Introduction to the report / core points
The biggest expectation difference of the current market is that it underestimates the contribution of manufacturing investment to steady growth. In our annual strategy report "breaking through the industrial encirclement first" released in November 2021, we prospectively proposed that the manufacturing industry will once again become an important support for steady growth in 2022 after a lapse of 20 years. Due to the systematic migration of the carrier of steady growth, we suggest that the follow-up should focus on the meso variables related to manufacturing investment, while the traditional meso variables (such as rebar, cement, excavator, etc.) mainly reflect the marginal changes of real estate development and narrow infrastructure, and their reliability and validity will be greatly reduced. We believe that strengthening the chain and supplementing the chain and industrial foundation are the two clues of manufacturing investment and important policy guidelines for steady growth, driving a large amount of capital expenditure to stabilize the macro-economic market. It is estimated that manufacturing investment will be the main contributor to economic growth in 2022, with an annual growth rate of 11.1%.
In the future, the steady growth of new manufacturing will replace infrastructure and real estate, and the manufacturing industry will become a new policy carrier. We focus on suggesting that under the pattern of "steady growth of new manufacturing" in the future, manufacturing investment will replace traditional infrastructure and real estate investment and become the core driving force of the economy. There are two main logics:
1. Making up for weaknesses at the supply side of the manufacturing industry is mainly manifested in strengthening the chain and making up the chain of the manufacturing industry, focusing on the chain length system, and the government participates in the coordination and derivation of a large number of manufacturing investment. The so-called "chain leader system" refers to selecting the core industries of local economic development, and serving as the "chain leader" through the main officials of local governments and even the heads of provincial and municipal governments, so as to "supplement the chain" and "strengthen the chain"
A series of system designs aimed at breaking through the technical obstacles in some industrial links with the new system. Many places in China have focused on the deployment of special actions to strengthen and supplement the manufacturing chain, so as to drive the development and growth of industrial clusters with chain owners.
2. The reconstruction of industrial foundation in the process of economic structure transformation is mainly reflected in the "two transformation" of industry, namely, industrial new energy and industrial intelligence, which respectively correspond to the two major regulatory waves in the world: industrial new energy mainly corresponds to carbon neutralization and industrial intelligence mainly corresponds to antitrust. Industrial base reengineering will drive the investment behavior of enterprises to undergo profound changes. The capital expenditure of enterprises will no longer be confined to the profits of the original industry, but will be promoted by the trend of industrial transformation to a greater extent to carry out cross industry investment. Among them, industrial new energy industrialization is the process of industrial structure reform following the industrialization of new energy, which refers to the deep integration of new energy and various fields of economy and society, promote the reform of energy production and consumption, drive the new energy of the whole industrial chain, achieve the goal of carbon peak and carbon neutralization, and form a new form of economic and social development based on new energy consumption. This process will lead to the comprehensive reconstruction of the manufacturing industry and even the industrial system. First, the cross industry transformation of traditional industries under the wave of carbon neutralization will cut into the new energy track, which belongs to the significant adjustment of the industrial direction. Second, the new energy transformation of traditional industries under the original industrial framework belongs to the slight adjustment of industrial direction. On the whole, this process will bring a lot of incremental investment demand for equipment renewal and technological transformation. At the same time, the promotion of double carbon has formed a global trend. China's perfect industrial chain advantage means that the overseas incremental investment demand will significantly stimulate China's exports, thus replicating the high growth rate of manufacturing industry after China's entry into WTO at the beginning of this century.
Traditional meso data mainly focus on real estate and traditional infrastructure, which is difficult to map manufacturing investment. We can track meso high-frequency data to grasp the trend of monthly macro data prospectively, such as iron ore price, steel inventory and price, blast furnace operating rate, coke oven productivity, coal inventory and price, cement storage capacity and price, glass price, automobile steel tire operating rate, excavator and heavy truck production and sales data, etc, However, most of the above meso data focus on real estate and traditional infrastructure, so it is difficult to fully map the investment status of manufacturing industry. For example, iron ore, rebar, cement and glass mainly correspond to real estate and infrastructure projects in the downstream. In other data, only coal inventory and price data can represent the power generation status, which is highly related to industrial power consumption, while most data can only reflect the local performance of manufacturing industry. For example, the downstream of hot rolled coil is mainly machinery and ship manufacturing, The downstream of cold rolled coil is mainly automobile and household appliance manufacturing, and the operating rate of automobile steel tire reflects automobile manufacturing. Generally speaking, the traditional meso variables are difficult to be used as effective high-frequency tracking of manufacturing industry.
In addition to the above reasons, there are also two disadvantages in the use of meso high-frequency data, which should be noted: first, it is greatly disturbed by seasonality, and the month on month performance deviates from the year-on-year growth rate of macro data; Second, the sample selection is not completely consistent with the macro data, which makes the representation of meso data on macro data deviate in stages. This is also one of the reasons why macro judgment cannot completely rely on meso.
