Subprime crisis "kicks" China's economy (1): Financial route

The immediate effects of the financial approach appear to be relatively small and slow, but the potential losses can be high:

According to the latest statistics, among the four major state-owned listed banks and six joint-stock listed banks in China, there are currently nine listed banks in ICBC, China Construction Bank, China Construction Bank, Bank of Communications, China Merchants Bank, Minsheng, CITIC, Xingye and Huaxia. Lehman related assets). In addition, the principal of the Huaan International Configuration Fund is Lehman Brothers. Due to its bankruptcy, the fund faces liquidation risk. However, the proportion of total assets and net assets held by banks in China that hold Lehman-Brothers-related bonds is relatively low, so it will not have a significant impact.

The deterioration of the US economy has caused the devaluation of the US dollar and the actual reduction of the US dollar’s ​​foreign exchange reserves. What is important is that the US economy will not be able to get out of the recession in the next 1-2 years, which will inevitably accelerate the devaluation of the US dollar, and the US “grade” of credit will also fall. At the end of September, China’s foreign exchange reserves stood at US$1905.6 billion.

Subprime Crisis "Abduct" China's Economy (II): Demand Approach

Through the influence of foreign trade routes, it is relatively straightforward and its role is relatively obvious:

In August, the speed of exports to the United States continued to decline after falling to single digits in July. Relative to the 27% increase in the nominal investment in fixed assets from January to August, external demand slowed down significantly, and external demand played a stronger role in the economic downturn. .

Subprime crisis "kicks" China's economy (3): crisis mechanism

The fictitious economy is based on the real economy. The over-allocation of global funds in the United States, the US financial market absorbs 5 trillion U.S. dollars in world funds in 2002-2007, and many funds chase the limited real economy, leading to high asset prices .

Subprime crisis "kicks" China's economy (4): economic autonomy

The external demand stimulates the economic limit - China's economic autonomy mode can effectively alleviate the impact of the shrinking external demand.

The US economy driven by technological innovation and consumption may be weakened for a long time. Its fiscal deficit is further expanded. The United States now has 9 trillion international debts, and the total loss of the subprime mortgage crisis is about 2 trillion yuan.

Impact on China's GDP growth rate will not exceed 2% this year

Analysis of Possible Combinations of Economic Regulation and Control Policies (I): Characteristics of Policies

Starting the economy should try its best to avoid excessive fiscal deficits

The characteristics of monetary policy: Focusing on the vitality of the economy, policies are more moderate, and generally speaking, it is the first choice for policy control, especially interest rate and deposit reserve tools.

The characteristics of fiscal policy: The function of taxation policy is similar to that of monetary policy, but investment policy is a relatively direct and vigorous one. In particular, government-led investment has many considerations of investment direction and investment efficiency.

Analysis of Possible Combination of Economic Regulation and Control Policy (II): Policy First

Considering that the current overall economic situation is still healthy and steady, monetary policy is prioritized as a double-rate downward adjustment channel.

If the international economic situation deteriorates further and affects domestic employment, appropriate government direct investment can be considered to initiate economic policies.

If faced with a more serious economic recession and rapid start-up of economic considerations, fiscal and monetary policies should be a two-pronged approach

Analysis of Possible Combinations of Economic Regulation and Control Policies (III): Foreign demand may continue to be sluggish, economic downturn may continue, but there are signs of recovery

Estimated GDP growth in the third quarter: 9.7%

Estimated September CPI: 4.5-4.8%

It is estimated that the top of the PPI has passed September: 8.5 - 10%

The business climate has declined, but it is still in control: In the third quarter, the national business climate index was 128.6, down 8.8 points from the second quarter and 16.1 points from the same period of last year.

Foreign demand continues to decline: In September, exports are expected to increase by 19% year-on-year; imports are expected to increase by 22% year-on-year; trade surpluses are up 7.9% year-on-year to $25.8 billion. Exports to the EU have also decreased.

Leading indicator PMI: CFLP China Manufacturing Purchasing Managers Index was 51.2% in September, showing signs of economic recovery

Possible Portfolio Analysis of Economic Regulation and Control (4): Policy Collocation

short term

At present, it is advisable to use monetary policy as the main tool to appropriately increase liquidity, but pay attention to the flow of funds.

