I. recently, the epidemic situation in China has increased significantly, which has brought significant pressure to the economy. At present, the epidemic situation in China is still grim. There are 25000 new cases in Shanghai every day, and the inflection point has not yet appeared; Cases have occurred in 23 provinces and municipalities directly under the central government. The outbreak of the epidemic in Shanghai shows that although the mortality and severe rate of Omicron are relatively low, it is highly infectious and more difficult to prevent and control. Therefore, many provinces and cities have strengthened epidemic prevention and control policies. The manufacturing PMI in March released on March 31 fell 0.7 percentage points against the season to 49.5, and the business activity index of the service industry fell sharply by 3.8 percentage points to 46.7, which has shown that the spread of the epidemic in China has significantly inhibited the economy. Since April, the epidemic situation in China has further aggravated, and the pressure on the economy caused by the epidemic has further increased.
II. Under the background of the new pressure brought by the epidemic to the economy, China's efforts to stabilize growth will continue to increase. On March 30, the national standing committee said that "we will not relax our commitment to the goal and put steady growth in a more prominent position". This means that this year's GDP growth target will not be lowered due to the impact of the epidemic, but to strive to achieve the set target. This requires further efforts to stabilize growth. The national standing committee meeting on April 6 and the Expert Symposium on April 7 continued to focus on steady growth. Considering the great impact of this round of epidemic on the economy, we expect that the steady growth will continue to increase in the future, and the direction of policy development may include four aspects. First, we should step up efforts to rescue industries that are more affected by the epidemic, maintain smooth logistics and supply chain stability in China, and reduce the direct impact of the epidemic on the economy. Second, further expand effective investment by improving fund utilization efficiency and accelerating project progress. Third, encourage the consumption of durable goods such as automobiles and household appliances. Shanghai, which is greatly affected by the epidemic, may encourage residents to consume by issuing consumption vouchers. Fourth, relax the property market policy due to urban policies, maintain the steady and healthy development of real estate and consolidate the foundation of steady economic growth. The market has certain expectations for the central bank to cut interest rates. However, from the perspective of recent policy statements, we still believe that the probability of interest rate reduction in the future is small. The statement of monetary policy at the national standing committee meeting on April 6 emphasized the use of various monetary policy tools such as refinancing, increased small refinancing for agricultural support, and established two special refinancing for scientific and technological innovation and inclusive pension. This means that the focus of monetary policy is still "wide credit". At the Expert Symposium on April 7, the premier said that "we should use reform measures and innovative methods to promote the expansion of consumption and effective investment", which once again shows that China tends to improve the quality of economic development rather than directly take interest rate reduction measures.
Risk tip: China's steady growth is less than expected, and overseas geopolitical uncertainty is increasing
