2010 Macroeconomic and monetary policy outlook

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2010 Macroeconomic and monetary policy outlook Powered By Docstoc
					2010, China'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'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'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 "Supplementary capital of commercial banks on
the complete mechanism of notification" 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'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 "hot
money" 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 "hot money" figure. This will lead to even slow
the growth of domestic credit environment, this year'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'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'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'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'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'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 "inverted scissors" 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'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, "pig cycle" 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 "pig cycle",
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'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'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'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'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'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's monetary policy will be targeted and
flexibility to provide guidance to gradually tighten up, by the end of 2008 and early
2009'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'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'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'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's asset prices
and commodity prices and even the role of monetary policy effects. In fact,
"impossible triangle" 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'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.