1、 Key words of 2022: switching between old and new kinetic energy and moving towards “5 times”
Every year, economic operation has its key leading factors. If we can accurately grasp the annual theme words, we can fully grasp the economic situation of that year, understand the policy logic, and then tap investment opportunities.
1. The theme word of China’s economy in 2022 is “new 1-day kinetic energy switching”. High quality development is the theme of China’s economic and social development during the 14th five year plan and even longer. In 2021, we made a steady start and made significant breakthroughs in the “one-day” issues such as the polarization between the rich and the poor, high energy consumption and high house prices: 2022 will build on the past and the future, tap the “new” kinetic energy of economic development, and realize the replacement of the old and the new.
2. In terms of total amount, 2022 is the first year of the “5 times” of China’s economy. After more than 40 years of rapid growth since reform and opening up, the “demographic dividend” and “late development advantage” have gradually subsided, and the potential growth center of China’s economy will move down to about 5%. It is estimated that the GDP growth rate will be about 5.2% in 2022, officially entering the “5 era”.
3. In terms of structure, economic growth faces the switching between old and new kinetic energy. First, in terms of development goals, from the rapid growth in the quantity of building a well-off society in an all-round way to the substantial improvement in the quality of building socialist modernization in an all-round way; second, in terms of terminal demand, from exports and real estate investment to consumption, manufacturing and new infrastructure investment; third, in terms of production factors, from demographic dividend and capital accumulation, Turn to talent bonus and scientific and technological innovation: Fourth, in terms of production mode, from high energy consumption and high pollution to green and low carbon; fifth, in terms of income distribution, from getting rich first to getting rich together, and from efficiency to fairness.
To sum up, 2022 is the “5 times” of kinetic energy switching, the “5 times” of old and new, and the “5 times” of high-quality development. The economy is looking for a medium speed growth platform again.
2、 Macroeconomic Outlook: GDP will grow by 5.2% in 2022. Consumption, manufacturing and infrastructure investment will take over exports and real estate investment, and the ppi-cpi scissors gap will narrow
1. GDP: real estate and exports are down, fiscal and monetary policies are growing steadily, and the economic growth is expected to be 5.2%. To predict the future economic situation, we need to answer three questions: first, if the government does not intervene and allows the economy to operate according to the current trend and logic, how will it evolve? Second, in the face of such an economic situation, what policies will the government introduce to deal with it? Third, what is the final effect after the implementation of the policy?
Since the second half of 2021, China’s economic growth has dropped significantly, and the downward pressure on the economy will increase in 2022. First, although the real estate regulation and control policies have been adjusted to support the just needs of residents, reasonable financing of real estate enterprises and affordable rental housing, the real estate trend is strong, and the downward trend will continue in the short term. Second, the withdrawal of overseas loose policies leads to a decline in commodity consumption demand, the supply substitution effect also weakens with the recovery of overseas production, and exports will fall back at a high level. Third, without policy stimulus, it is difficult for consumption, manufacturing and infrastructure investment to fully impact the resonance of exports and real estate investment. Therefore, the policy will turn to “steady growth”, with wide fiscal, monetary and structural credit.
It is estimated that GDP will show a “Nike” trend in 2022. It is the low point of the whole year in the second quarter, and then it will stabilize and recover, with an annual growth rate of 5.2%. Consumption, manufacturing and new infrastructure investment will take over export and real estate investment. The traditional real estate and infrastructure model is unsustainable. New energy, new infrastructure, high-tech manufacturing and specialization will become new growth points.
2. Consumption: it is estimated that the total retail sales of social consumer goods will increase by 7.1% next year, which is higher than this year, but still lower than the level of about 8% in 2019. First, the marginal impact of the epidemic weakened, and offline consumption gradually recovered. Second, a new round of policies to promote consumption, combined with the implementation of the “common prosperity” policy, is expected to pry the release of savings and boost consumption. It is expected that the new round of consumption promotion policies will mainly focus on green household appliances, new energy vehicles and other categories, in the form of issuing consumption vouchers, encouraging e-commerce and live broadcasting platform consumption. Third, services, construction and other industries that gather more low-income employees should be repaired to improve the consumption capacity of low-income groups. Fourth, the problem of “lack of core” of automobile is alleviated, and the scenery of consumer goods is higher.
3. Real estate investment: the end of the policy has been realized and the fundamentals have been found. The growth rate is expected to be. 1.4% next year. First, the decontamination of soil storage and pre-sale supervision will add to the decline in sales and slow down payment collection. New construction will continue to decline next year, dragging down construction and construction and installation investment. Second, the depressed land transaction will lead to the decline of land purchase fees next year. Third, both Jian’an investment and land investment went down, driving the growth rate of the whole real estate investment to negative. We need to pay close attention to four policy trends: first, whether the landing of real estate tax will further aggravate the wait-and-see mood; second, whether there is policy support in terms of bond issuance and ABS of real estate enterprises; third, the efforts to broaden credit under the pressure of steady growth; fourth, the investment in affordable rental housing.
