每日推荐

Early signs of reflation in China

1. When assessing China’s 2019-2020 economic outlook last November, our key question was whether the economic slowdown in 2018 would be a mid-cycle correction or the start of a prolonged downward trend. We concluded that the medium-term growth trajectory would largely depend on how policies were adjusted both in China and the US. Thus, we chose to present our 2019-2020 macro outlook under three scenarios based on different policy trajectories of the “G2”. Under our base case scenario of 6.4% real GDP growth in 2019, we assumed: 1) notable yet insufficient adjustments of the cyclical management policies in China (mainly fiscal easing that likely begins to occur in 2Q19), 2) 2 interest rate hikes by the Fed in 2019, and 3) partial relief of the US-China trade frictions. We also saw that risks were mostly on the downside for our base case growth forecast.

2. However, after a gloomy quarter of disappointing macro data and market performances at the end of last year at home and globally, Chinese policymakers have taken notable counter cyclical actions earlier and stronger than expected. Strong credit and total social financial growth for January has offered the first positive sign that the world’s second largest economy may be putting an effective “circuit breaker” to halt the slide of its domestic economy. Coupled with a more dovish Fed, as well as relatively positive news flows from the on-going US-China trade negotiations, almost all asset classes globally have seen a strong rebound since the start of this year.

3. Experience shows that if the rebound in credit and total social financing growth is sustained, it will lead to a powerful growth impulse in the Chinese economy, with its reflationary impact felt beyond its borders (Figure 1). The simultaneous easing of financial conditions in the US and China has already resulted in a noticeable rebound in global commodity prices, particularly oil prices. Meanwhile, 10-year Treasury yields seem to also have stopped falling in both markets. Unsurprisingly, the sustainability of China’s credit upsurge should, and will likely, be the focus of global investors in the coming months.


4. We see two related, but also distinct issues in assessing the sustainability of China’s credit expansion. One has to do with its medium-to-long-term efficiency and the other with its durability in the near term. The first issue is important, but evidence will likely be inconclusive for some time. On the other hand, the speed and durability of the credit recovery over the next 3-6 months is more relevant for global risky assets, and it can be observed by investors who can then adjust their macro outlook and asset allocation when facts change.

5. In our view, the earlier and stronger policy responses have revealed that a broad policy consensus may have been reached that: 1) maintaining a healthy pace of growth (still at above 6% level) is important for China; and 2) the severe tightening of financial conditions in 2018 was a policy misstep and needs to be adjusted. Thus, we believe the present growth supporting environment, including an accommodative monetary policy stance, further tax and fee cuts, and lessening of some overly restrictive regulatory requirements, will likely be maintained until signs of growth and/or inflation pickup are confirmed. In other words, the economy is likely to have bottomed, and we now see risks to our growth forecast of 6.4% this year as balanced.

6. On the other hand, the slope and duration of this episode of credit recovery are likely to be more constrained than either the 2008-2009 or the 2016-2017 reflation experiences for three reasons. First, the balance sheets at both banks and government (incl. local governments) are more stretched, and need to be repaired and/or restructured. Second, many regulatory constraints introduced in the last few years, including those on the financial sector, local government financing, and the property sector, have not formally been removed. Thus, they may continue deterring credit supply. Third, although a more dovish Fed has provided China with some breathing room to reflate its domestic economy, an overly expansionary credit boom that leads to a rapid upsurge in commodity or asset prices would still put the renminbi under severe depreciation pressures.

7. Nevertheless, the effective easing of financial conditions is an important and necessary step to lift China from the negative feedback loop of below potential growth -> deflation -> worsening NPLs. The sustainability of the recovery over the medium term hinges on whether China can make material progress on many badly needed efficiency-enhancing structural reforms, particularly those related to improving the functionality of its capital markets so as to allocate its massive savings more efficiently. A stable growth and inflation macro environment is certainly more conducive to undertake these reform efforts than a contractionary economic setting. With an already stretched balance sheet and still facing a challenging external environment, China should take the opportunity of a stabilizing macro environment and act decisively to implement the reform agenda it laid out more than 5 years ago at the Third Plenary Session of the 18th Party Congress.

For more details, please see our report entitled Early signs of reflation in China published in February 2019.

