Former deputy director of the Development Research Center of the State Council, China's new supply-side economics 50 Forum members Liu Shijin, new supply in the Chinese Academy of economics hosted the "first quarter of 2016, the macroeconomic situation analysis", he said the Chinese economy has very close to the bottom, but the change in the first quarter is not clear, it needs further confirmation.
"Of course, after bottoming out is how a situation, some say the bottom will not rebound significantly, will not. Bottoming meaning is not lower, it is most likely shape the future is a large L-shaped ., L shaped bottom there is a small W-type, is that some small fluctuations, "Liu Shijin said that if such a platform to enter the future, which will maintain 5--10 years.
About bottoming point, he believes that China's economy is expected to bottom out in the second half of 2016 or the first half of 2017.
He noted that the judgment of the current economic recovery in the short term, or has reached bottom inflection point? On the demand side of the key depends on infrastructure, real estate, export three investment indicators, especially in real estate investment.
Liu Shijin judge, real estate has reached a historic turning point, "the reason is urban residential housing demand peaks, probably about 1200-1300 million units," which had arrived in the ceiling in 2014.
In addition, from the supply side point of view to determine whether the economy is bottoming out, said Liu Shijin, the key depends on efficiency, is a PPI, a profit of industrial enterprises.
Based on this, he believes, has little potential boost from the demand side, the economic success of a bottoming out condition is necessary to capacity, supply-side reform will be implemented.
Record following statement:
After a quarter of the information out, we are more optimistic estimate, the issue to be discussed is the basic economic rebound or start bottom, today's topic is "short-term rebound or bottom." From a high to medium speed: behind the economic structure and growth momentum conversion is an equilibrium shift another balance. Supply and demand is a state of rapid growth, the growth speed is another state. Supply and demand balance by the high-speed steering in the supply and demand balance, the process is the process of economic downturn, the process is actually a transformation.
Our time in the past six years, the economy is in the process of such a transformation process. Where is the bottom? In fact, looking for a new medium-speed growth in the balance. From the demand side is concerned, we have over the past three years mainly high investment, because consumption is substantially more stable, and high investment is mainly composed of three parts, infrastructure accounted for 20% of the past period of time is relatively high 25%, about 25% of real estate, but also said 30% of the manufacturing sector accounting for more than 30%. These three together can explain 85 percent of Chinese investment, and the remaining 15% in agriculture and others.
Manufacturing investment itself is directly dependent on the infrastructure, real estate and exports. So, in fact, China has just three in the last relatively long period of time we have three main demands. Therefore, high investment is three to bottoming boots to the floor. The current situation, is the highest point of the infrastructure around the year 2000, investment in infrastructure in recent years has been the steady growth of government tools, sometimes more volatile. Export growth in the past twenty or thirty percent last year negative growth. I mean down exports, mainly domestic factor costs, rising labor export competitiveness in relative decline. Therefore, this decline is regular. Recently in 2023 there is a special case, globally speaking, the so-called business investment growth rate is lower than the growth rate of the economy, which have a certain impact on our export growth.
Then real estate. Real estate have different judgments, some people think is a periodic change, we judge that it is a historic turning point, because that is composed of real estate investment urban historical demand peak of about 70% is probably about 1200-1300 million units, and this is from a a long time, the history of the peak demand for real estate equivalent of a ceiling, this historical peak demand is a concept more emphasis in my analysis, I think this is actually a technical decision for a long period of time from the essence the so-called ceiling needs. Real Estate in 2014 such a ceiling has been reached, reached after a total real estate investment is flat. Therefore, the real estate investment in 2014, the time has dropped to about 10%, in 2015 we want to 5%, but in fact has dropped to about 1%. After last August, monthly year on year real estate investment has experienced negative growth. My estimate when this negative growth can be substantially stable down, even when from negative to positive, real estate investment if you can hit bottom three boots basically came down. From the demand side, the entire Chinese economy basically hit bottom. Investment in the current situation, the growth rate beyond February's 10.2% investment.
In addition, we look at the supply side and the demand side should be adjusted accordingly supply, but adjust the supply of relatively slow, so there is a so-called serious overcapacity, the most prominent of the Coal and Steel, these industries are basically in excess of 30% or more. Iron existing and under construction production capacity is estimated at around 12 million tonnes, but production of 800 million tons last year, exports about 100 million tons, 700 million tons of domestic 6 left and right. Existing coal and build capacity should be about 50 million tons last year, output was 3.69 billion tons, the excess over 30%. This has led to a serious surplus of so-called deflation, industrial producer prices 48 consecutive months of negative growth, the recent -5.9%, the data show that in February after a slight rebound in commodity prices rebounded, and now to about -4.9 %.
Some people believe that on this issue deflation to relax monetary policy, but I do not always agree with this point of view, I think this kind of deflation in some countries and the international community for the lack of liquidity and the emergence of deflation is not the same thing children. For quite some time our monetary policy is still quite loose, but the excess capacity problem solved? Coal, steel more and more problems changed? No.
The result is an important industrial level of corporate profits associated with the second, from August 2014 after more than a year's time has been negative growth, negative growth in corporate earnings in the industrial process of coal, steel, iron ore, petroleum, petrochemical, Materials about five or six overcapacity problems are most prominent industry in which they, PPI downward contribution they are seventy to eighty percent or more, excluding these industries profitability of the entire industry can still be negative growth in industrial profits of major because these excess capacity.