4. Manufacturing investment: expected to increase by 7.8% next year. First, the implementation of “dual control of energy consumption” and “carbon peaking and carbon neutralization” has shifted from a sporty to a moderate stage of seeking truth from facts, “ensuring supply and stabilizing price” has played an effect, the marginal adjustment of real estate regulation and control, the situation of large-scale rise eroding the profits of middle and lower reaches enterprises has been alleviated, and the utilization rate of superimposed capacity is still high, supporting manufacturing investment. Second, under the goal of double carbon and manufacturing power, a series of policies may pry the reshaping of the industrial pattern and bring more than expected growth in manufacturing investment. Third, the financial policy is increasingly inclined to manufacturing enterprises. For example, the implementation of carbon emission reduction support tools will accelerate the release of carbon reduction loans and provide targeted financial support.
5. Infrastructure investment: expected to increase by 4% next year. Next year, the shortage of infrastructure projects will be alleviated, and the government has a strong willingness to expand infrastructure and stabilize growth, but the special debt is “difficult to support”, or there may be “project and other funds”. The growth rate of infrastructure investment is expected to be higher than this year, but the range is limited, and the overall trend is high before and low after.
6. Export: the growth rate is expected to fall to 6.2% next year. First, the momentum of overseas economic recovery slowed down and the support for China’s exports weakened. Second, the share increase brought by overseas industrial chain repair and supply substitution may be reversed. Third, the support of prices for exports has gradually weakened.
There may still be some supporting factors for exports: first, the epidemic situation repeats again on a large scale, resulting in the continuation of the supply substitution effect; second, the capacity utilization rate of the U.S. manufacturing industry is higher, entering the replenishment period, and the acceleration of production recovery may continue to support China’s exports of intermediate and capital goods; third, sea freight rates are down, The export of low value-added commodities such as textiles and clothing may increase: Fourth, the United States may reduce tariffs on China under inflationary pressure.
7. Inflation: the ppi-cpi scissors gap narrowed, the PPI fell year-on-year, with an expected growth rate of 2.1%, and the CPI rose year-on-year, with a growth rate of 2.0%. The downward trend of PPI is mainly caused by the increase of the base and the easing of the contradiction between supply and demand: the upward trend of CPI is mainly caused by the restart of the pig cycle, the transmission of PPI to CPI and the recovery of demand.
8. Potential risks of China’s economy: first, real estate investment went down more than expected, resulting in a hard landing; second, under the background of the tight fiscal balance and the sharp decline of land transfer income, the risks of fiscal and urban investment bonds were highlighted, the government interest payment expenditure increased, and the fiscal advantage and space were reduced; third, the impact of the tightening of the Federal Reserve’s monetary policy on China was more than expected.
3、 Broad asset outlook
1. Stock market: the two main lines of “narrowing the ppi-cpi scissors gap” and “high prosperity + strategic orientation” support the structural market of a shares. First, the ppi-cpi scissors gap has narrowed, the price of mandatory consumer goods has room to increase, and food and beverage and other related industries have benefited. Second, the concept sectors such as new energy, high-tech manufacturing, specialization and innovation are expected to continue to bring investment opportunities.
2. Bond market: the first half of 2022 ushered in a window period of monetary policy relaxation, driving the yield of 10-year Treasury bonds to continue to decline. First, steady growth, rising demand and relatively controllable inflation; second, external constraints such as exchange rate and China US interest rate spread are weak.
3. Commodities: prices fell, but the center is still higher than before the epidemic. In 2022, the contradiction between supply and demand will ease, and the current high commodity prices may continue to fall: however, in view of the long-term nature of the carbon reduction target, the commodity prices may be higher than before the epidemic.
4. RMB exchange rate: stable but declining, maintaining resilience. On the one hand, China’s exports may fall back from a high level in 2022. At the same time, China’s and the United States’ monetary policies are divided, the interest rate gap is narrowed, and the RMB exchange rate is under pressure. On the other hand, with the gradual entry into force of the steady growth policy, China’s economy will stabilize in the second half of 2022, while the overseas economy may still be disturbed by the epidemic, and the RMB exchange rate will maintain strong resilience.
Risk tips: the change of epidemic situation exceeded expectations, the decline of real estate exceeded expectations, and the tightening of Federal Reserve Policy exceeded expectations