法律声明

一般声明

本报告中的信息均来源于我们认为可靠的已公开资料,但中国国际金融股份有限公司及/或其关联机构(以下统称"中金公司")对这些信息的准确性及完整性不作任何保证。本报告中的信息、意见等均仅供投资者参考之用,不构成所述证券买卖的出价或征价。该等信息、意见并未考虑到获取本报告人员的具体投资目的、财务状况以及特定需求,在任何时候均不构成对任何人的个人推荐。投资者应当对本报告中的信息和意见进行独立评估,并应同时考量各自的投资目的、财务状况和特定需求,必要时就法律、商业、财务、税收等方面咨询专业财务顾问的意见。对依据或者使用本报告所造成的一切后果,中金公司及/或其关联人员均不承担任何法律责任。 

本报告所载的意见、评估及预测仅为本报告出具日的观点和判断。该等意见、评估及预测无需通知即可随时更改。过往的表现亦不应作为日后表现的预示和担保。在不同时期,中金公司可能会发出与本报告所载意见、评估及预测不一致的研究报告。 

中金公司的销售人员、交易人员以及其他专业人士可能会依据不同假设和标准、采用不同的分析方法而口头或书面发表与本报告意见及建议不一致的市场评论和/或交易观点。中金公司没有将此意见及建议向报告所有接收者进行更新的义务。中金公司的资产管理部门、自营部门以及其他投资业务部门可能独立做出与本报告中的意见或建议不一致的投资决策。 

本报告由受香港证券和期货委员会监管的中国国际金融香港证券有限公司于香港提供。香港的投资者若有任何关于中金公司研究报告的问题请直接联系中国国际金融香港证券有限公司的销售交易代表。 

本报告由受新加坡金融管理局监管的中国国际金融(新加坡)有限公司(“中金新加坡”) 于新加坡向符合新加坡《证券期货法》及《财务顾问法》定义下的认可投资者及/或机构投资者提供。提供本报告于此类投资者, 有关财务顾问将无需根据新加坡之《财务顾问法》第36 条就任何利益及/或其代表就任何证券利益进行披露。有关本报告之任何查询,在新加坡获得本报告的人员可向中金新加坡提出。 

本报告由受金融市场行为监管局监管的中国国际金融(英国)有限公司(“中金英国”)于英国提供。本报告有关的投资和服务仅向符合《2000年金融服务和市场法2005年(金融推介)令》第19(5)条、38条、47条以及49条规定的人士提供。本报告并未打算提供给零售客户使用。在其他欧洲经济区国家,本报告向被其本国认定为专业投资者(或相当性质)的人士提供。 

本报告将依据其他国家或地区的法律法规和监管要求于该国家或地区提供。

特别声明

在法律许可的情况下,中金公司可能与本报告中提及公司正在建立或争取建立业务关系或服务关系,也可能会持有本报告中提及公司所发行的证券头寸并进行交易。因此,投资者应当考虑到中金公司及/或其相关人员可能存在影响本报告观点客观性的潜在利益冲突。投资者请勿将研究报告或相关信息视为投资或其他决定的信赖依据。

与本报告所含具体公司相关的披露信息请访https://research.cicc.com/footer/disclosures,亦可参见近期已发布的关于该等公司的具体研究报告。

中金研究基本评级体系说明:

分析师采用相对评级体系,股票评级分为跑赢行业、中性、跑输行业(定义见下文)。

除了股票评级外,中金公司对覆盖行业的未来市场表现提供行业评级观点,行业评级分为超配、标配、低配(定义见下文)。

我们在此提醒您,中金公司对研究覆盖的股票不提供买入、卖出评级。跑赢行业、跑输行业不等同于买入、卖出。投资者应仔细阅读中金公司研究报告中的所有评级定义。请投资者仔细阅读研究报告全文,以获取比较完整的观点与信息,不应仅仅依靠评级来推断结论。在任何情形下,评级(或研究观点)都不应被视为或作为投资建议。投资者买卖证券或其他金融产品的决定应基于自身实际具体情况(比如当前的持仓结构)及其他需要考虑的因素。

股票评级定义:
i. 跑赢行业(OUTPERFORM):未来6~12个月,分析师预计个股表现超过同期其所属的中金行业指数;
ii. 中性(NEUTRAL):未来6~12个月,分析师预计个股表现与同期其所属的中金行业指数相比持平;
iii. 跑输行业(UNDERPERFORM):未来6~12个月,分析师预计个股表现不及同期其所属的中金行业指数。

行业评级定义:
i. 超配(OVERWEIGHT):未来6~12个月,分析师预计某行业会跑赢大盘10%以上;
ii. 标配(EQUAL-WEIGHT):未来6~12个月,分析师预计某行业表现与大盘的关系在-10%与10%之间;
iii. 低配(UNDERWEIGHT):未来6~12个月,分析师预计某行业会跑输大盘10%以上。

研究报告评级分布可从https://research.cicc.com/footer/disclosures 获悉。

本报告的版权仅为中金公司所有,未经书面许可任何机构和个人不得以任何形式转发、翻版、复制、刊登、发表或引用。 
回到顶部