Two ideas, a discharge currency, in fact, called for further expansion of demand, I have talked about, this potential is not great. Expanding demand, including real estate, steel, these historical peak demand has seen the ceiling, then you do not have much potential for expanding demand. Out in what areas? Is to produce energy, and this went capacity should be substantive to capacity, or to capacity in the physical sense, excess capacity of 30% was reduced by 20%, so the price to rise, the financial situation of the relevant areas can be good. Capacity to speak of this thing children more recently, the central government has arrangements for the deployment, but also the support of some of the relevant funds, and now it seems to promote the difficulty is relatively large.
First, there is a view that went capacity will not affect the growth rate, I personally think that can not affect, because of severe overcapacity industry their production is basically on demand, and these industry at least a year or so has been to in stock. So, you can get rid of the excess capacity in the future has little impact on current production.
A further problem right now is to go to a game production process, and now we are waiting for someone else to go, they do not go. Because these industries if the capacity in place to go after their own growth scale is still quite large. Such as the steel industry, I did a calculation, China's per capita steel stock is about 6 tons, the United States is 24.6 tons, more than 40 tons per capita in Japan. China is assumed to reach US per capita level, we also need to add more than three hundred tons of steel production, and if we yield 800 million tons of steel per year, you can also grow for 40 years. 800 million tons of sizable, and more than half of world production. This figure in the end there is no basis for it? For example, in 1972 the Japanese economy down the stairs when they were production is 119 million tons. Japan's steel production last year, how much? One hundred million tons. In fact, it is not a great way, China's iron and steel industries, including the coal industry, in the future if the excess capacity is removed, it has the size, the steel industry in the future engage in thirty or forty years it has this potential. Under the present circumstances we are all waiting for you Save me diminished, the future I do not normally just sit back and enjoy it? It is a game process.
In the end from the supply and demand in the bottom of where the bottom two, one is the end demand, investment is largely stable down. Recent real estate investment after a period of negative growth to positive from negative. To February, housing prices is a first-line stimulus, but may be a short-term, this time to have a look if the large Chinese real estate investment trend, it is likely to maintain a negative growth. It remains to be seen. When disturbed after watching over the entire trend.
Infrastructure and policy is largely a relatively large relationship. Future exports is normally around 5% is a normal growth rate, a negative growth now is low, see if I can rebound. I emphasize very important outlet for investment. The contribution of exports to GDP growth itself, it needs to have a net incremental exports, the conditions are very harsh, but why exports to overall economic growth is very important? Little impact on investment in the current period, and the impact on investment should not affect exports According to our estimates at about 30%. So, from the demand point of view, observe these factors, last seen as an indicator, the investment can not stabilize down.
From the perspective of supply and demand or supply adapted from an angle, it is effective. Mainly depends on two indicators, one is the PPI began to rise, two factors, when we go to the production of this signal is sent, there is actually a market expected. Commodities may rise some time ago and this signal has a relationship. Another point also needs attention, some time ago, at least until after the last year's fourth quarter, the best in the industry companies are losing money, the steel industry, the future of this industry in the best companies losing money is probably a price floor, no longer low, because the industry but also to survive. Therefore, the lowest point in commodity prices is likely to have passed. The second indicator is the bottom-effective industrial profits from negative to positive, and to maintain a moderate growth. Now it needs to stabilize unstable observation, how about sustainability.
Overall, a quarter of these indicators bullish, there are short-term disturbance factors, after it is removed, a recent high point, according to some of our model, it will come down, we need to observe, the second placement out the future will not be lower than the first placement, if lower, then the economy will continue downward, or closer to, if not lower, then he is likely to construct a new bottom. I am more concerned about the Chinese economy is beginning to bottom out, began to bottom out, if so, is the need to repeatedly verify the bottom, in the coming months is the first verification, will not later than the first second lows a lower low, if not lower, then it is possible to construct a new platform.
He said a large judgment after the Chinese economy, after six years of decline, is now very close to the bottom of. The second half is expected to bottom out in 2016 or the first half of 2017. I think there are two aspects to verify or analyze a like Japan, South Korea and China Taiwan, Japan, 1950s, 1960s, the growth rate of 9.4 percent a few, the next step after 1972, direct is 4%, Korea after falling about 5%, Taiwan's relatively good, and Taiwan is between 5% -6%. China's growth rate after that it will come back six years a particular concern is the growth rate of investment data, the growth rate of investment we are now at about 10%, and fixed capital formation but that is not the same thing children. Our growth rate in the middle gap in recent years and the growth rate of investment in fixed capital formation growing, now almost bad to about half. If we invest in the growth rate of around 10%, the growth rate of fixed capital formation is likely to be between 5% -6%, if it is such a growth rate is also very close to the bottom. I always judge the next two years a lot of possibilities began to bottom out. The most recent bearish on China's economy sound more, some people are rather pessimistic, and can include a variety of reasons is very reasonable, but the time being it is now time closest to the bottom of the Chinese economy .
2009, 2010, we did a study under the Chinese economy will be a relatively large step, many people do not believe that, because at that time that the high growth for granted, but now, in turn, we should not be too pessimistic, Chinese economy has been very close to the bottom, and difficult to identify changes in the first quarter, we still have to further confirmation. Of course, after bottoming out is how a situation, some say the bottom will not rebound significantly, will not. Bottoming meaning is not lower, it is most likely shape the future is a large L-shaped, L-shaped bottom with a small "W" type, is that some small fluctuations. If they can enter such a platform in the future, this platform to maintain 5--10 years, and we have a long-term development goal is better.
There emphasize supply-side reform, the success of a bottoming necessary conditions is to production capacity, production capacity is a top priority to supply-side reforms, must bear fruit in 2012. Reform of the supply side to really solve deep problems of the Chinese economy, we are largely enhance the confidence you start to prepare to face the problem of reform. Therefore, the Chinese economic assessment should consider these factors. Thank you.