Appropriate tax relief, but it is not appropriate to relax the government’s financial resources too early. According to the development of internal and external economic conditions, when the employment problem is prominent, it is determined that the government will guide large-scale investment and direction.

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Guide the flow of investment to rural areas and underdeveloped areas in the central and western regions, and diversified ways to increase investment in infrastructure in backward areas

Avoiding the "hollowing out" of industries in the eastern region and realizing industrial upgrading in the eastern region requires the cultivation of high-tech and effective market development capabilities.

Appropriately improve income distribution and increase spending power

The source of China’s economic growth comes from two sources: investment in high-tech and backward areas.

Technology is the ultimate driving force for economic growth. The long-term fundamental task of the long-term self-growth capacity building of China's economy is long-term. On the one hand, it is necessary to improve distribution policies to increase the spending power of the majority, and on the other hand, to have independent technological development market capabilities.

Impact of Economic Policy in the Future on Steel Market (1): Construction Industry

Due to the unbalanced dual economic structure and regional development, China will maintain a relatively high investment rate and the real estate market will continue to improve for a long time. Therefore, the long-term construction steel market should be optimistic.

The current slump in the construction steel market is more of a panic problem caused by the weakened exposure of investment structures and demand.

In the first eight months, real estate investment increased by less than 30% for the first time, and foreign investment increased by 6%.

Impact of Economic Policy in the Future on Steel Market (II): Machinery Industry

In 2008, the machinery industry will maintain a growth rate of 25% throughout the year. However, the profitability of the company may be further reduced, there is room for downward adjustment in earnings forecasts, and the price of steel products in the second half of the year will fall. The effect is still hard to show. For the machine tool and shipbuilding industry, since the procurement period of steel products is more than three months, the improvement in industry profitability will be reflected in the first quarter of next year. The mechanical products such as loaders, small excavators and forklifts are expected to rebound in the fourth quarter because of their short production cycle and short steel procurement cycle.

Construction Machinery: The annual production value growth rate should be around 40%. Although the next two years, the global economy and China's economic slowdown trend is more obvious, but the construction machinery industry's most internationally competitive industries as China's machinery industry sub-sectors, as China's enterprises gradually overcome technical bottlenecks, localization rate of parts It is expected to continue to rise and will maintain a high growth rate in the next two years.

Machine tool industry: Decline in growth rate, warming needs policy stimulus. The rapid decline in the growth rate of investment in fixed assets of the downstream machine tool industry resulted in a significant year-on-year decrease in the growth rate of machine tool production. In July 2008, the output of Jinqi Machine Tools and CNC Machine Tools increased by -2.87% and -7.34% respectively year-on-year.

As a sub-sector that is most protected by national policies in the machinery industry, technological progress in the future is still a key factor in the competitiveness of the Chinese machine tool industry. At the stage of the structural upgrading of the machine tool industry.

Heavy and high-grade products are profitable and are the development direction of machine tool industry

Impact of Economic Policy in the Future on Steel Market (III): Shipbuilding:

Adjustment has begun. The shipbuilding industry is a typical cyclical industry and has the characteristics of an asymmetric cycle, ie, a short boom period and a long recession period. The profitability of the industry began to decline.

At present, the shipbuilding market has reached a historically high peak. Under the circumstances of global economic slowdown and unbalanced supply and demand of shipping capacity, the adjustment of the shipbuilding industry has started and is facing increasing risks.

In the first half of the year, the profits of the shipbuilding industry increased by 150% year-on-year, and it is expected that high profit growth will continue throughout 2008.

Impact of Economic Policy in the Future on Steel Market (4): Household Appliance Industry

From January to July 2008, sales of major home appliance products showed a slowing trend. After entering July, sales growth of major home appliance products continued to slow, and sales of air conditioners even dropped by 19% year-on-year.

Since the second quarter, affected by the cool summer, the monthly sales of air conditioners and refrigerators have experienced a significant decline in sales, while the economic recession in Europe and the United States, the “stagflation” in the domestic real estate market, and the expected slowdown in economic growth have caused demand for consumer electronics to decline.