Infrastructure investment is controlled by local government debt, which is difficult to become a breakthrough for steady growth. At present, China is tightening the control of local government implicit debt. According to the Ministry of finance, at the end of 2020, the local government debt ratio was 93.6%, which is not high overall, but it is close to the warning line of 100%. At present, China focuses on preventing and resolving the risk of implicit debt of local governments, forbids local financial institutions from financing or guaranteeing local governments in violation of regulations, and forbids any form of new implicit debt. Therefore, we believe that infrastructure investment needs to fully consider the debt control of local governments. In this context, infrastructure investment mainly comes from special bonds. The new limit of special bonds in 2022 is 3.65 trillion yuan, which is the same as that in 2021.
The proportion of infrastructure investment in the total investment in fixed assets has decreased year by year, and it is difficult for infrastructure investment to return to steady growth. Under the current strict control over the implicit debt of local governments, combined with the limitation of debt burden accumulated for a long time, the proportion of infrastructure investment in the total investment in fixed assets shows a downward trend. From 2017 to 2021, the proportion of infrastructure investment in broad and narrow terms decreased by 1.8 and 1.4 percentage points respectively. In addition, infrastructure construction is gradually transforming to new infrastructure, including information infrastructure, integration infrastructure and innovation infrastructure. Traditional meso variables such as cement and glass will be difficult to accurately reflect the marginal changes of infrastructure investment.
Looking ahead, we expect that infrastructure investment will play a supporting role rather than a major driving factor in economic growth in the future. China will do a good job in "opening the front door and blocking the back door", prevent and control the risk of local government debt, and continue to strengthen the whole process management of "borrowing, using, managing and repaying" special bonds. Infrastructure investment pays more attention to improving quality and efficiency, strengthening investment direction management, paying attention to the balance between financing and income, and promoting the safe, standardized and efficient use of funds.
Urban renewal is a strong variable for the real estate industry to turn to public utilities. In the past, the high turnover real estate industry has gradually transitioned to the attribute of public utilities. Incremental real estate projects will take the form of affordable housing as quasi public goods. In the past, the urban development and construction mode of "massive construction, massive consumption and massive emission" and excessive real estate can not be sustained. On August 30, 2021, the Ministry of housing and urban rural development issued the notice of the Ministry of housing and urban rural development on preventing large-scale demolition and construction in the implementation of urban renewal, which pointed out that: strictly control large-scale demolition, large-scale additional construction, large-scale relocation and ensure the stability of supply and demand in the housing rental market. We believe that in the past, local governments increased fiscal revenue through land sales, and developers passed on high costs to property buyers after developing the land. There is a shift in the analysis paradigm of real estate development and investment. The traditional meso variables are not suitable for the new model with stock real estate projects as the core.
China's urbanization rate has exceeded 60%, entering the middle and late stage of urbanization. With the national new urbanization putting forward the new land use principle of "controlling the total amount, strictly controlling the increment and revitalizing the stock", China's urban development has changed from the increment mode to the stock mode, and urban renewal has become one of the important ways of urban development. Under the guidance of the strategy of big country and big city, the focus of big city development has shifted from extensive development to the improvement of urban internal space quality, and the mode of urban renewal has also shifted from extensive "large-scale demolition and construction" to "embroidered" fine micro renewal.
We will implement the action of urban renewal, promote the transformation of urban development and construction mode from extensive and extensive development to intensive and connotative development, and gradually shift the construction focus from incremental construction led by real estate to stock upgrading and transformation focusing on improving urban quality. In this process, we emphasize again that the traditional meso variables (including but not limited to cement, rebar, etc.) have weak indication. We judge that the real estate industry is no longer the starting point of steady economic growth. It mainly plays a supporting role during the 14th Five Year Plan period. However, considering the investment scale of urban renewal, real estate development investment should not be overly pessimistic. On the whole, real estate development investment will not become a drag on the economy.
The energy reform makes the supply demand converge to the new equilibrium, the structural change of manufacturing industry is no longer applicable to the traditional meso variables, and the economic system based on new energy consumption is gradually established. Under the guidance of the policy of "establishing first and then breaking down" of industrial policy, we believe that both sides of supply and demand will face comprehensive system reengineering, and the traditional meso variables are difficult to apply. According to our calculation, since 2017, the proportion of high-tech manufacturing industry in manufacturing investment has continued to rise, while the proportion of traditional manufacturing industry tends to decline. Among them, the proportion of computer and office equipment manufacturing industry will reach 10.1% in 2021. On the whole, new energy and its industrial chain driven by energy reform have gradually become the main supporting force of the economic system, and the structural changes of the manufacturing industry at both ends of supply and demand need to be paid high attention.
Risk warning: repeated conflicts between Russia and Ukraine; Global Shenzhen Agricultural Products Group Co.Ltd(000061) inflation exceeded expectations; The spread of the epidemic in China exceeded expectations
