Shift to demand

  Looking forward to the macro economy and policies in 2022, what key issues should we pay attention to? We believe that, of course, we still need to pay attention to the shortage of supply, but the focus will be from the supply side to the demand side.
  In addition to the evolution of the epidemic, we must pay more attention to the impact of the debt problem. For example, can the situation of weak consumption be changed? Can manufacturing investment continue to pick up, and when will the growth rate of real estate investment bottom out? In terms of external demand, what factors have caused exports to significantly exceed expectations in 2021, and will they continue to demonstrate resilience in 2022?
  Energy shortages have brought changes in relative prices, rising mid- and downstream costs, lowering the quality of balance sheets, weakening real estate, and increasing the debt burden of non-government sectors.
  From January to August, the quality of the balance sheet of some midstream and downstream industries declined compared with the end of 2020, and the debt service burden of non-financial companies rose further. The manufacturing revenue cost ratio in September 2021 is the highest in the past four years, and the cost pressure of utilities, construction and small and medium-sized enterprises is relatively greater. In August, the asset-liability ratios of manufacturing and public utilities both increased by 0.4 percentage points from the end of 2020, and the year-on-year growth rate of residents’ disposable income also declined slightly compared with the fourth quarter of 2020.
  The energy shortage may be alleviated in 2022, but in the early stage of dual-carbon, new energy cannot fully make up for the gap between supply and demand due to unstable supply and low net energy coefficient (ratio of energy output to input). In the second half of 2021, the proportion of completed unsold inventory of real estate companies will increase, and the operating pressure of housing companies that have fallen in urban qualifications will increase. In recent years, the cooperative development model of real estate enterprises has become common, and it is also necessary to pay attention to the impact of the spillover effect of real estate debt on demand. However, real estate supervision is conducive to the healthy development of the economy in the medium and long term, just as dual carbon will improve the quality of my country’s economic growth.
  Unlike commodities, the elasticity of labor supply is low. It is both a factor of production and a demander. The labor shortage in the United States pushes up wages and supports demand. With its currency growth rate still high, this will continue to support China’s exports in 2022. Global exports are mainly supported by prices, and in 2021, volume will contribute more to my country’s exports than prices, reflecting that China’s exports are indeed resilient.
  Monetary and fiscal expansion has improved the balance sheets of American households, and its low-end labor force has experienced higher wage increases due to shortages, pushing up consumer demand. The shortage also pushes up the company’s desirable inventory demand by increasing the opportunity cost of inventory. Data shows that the United States’ desirable inventory is much higher than its actual inventory. We predict that the labor shortage in the United States will hardly change fundamentally in 2022, because before the epidemic, the United States experienced a low-end labor shortage due to structural reasons. The epidemic only exacerbated the shortage, and the number of early retirees increased significantly, and low-end labor values ​​were also affected by the epidemic. Great changes have taken place, and the labor participation rate has dropped significantly.
  We expect the US economy to grow at around 3.5% in 2022, and China’s exports may still grow at around 5%, but the high freight rates will erode some corporate profits.
  We expect that in 2022, the domestic macro policy portfolio will continue to show a trend of “tightening credit, loose money, and lenient fiscal”, and the importance of finance will increase. In addition to supporting infrastructure, revenue reduction may be an important option. In the first half of the year, the RRR and even interest rate cuts may continue. In the context of upstream supply constraints, infrastructure construction will accelerate but will not be too strong, and tax cuts and fee reductions may also be important points of force. With policy support and the marginal improvement of the epidemic, consumption may pick up.
  It is estimated that the year-on-year GDP growth rate in the four quarters of 2022 may be 5.7%, 4.8%, 6.0% and 4.9% respectively, and the quarterly adjustment may also gradually improve. The GDP growth rate in 2022 will be around 5.3%. If fiscal expansion is greater, GDP growth may also be higher than our current forecast.
  We expect fixed assets to grow by 4% year-on-year in 2022. Infrastructure and manufacturing will play a supporting role. Real estate investment may be low year-on-year and then high, with negative growth throughout the year. Consumption is moderately restored, and the total retail sales of consumer goods are expected to grow by about 6.5% year-on-year, which is lower than the growth rate before the epidemic.
  Due to base factors, we estimate that PPI will be high and low in 2022 year-on-year, with an annual average of about 4%, while CPI will be low and high, and it may be about 2% for the whole year.

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