In the coming months, it is expected that the pressure on home appliance companies to face the slowdown in sales and profit will also increase.

Impact of Future Economic Policies on Steel Market (V): Automotive Industry

It is expected that the downturn will remain, and is likely to continue into early 2009.

In the first three quarters of this year, the sales volume of passenger cars that accounted for more than 70% of domestic autos increased by 11.36% year-on-year, an increase of 5.71% and 12.48% from 17.07% in the first half and 23.84% in the same period of last year.

From January to September, a total of 510.32 million passenger cars were sold, a year-on-year increase of 11.36%. Among the major varieties of passenger vehicles, basic passenger cars (sedans) sold 3.7891 million vehicles, an increase of 10.19% year-on-year; multi-function passenger vehicles (MPV) sold 154,300 units, a year-on-year decrease of 6.66%; sports multipurpose use The sales of SUVs were 334,500, an increase of 32.90% year-on-year; the sales of crossover passenger cars were 825,300, a year-on-year increase of 13.55%.

According to industry insiders, the Chinese auto market can maintain a growth rate of more than ten digits compared to areas with single-digit or negative growth rates in North America and Europe, indicating that it is still in a period of rapid development.

In August 2008, China exported 57,531 vehicles, a decrease of 18% from July. China's auto market has ushered in a rare negative growth in recent years. Vietnam is the most important market for commercial vehicles in China. However, in August, the number of exports to Vietnam was only 859, a decrease of 73% year-on-year, resulting in a drop in the export of automobiles such as Futian and Jianghuai. Ukraine is the major emerging market for passenger cars in China. From January to August, the Ukrainian market exported 540,000 units, an increase of 103% over the same period in 2007. However, in August only 3814 units were exported, which fell by about 50% year-on-year and month-on-month.

Impact of Future Economic Policies on Steel Market (6): Overall Judgment

Private economy is greatly affected by policy control

Falling steel prices favor downstream industries, but there is a lag effect

Macroeconomic policies will begin with gradual relaxation of monetary policy and policy will gradually warm up

Considering the lagging factors of the policy, the demand for downstream steel products may gradually improve after the end of 2008.

However, the external environment will restrict the speed and intensity of the improvement of the domestic economic situation.

Considering that the amount of steel used for construction accounts for more than 50% of consumption, the real estate market situation is an important force that restricts steel demand.

Revelation of China's steel price “suddenly plunging and plunge” (1): Normal status of steel market

The phenomenon of “suddenly plunging and plunge” in steel prices not only occurred in 2008, but steel prices also fluctuate significantly in both 2005 and 2006.

The steel price in 2007 is more obviously manifested as the cost-effective effect of ore (from January to October, the average iron ore landed price in China has reached $81.3/ton, up by 32.36% from the same period of last year).

The soaring steel prices in the first half of 2008 were more due to the “bubble” of rising ore prices.

Revelation of China's steel price "suddenly plunged and plunges" (II): Analysis of steel price factors

In the multi-factor analysis model of the steel price (comprehensive index) we developed, the macroeconomic index including fixed assets investment and the cost composition index of steel production have a significant impact on steel prices, and their statistically significant normalization coefficients are 0.37 ( 7.41), 0.53 (6.42). The impact of cost factors is even greater than macroeconomic factors.

Model simulations show that the actual increase in investment and the downward fluctuation in the cost of steel production are slightly larger, which will cause a greater decline in steel prices.

Taking into account the substantial increase in iron ore prices that started gradually in 2003, we believe that the adjustment of steel prices should be completed with cost adjustment in place.

The Enlightenment of China's Steel Prices “Booming and Plunging” (III): Lagged demand

At present, the loss level of large and medium-sized steel plants is 18%, which reflects the price panic to a certain extent, which increases the wait-and-see mentality of the downstream demand side and further aggravates the decline in steel prices.

Revelation of China's steel price "suddenly plunged and plunges" (IV): Establishing a regulatory mechanism for stabilizing the market

The "chaos" of the steel industry has led to blindness in production and sales. The increase in industry concentration is an important means of solving problems, but it must be adapted to the stage of economic development.

Improve the relationship between supply and sales

Strengthen production and sales market analysis

At present, relevant departments should organize and stabilize the market.