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Looking at the hidden worries and support of China’s economy from the latest data

  Under the influence of factors such as the push up of the low base, the optimization of the epidemic prevention policy, and the effective implementation of the growth stabilization policy, China’s economic data in August exceeded expectations, and most of the major economic indicators rebounded year-on-year in the month compared with July, but the real estate industry chain is still dragging down China’s economy. .
  At present, the hidden worries of China’s economy lie in the decline of real estate investment growth, the downward shift in export growth, and the weakening of the endogenous driving force for the growth of manufacturing investment. With the support, the growth rate of manufacturing investment will continue to remain stable, the slow recovery trend of consumption is expected to continue, and infrastructure projects and physical workloads will be accelerated.
  The drag on the economy from real estate investment further increased in August. In August, the year-on-year growth rate of real estate development and investment completion fell further from -12.1% in the previous month to -13.8%. In August, the monthly decline in the area of ​​land purchase expanded to 56.8% year-on-year. The willingness of real estate companies to acquire land is still insufficient. However, with the promotion of “guaranteed delivery of buildings”, the new starts and completions of real estate have improved. In August, the monthly growth rate of real estate completed area “jumped” to -2.6% from -35.7% in the previous month; the monthly growth rate of newly started real estate area increased by 2.0 percentage points to -43.9%.
  It is worth noting that the monthly decline in real estate sales area narrowed to -22.0% year-on-year, and the month-on-month growth rate was also higher than the seasonal average, but it remains to be seen whether it can continue. The marginal stabilization of real estate sales at a low level has resulted in a narrowing of the year-on-year decline in personal mortgage loans, deposits and advance receipts among the sources of real estate development funds. The two exogenous funds of domestic loans and self-raised funds have also improved due to the promotion of “guaranteed delivery of buildings”.
  In addition, the growth rate of China’s exports dropped significantly in August, and downward pressure began to appear. This is the result of the combined effect of internal and external factors. In terms of internal factors, the domestic epidemic has spread again and again since August, sporadic epidemics have appeared in some coastal provinces, and high temperature power cuts in Sichuan and other places have hindered the supply of some export industry chains. These factors have had a negative impact on exports. In terms of external factors, the decline in external demand from developed regions in Europe and the United States cannot be ignored. South Korea, which has a similar export structure to China, has also seen a significant decline in its export growth in recent months. In the context of the high probability of falling demand in developed economies in Europe and the United States, it is necessary to continue to explore the ASEAN market externally, and to ensure the stability of the industrial chain and supply chain internally.
  In terms of manufacturing investment, its year-on-year growth rate rebounded to 10.6% in August, but the internal driving force behind its growth has weakened. On the one hand, the support of new kinetic energy for manufacturing investment is still strong: investment in high-tech manufacturing increased by 23.0% in the first 8 months, the growth rate of investment in new energy-related electrical machinery industry climbed to 38.4%, and the growth rate of investment in the automotive industry increased by 3.0%. percentage points to 12.9%. On the other hand, the growth rate of investment in some export-related industries has slowed down, including general equipment, special equipment, metal products, railway, ship, aerospace and other transportation equipment manufacturing, and textile industries. The export dependence measured by the proportion of operating income exceeds 10%.
  In the next few months, although real estate investment will continue to bottom out, the pressure of decline in external demand is imminent, and the spread of the epidemic will continue to disrupt domestic consumption and production, the follow-up economic recovery will also be supported by continued policy efforts.
  This is first manifested in manufacturing investment. Recently, the policy is actively exerting efforts to stabilize investment in the manufacturing industry. On September 8, the regular meeting of the National People’s Congress mentioned that “for the purchase and renovation of equipment in some fields, new loans will be implemented, and phased incentive policies will be implemented, and the central government will discount interest by 2.5 percentage points. 2019,” the National Standing Committee on September 14 further refined it, proposing that “manufacturing…renew equipment in the fourth quarter, and support national commercial banks to actively issue medium and long-term loans at an interest rate not higher than 3.2%. 100% of the total number of commercial banks will be given special re-loan support. The special re-loan amount is more than 200 billion yuan, trying to meet the actual needs, with a term of 1 year and can be extended twice. At the same time, the established policy is implemented. In the fourth quarter of this year, the actual loan cost of loan entities that renovated and renovated equipment was not higher than 0.7%.”
  Secondly, there is still “stamina” for infrastructure development. In August, the year-on-year growth rate of infrastructure investment reached 15.4%, a new high since March 2021. The allocation of infrastructure funds and the formation of physical workloads both accelerated simultaneously. Judging from high-frequency data, the operating rate of asphalt refineries and the operating rate of cement mills related to infrastructure construction rebounded significantly in August, which may indicate that the physical workload of infrastructure construction is accelerating. In terms of capital, as of August 26, the first batch of 300 billion yuan policy-based development financial instruments from China Development Bank and Agricultural Development Bank have been put into operation, and the scale of infrastructure investment they leverage may reach more than one trillion yuan; The regular meeting once required special debt funds to strive to be used up by the end of August, which also provided certain support for the high growth of infrastructure investment.
  In addition, on August 24, the new “19-point” continuation policy issued by the National Standing Committee includes adding more than 300 billion yuan of policy-based development financial instruments, and issuing more than 500 billion yuan of special bonds before the end of October. Further efforts were made to provide financial support for infrastructure investment. In terms of physical workload formation: On August 31, the regular meeting of the National People’s Congress took several measures to promote the implementation of infrastructure projects, such as clarifying that “local governments can make commitments on land use, environmental impact assessment, etc. according to their responsibilities and authorities, and complete procedures according to regulations after the project is implemented.”
  In addition, the slow recovery trend of consumption is expected to continue. For example, the strong performance of auto consumption is likely to continue, and other consumption also has more room for repair.
  In a word, the process of China’s economic recovery needs to be viewed rationally. The subsequent recovery of the economy depends on the implementation of the policy of stabilizing growth on the one hand, and on the other hand, it is necessary to prevent abnormal disturbances to the economy caused by excessive epidemic prevention in some regions.

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