2022 is a year of ups and downs. With the repeated outbreaks of Neocrown Pneumonia and the huge changes in the economic environment, China's construction machinery industry has experienced five consecutive years of upward cycles, and the downward pressure has increased sharply. Under the background of overlapping times, how can each participant in the value chain of China's construction machinery industry go through the cycle of industry and macro environment to achieve sustainable win-win development? How to redefine the value of the industrial chain and rebuild the business model? 2022 China Construction Machinery Marketing&Post Market Conference was officially opened on September 15. This conference gathered influential people from China's construction machinery industry, built a high-level communication platform, talked about "going through the cycle", and looked forward to the future with colleagues.
The following is Zhu Baoliang, Chief Economist and Researcher of the National Information Center and Special Subsidy Expert of the State Council, who reported on the Economic Situation and Policy Orientation since 2022.
Economic situation in 2022
China's economic situation from 2020 to 2021
The epidemic of Neocoronal Pneumonia has impacted the economy from both supply and demand, and the potential economic growth in China has slowed down. At present, the potential economic growth in China has dropped from about 6% in 2019 to about 5.5% in 2021. From 2020 to 2021, China's economy will grow by an average of 5.1% in two years. There is still a gap between the actual economic growth rate and the potential economic output. Since 2022, the base effect of the epidemic impact has basically disappeared, and there is little difference in the quarterly average GDP growth rate from 2020 to 2021. However, sub economic indicators such as manufacturing investment and infrastructure investment still have a base effect. Since the second half of 2021, there have been triple pressures of demand contraction, supply shock and expected weakening, superimposed on real estate regulation, double reduction of education and power rationing. Since March 2022, factors such as the spread of the new outbreak of Omikjon and the foreign situation have basically not been included in the economic growth goals of the 2022 NPC and CPPCC.
Since 2022, the economy has experienced three stages of improvement, decline and recovery
The economy will improve from January to February 2022, start to fall in March, hit the bottom in April, and start to recover in May, but the recovery will be slow. GDP growth in the first quarter of 2022 will be 4.8%, 0.4% in the second quarter, including 4.4% for primary industry, 0.9% for secondary industry and - 0.4% for tertiary industry; 2.5% in the first half of the year, including 5% for primary production, 3.2% for secondary production and 1.8% for tertiary production; The three major demand contributions are 0.8%, 0.8% and 0.9%.
From 2020 to 2021, industrial production will grow by 6.1% on average, and the capacity utilization rate will be at a historical high. From January to July 2022, the industry will grow by 3.5% and the capacity utilization rate will decline. The service industry production index will average 6.1% in 2020-2021, and the accommodation and catering industry will not recover to the same level in 2019. From January to July 2022, the service industry production index increased by - 0.3%. According to the estimation of monthly production and financial expenditure, the GDP in July was about 3.5%, and the drought and epidemic situation in August were slightly slower than that in July.
one
Consumption downturn, real estate investment decline, infrastructure and manufacturing investment growth
In 2021, the overall investment will increase by 4.9% year on year, with a two-year average of 3.9%. From January to July 2022, investment will increase by 5.7%. In terms of real estate investment, the year-on-year growth in 2021 will be 4.4%, with a two-year average of 6.4%. From September 2021, the year-on-year growth will be negative. From January to July 2022, it will decrease by 6.4%. In terms of infrastructure investment, the year-on-year growth in 2021 is 0.0%, with an average of 0.4% in two years, 2.2% in the first half of the year and - 1.5% in the second half of the year. The base is low. Increase by 7.4% from January to July 2022. In terms of manufacturing investment, the year-on-year growth in 2021 is 13.5%, with an average of 5.4% in two years, 2.6% in the first half of the year, 5% in the third quarter, and 9% in the fourth quarter. The base is high. From January to July 2022, it will increase by 9.9%.
two
High employment pressure
The biggest impact of the epidemic is in food and beverage, tourism, entertainment, culture, housekeeping, logistics and other labor-intensive industries, which have reduced employment. From January to July 2022, 7.83 million new jobs were created, a year-on-year decrease of 390000. The average unemployment rate was 5.6 per cent. The unemployment rate surveyed in July was 5.4%, and the unemployment rate at the age of 16-24 was 19.9%, the highest since statistics.
three
Moderate rise in core consumer prices
China's supply side recovered faster than the demand side. After the resumption of pig production and the continuous rise of pork prices for 19 months, the month on month (MoM) decline began in September 2020, and the month on month (MoM) recovery began in November 2021. The month on month price of industrial products began to rise from October 2020. The price of commercial residential buildings will rise by 4.2% in 2021, and the month on month increase will fall back from April. From January to July 2022, the price will drop by 5.9%. In 2021, China's export price will rise by 4.2%, import price will rise by 13.1%, and the increase of import price will drive China's industrial product price up by 1.8 percentage points. From January to June 2022, the export price will rise by about 11.1% and the import price will rise by about 14.2%.
four
Problems in economic development
The triple pressures of demand contraction, supply shock and expectation weakening increase
First, the demand is insufficient, which is mainly reflected in the low consumption and sluggish real estate market. In 2022, the residents' income gap will widen, the savings rate will rise, and the borrowing and lending consumption will decrease. From January to July, the residents' savings will increase by 10 trillion, an increase of 3.9 trillion year-on-year; The leverage ratio of residents is still high, and there is a great pressure to repay the principal and interest. In 2021, the debt service of residents will account for 15.6% of disposable income, higher than that of major countries in the world. In terms of the real estate market, the cycle of weak sales - difficult payment collection - difficult financing - insufficient willingness to acquire land - slow down of new construction - investment decline has not been broken, sales and investment are sluggish, land acquisition area is reduced, and real estate credit risk appears.
