[matters]
China’s macroeconomic data from January to April 2022 can be divided into four dimensions: growth power, economic operation, financial credit and government finance:
In terms of growth momentum, the cumulative year-on-year growth rate of fixed assets decreased gradually by 6.8%, of which the cumulative year-on-year growth rate of manufacturing investment was 12.2%, and the cumulative year-on-year growth rate of infrastructure investment was 8.26%, which was significantly stronger than that in the same period last year. The cumulative year-on-year growth rate of real estate development investment is – 2.7%, which is still in the recession range. The cumulative year-on-year growth rate of exports is 12.5%, and the cumulative year-on-year growth rate of imports is 7.1%. It is expected that the rapid depreciation of RMB will further stimulate the growth of exports. The cumulative year-on-year growth rate of total retail sales of social consumer goods was – 0.2% and continued to fall.
In terms of prosperity, PMI entered the recession range for the second consecutive month, which was 47.4, and the unemployment rate rose to 6.1%. The growth rate of added value of manufacturing industry was – 4.6%. CPI began to rise month on month to a year-on-year growth rate of 2.1% in April. PPI continued to decline, with a growth rate of 8% in April. Finally, GDP grew by 4.8% in the first quarter of 2022.
In terms of financial credit, the cumulative year-on-year growth rate of new social finance was 7.21%, which was lower than expected, and the cumulative year-on-year growth rate of RMB loans was – 5.4%. The year-on-year growth rate of M1 was 5.1% and that of M2 was 10.5%. The macro leverage ratio of the real economy sector rose to 268.2% in the first quarter, an increase of 4.4% over last year, and the leverage ratio of the resident sector fell slightly to 62.1%. The five-year LPR fell to 4.45% in mid May, down 15 BP from the end of last year, and the yield of 10-year Treasury bonds remained at 2.83%.
In terms of government finance, the cumulative year-on-year growth rate of fiscal revenue was – 4.8%, the cumulative year-on-year growth rate of fiscal expenditure was 5.9%, and the deficit began to expand. The average issuing interest rate of local government bonds fell to 3.09%, 27 BP lower than that at the end of last year, including 36 BP lower for general bonds and 27 BP lower for special bonds. A total of 0.46 trillion general bonds and 1.65 trillion special bonds were issued, with a ratio of 1:4, a new high in recent three years. It is expected that the issuance of special bonds will expand significantly in June to support infrastructure investment.
[risk tips]
Market liquidity risk
Global geopolitical risks
[comments]
The most difficult period of the economy is about to pass: the PMI has entered the recession range of 47.4 for the second consecutive month. With the full promotion of resumption of work and production, the economy is expected to start bottoming and rebounding. For example, in the first half of May, the power consumption of Industrial Enterprises above Designated Size in Shanghai recovered to 80.5% of the same period last year. The daily container throughput of Shanghai Port reached 119000 TEUs, returning to 90% of the normal level. With the recovery of the supply chain, economic development is expected to return to the high growth track.
Infrastructure will become the core investment increment in the second half of the year: from January to April 2022, the cumulative year-on-year growth rate of fixed assets is 6.8%, which gradually drops, of which the cumulative year-on-year growth rate of manufacturing investment is 12.2%, and the cumulative year-on-year growth rate of infrastructure investment is 8.26%, which is significantly higher than that in the same period last year. In May, the national development and Reform Commission and other departments clearly put forward the key points of promoting work relief in the field of agricultural and rural infrastructure in 2022. At present, the total number of migrant workers in China has exceeded 290 million. Work relief will effectively alleviate the employment problem of the rural population. In the future, rural roads, rural informatization, rural public facilities and rural environmental governance facilities will become new growth points in the field of infrastructure.
The real estate industry is strongly supported by policies: from January to April 2022, the cumulative year-on-year growth rate of real estate development investment is – 2.7%, which is still in the recession range. Since the Politburo meeting in April, it has been emphasized for the first time that we should effectively control key risks and hold the bottom line of no systemic risks. In the near future, the five-year LPR has been reduced to a new low of 4.45%. In line with the policy of adjusting the lower limit of interest rate of commercial personal housing loan for the first set of housing to no less than LPR minus 20 basis points, the real estate industry will receive strong support for the loan interest rate of 4.25%. It is expected that the investment in real estate development will return to the positive growth range after the second quarter.
The rapid depreciation of RMB has come to an end, which is expected to drive the strengthening of net exports: from January to April 2022, the cumulative year-on-year growth rate of exports is 12.5%, the cumulative year-on-year growth rate of imports is 7.1%, and the export of high-tech and electromechanical equipment continues to expand. It is expected that after the current round of RMB devaluation to the 6.8 range, it will continue to stimulate the growth of net exports and effectively drive the growth of GDP.
The government’s fiscal and monetary policies will double boost the real economy: the central bank will maintain the active response of monetary policy, move forward, and comprehensively use a variety of monetary policy tools to maintain reasonable and abundant liquidity. In April 2022, the people’s Bank of China guided the interest rate self-discipline mechanism. The weighted average interest rate of new deposits in financial institutions across the country was 2.37%, down 10bp. By April 2020, the average issuance interest rate of local government bonds had dropped to 3.09%, 27 BP lower than that at the end of last year, including 0.46 trillion of general bonds and 1.65 trillion of special bonds, with a ratio of 1:4, a new high in recent three years. It is expected that the issuance of special bonds will be significantly expanded in the second half of the year to support investment in infrastructure and other public expenditure.
