary policy: a flexible response to the direction of tightening Keynote of this year&#39;s monetary policy is still moderately easy positioning. Moderately relaxed monetary policy tone is a big framework, is a certain range of space to run, monetary policy, content can be conducted within the framework of this large degree of fine-tuning or adjustment. Continuity, stability, relevance and flexibility of the future direction of monetary policy very important principle. When the economy is running basically stable, not much changes, policy continuity and stability can be based; when running a larger trend changes, they have targeted and flexibility to the main. Subject to demand, currency, international, food, and a series of reforms and expected factors, the price in 2010 there appeared the possibility of a rapid rise; by accelerating economic growth, ample liquidity, speed up the inflow of foreign capital enterprises profit improvement and the expected impact of inflation, asset price bubbles may also form a local large; this year&#39;s monetary policy will be targeted and flexibility to provide guidance to gradually tighten up, by the end of 2008 and early 2009&#39;s actually very easy to substance The solid or neutral. This year to tighten monetary policy gradually in the process of quantitative tools will play a major role. Although the recent U.S. economic recovery gathers momentum, but still in the initial stage, the short-term Fed rate hike is unlikely. Both the 2008 and early 2009 to stimulate the economy, U.S. interest rates down quickly to zero and has been more stable. The relatively modest decrease in our interest, so far the interest rate gap with the United States, if the earlier interest rate increases will further expand China-US interest rate differentials, and further attract foreign capital into the country, thereby increasing asset prices and commodity prices pushed up the level of pressure; which will generate further tightening of monetary policy requirements. As the good momentum of China&#39;s economic recovery and more stable, economic growth potential, and the expected appreciation of the yuan again, outside the capital entered already exists a strong motivation, if interest rates will lead to further enhancement of Sino-US spreads to expand this type of motivation, that are likely to form such a non-virtuous cycle. Besides China&#39;s rapid economic recovery, but business conditions are still recovering, especially in the private economy and the general profitability of SMEs is still weak. In this case, lower interest rates help to further restore their good financial environment, thereby boosting economic growth more stable. Therefore, the parties to use interest rate tools to be more cautious. That we were a regulation can be clearly seen, fewer interest rate adjustments, less volatile. The future, this will be basically the same pattern. In 2010, with the price to speed up recovery, CPI likely will be more than 2% in the first quarter, it is likely to form a negative interest rate state, such as the U.S. interest rate outlook becomes clearer, then after the second quarter rate hike in China will enter sensitive period. In 2007-2008, there was once in RMB appreciation to curb rapid price increases of thinking. But people see the actual result, the sharp appreciation of the yuan, after more than three consecutive years, foreign capital inflows, asset price increases; while prices continued to accelerate in 2007-2008, up, and intensified. Despite the substantial rise in prices of various factors, including demand, cost-push and ample liquidity, etc., but the capital appreciation of the RMB to promote greater efforts to bring demand and liquidity inflows increased significantly, it is an indisputable fact. Therefore, the need for such a trade-off of: the monetary authorities to pay a huge hedge costs, but more substantial appreciation of the yuan is boosting capital inflows, asset price bubbles and the substantial rise in prices, monetary policy has thus they bear a great control pressure. The other pattern is the same money to pay a huge hedge costs, but because the RMB exchange rate remained stable, reduced capital inflows, asset prices and inflation pressures, monetary policy has thus regulating the pressure will be reduced accordingly. The more likely is that, due to elimination of the appreciation of the expected inflow of foreign capital will be less dynamic, monetary authorities may also reduce the hedging cost. In view of this, consider the export industries in addition to the actual needs, which may also be keeping the yuan basically stable exchange rate against the U.S. dollar, another a reason. Recently, the central level and the monetary authorities reiterated that the yuan at a reasonable and balanced level basically stable position. Although, to date no one can come up with a currency exchange rate reasonable and balanced level of convincing evidence, but the exchange rate is without any doubt, is China&#39;s core interests. It is not only related to direct and indirect employment to accommodate 150 million people in the export industry, also has ties to China&#39;s asset prices and commodity prices and even the role of monetary policy effects. In fact, &quot;impossible triangle&quot; relations, we are only three possible pursuit of a more favorable result, which is difficult to be neglected either. The RMB exchange rate should