Second, supply shocks. Core shortage, coal shortage, power shortage, etc. have been improved, due to the epidemic situation, logistics and people flow congestion points have increased; The conflict between Russia and Ukraine, the impact of the rising prices of primary products on the middle and downstream industries has increased; Countries such as the United States and Europe coexist with the epidemic, the global industrial chain moves outward, the supply of key parts and components is cut off and technical constraints may be strengthened, and China's industrial chain supply chain security issues are highlighted.
Third, expectations have weakened. Small, medium and micro enterprises have difficulties in operation, the traffic light problem of platform enterprises and other capital settings has not been solved, and the enterprise lacks confidence. The residents have great employment pressure and insufficient consumer confidence. Local policies are difficult and cadres are not enthusiastic.
five
China's economic development is at different stages
By 2020, China's economy will be basically stable. In the second half of 2021, China's economy will face triple pressures of shrinking demand, supply shocks and weakening expectations. In the new development stage of 2021, the pursuit of multiple objectives and policy optimization, the pursuit of common prosperity, environmental protection and climate change, the prevention of economic and financial risks, economic security and other goals, and the emergence of composite fallacies and decomposition fallacies.
The macro-economic policies to deal with the impact of the epidemic are different
In April 2020, we implemented the "six guarantees" task of ensuring residents' employment, basic people's livelihood, market players, food and energy security, industrial chain supply chain stability, and grassroots operation, adopted positive fiscal policies and relatively loose monetary policies, created financial and monetary policy tools that directly reach the grassroots and enterprises, and issued epidemic resistant special national debt. By 2020, the broad fiscal deficit will account for 8.4% of GDP, Land transfer income and fund expenditure also increased by 15.9% and 28.8% respectively. In 2022, China's broad fiscal deficit will only account for 5.8% of GDP, the income from land transfer will show negative growth, and the scale of monetary credit and social financing will also be slower than that in 2020.
six
Different international economic and political environments
The shift in US and European monetary policies and the conflict between Russia and Ukraine led to a slowdown in the world economy. The United States has continued to accelerate measures in many areas, including personnel, trade, investment, finance, science and technology, and security, to curb China's economic development and catch up quickly by all-round containment. Industries related to the country and life safety returned to China, and the industry was characterized by decentralization, diversification and regionalization. With global inflation rising, the Russia Ukraine incident may continue to push up the prices of energy, food and other products, and the sanctions against Russia will indirectly affect the export and production of Chinese enterprises. The spillover effect of the withdrawal of monetary and fiscal policies of major countries such as the United States and the United Kingdom on the world economy is uncertain.
Economic policy orientation in 2022
On April 29, 2022, the meeting of the Political Bureau of the Central Committee put forward three requirements: to prevent the epidemic, to stabilize the economy, and to secure development, and to stabilize growth, employment, and prices. On July 28, 2022, the Political Bureau meeting set the economic and social goals: to prevent the epidemic, stabilize the economy, and secure development, consolidate the upward trend of the economy, focus on stabilizing employment and prices, maintain the economic operation within a reasonable range, and strive to achieve the best results.
We should effectively solve the problems of market access and disorderly expansion of capital, encourage private investment, stabilize the development of the market expected platform economy, complete special rectification of anti-monopoly issues, and implement regular supervision. Monetary policy should maintain reasonable and sufficient liquidity, provide liquidity through reserve ratio reduction, MLF and other tools, expand the scale of credit, and subsidize inclusive loans for difficult industries, small and micro enterprises, and self-employed households
Expand domestic demand: provide price subsidies to families and individuals in need affected by the epidemic; Support the consumption of automobiles and green household appliances; Promote infrastructure construction through policy bank financing and special debt quota. For the real estate policy based on the city, relax the loan limit, purchase limit, sales limit, increase the amount of provident fund loans, purchase subsidies, etc., and provide "special loans for guaranteed delivery of buildings" of 200 billion yuan, which will be paid into the local government debt, and the central finance will discount the interest by 1%; Three red lines and two upper limits will be relaxed periodically.
Outlook for 2022 Economic Situation
2022 Growth Estimation
It is estimated that the economic growth in 2022 will be about 3.5%, including 3% - 4% and 4% - 5% in the third and fourth quarters respectively. PPI decreased year on year and is expected to increase by 3.5% and 1% respectively in the third and fourth quarters. The CPI has increased to some extent, about 3% in the third and fourth quarters.
From the demand side, the average investment in manufacturing industry in the two years from 2020 to 2021 is low in the first half of the year, and the growth rate in the third and fourth quarters is 5% and 9%, with a high base. It is estimated that the investment in manufacturing industry will slow down in the third and fourth quarters of 2022, and will be about 7% in the whole year. The infrastructure investment was 2.2% in the first half of the year and - 1.5% in the second half of the year, with a low base. It is expected to be about 8% in the whole year. In the second half of the year, the real estate investment will slow down, but it is difficult to turn positive. The annual negative growth is about - 3%. Automobiles will continue to grow, but consumption is sluggish. In the second half of the year, retail sales of consumer goods will increase by about 4%, and the annual growth will be about 1.7%. Exports slowed down and imports rebounded.
Basic forecast in 2023
China continues to implement the dynamic zero clearing policy, and the monetary and fiscal policies are basically stable. The world economy has changed from stagflation to recession, and China is facing increased trade frictions. In the first quarter of 2023, the economy will slow down, with a year-on-year growth rate of about 4%. It is expected to rise to about 8% in the second quarter and about 5% in the whole year.