adhere to its controllability and autonomy principles. Therefore, we can determine the future of the RMB against the U.S. dollar will remain stable in the main, but does not rule out a slight rise after years possible. Only a firm confidence and the formation of stable the stability of the reality of a period of time, be possible to form a stable of market expectations. Quantitative tools of monetary policy include open market operations, reserve ratios and credit management. The future the number of open market operations will be based tool one of the most important role. It is more flexible and stronger in a certain range targeted. Since the second quarter of 2009, although the two-way operation, but in fact is mainly to tighten in 2010 will continue along this direction. After 2010, monetary policy operations, the deposit reserve ratio will increase the use of tools, but hardly as significant as between 2006-2008, a large frequency of use. Liquidity in the banking system is very comfortable, stimulating the economy by the end of 2008 when the rate of deposit reserve rate cut is not big. After the latest adjustment, the current rate of 16% of the large banks, small and medium banks was 14%. 2010, continued good economic growth still needs to maintain a reasonable growth rate of bank credit, and if the stock market and property market activity may result in bank deposits slowed down, the banking industry seems unbearable higher deposit reserve ratio. This year, with the accelerated pace of economic recovery and more stable capital inflows would be speeded up, resulting in increased speed of Foreign Exchanges, the increased bank deposits faster, liquidity and the well-off, the deposit reserve ratio will further enhance demand. This raised the deposit reserve ratio by 0.5% in 2008 to adjust the first time since the fourth quarter. The current phase is more clearly generous liquidity is the main background of this upgrade. End of the year funds will generally return the Bank, except with the lay of the deposit will be significantly increased; the recent expiration of a larger number of central vote, a lot of money will be devoted to the financial system; to accelerate the pace of capital inflows since the end of the year, foreign exchange may be significantly increase in the amount of funds to market expansion, etc., plus the first week of the New Year is said credit capacity, the parties concerned that the momentum of the future reproduction of a credit boom. But I think the market may not be the legendary figure shows in January or the first quarter of the overall situation. The first week of release was more important reason is that the end of the project devoted to accumulate. In fact the large banks to control credit method is not only the reserve ratio, regulators, window guidance should be a very effective means. Of course, for a large number of small commercial banks reserve ratio to be more effective tools. Deposit-loan ratio for small banks is relatively high, some tight financial position, increase the reserve ratio will help to check their credit impulses. With the further recovery of economic growth, accelerate the pace of capital inflows and credit activities have become more active this year, ample liquidity conditions will further develop in the future to further raise the reserve ratio is still possible, but the spatial and frequency but not with the 2006 - comparable period in 2008. Nevertheless, the recent rise is an important signal of changes in monetary policy is tightening monetary policy direction towards the important steps that the monetary authorities to determine the future trends in economic performance, money and credit control has entered a new stage . Quantitative credit control is a very important aspect of tool, not only because of changes in credit deposit direct effects of the broad money supply, but also because the financing structure in China is still so far mainly indirect financing. 2010, 2009, the credit would be very out of state, but to normal. However, the demand for the real economy is still strong, the contraction must be prudent, reasonable, or would seriously restrict the steady rise of just economic growth. Thus, in 2010 the principle of the credit control should be a reasonable guide. The amount should be more appropriate, and that should be higher than in 2009 but no less extraordinary state of rapid decline. Because a large number of long-term infrastructure projects have been launched, the manufacturing sector started to recover and private investment to pick up, prices go from negative to positive growth in fast rising, economic growth may be near or at double-digit, which are required to meet credit growth. From a structural point of view, should be optimized, that is, have started projects in the basic requirements to maintain the same time, should increase efforts to invest in the manufacturing sector, the private economy, SMEs and high-tech energy industry, promoting the economic improvement. Judging from the pace should be relatively balanced, that is to change too fast in the first half, especially in the first quarter put the situation, efforts to eliminate non-normal impact of the credit demand, this year&#39;s total due, the relative equilibrium. If a quarter of operation to meet the seasonal needs of the economy put in 30% -40% of the credit, in the first half put in 60%, should be reasonable and normal.