https://business.nikkei.com/atcl/seminar/19/00122/00006/
February 20 , 2019 Ueno Yasuya Mizuho Securities Chief M Economist
Is the Chinese economy really all right?2
Is the Chinese economy really all right?
Baltic shipping index falls sharply
Global economic growth is slowing down ( slowing down ).
Alongside the eurozone, China needs special attention, especially in China ,
where the economic situation is getting more and more severe .
In addition to squeezing the economy with a trade war with the United States,
monetary easing is becoming less effective,
and the economic support is in the form of a request for fiscal policy
(such as infrastructure development and various tax reductions ).
And that brings to light Japan's situation in the 90 's that suffered
from bankruptcy problems.
What has happened to Japan,
which has stimulated the economy
by implementing a large-scale public works project
with large-scale economic measures
and implementing a large-scale income tax cut,
while population measures are incomplete?
China's policy makers should have learned “Japan's lessons” well,
but when you notice, it looks to me as if you are following the same path .
"The downside risk is on the rise"
According to the main opinion
at the Monetary Policy Decision Meeting announced
by the Bank of Japan on December 28 , last year ( December 19 , 20 ),
the IMF 's global economic outlook downward revision
and stock prices falling mainly at the US epicenter In response
to a major change in circumstances since the fall of “departing from overseas,”
as indicated by the “”,
it has been observed that the mood
within the BOJ has rapidly shifted to economic downturn caution .
Of particular interest are the following descriptions.
" With the rising uncertainty of the global economy, including
the US-China trade problem , the downside risk is rising ."
" Overseas economies are beginning
to show signs of slowing as regional differences
become more pronounced .
If the slowdown and recession become clear,
the trends of fiscal and monetary policies in each country
become important. "
" The outlook for the global economy is becoming increasingly uncertain,
and with a growing view that such a situation will be prolonged ,
the risk is generally deepening downwards ."
"The risks to the economy are growing downwards .
According to China's latest trade data ,
import and export are also negative on a month-on-month basis,
which may indicate a decline in the Chinese economy. "
"In China, private-company default is increasing ,
and authorities are asking banks to increase lending
in an effort to alleviate funding difficulties.
We are closely watching the financing situation
of private companies under such circumstances. "
In addition, the main opinion released on January 31 (January 22 and 23 )
was described with alarming tone about the Chinese economy as follows:
"The downturn risk of the global economy is rising .
In particular, China 's economic growth has begun to slow down ,
partly due to the effects of trade problems, and it is necessary to watch closely,
including the trend of economic measures. "
"Even though stock prices amplify and convey changes in the real economy,
recent declines in stock prices have some expectations
of a decline in global real growth rates .
Behind this is the stagnation of the Chinese economy,
which has become the world's second largest import market.
This is clear if you look at import and export movements , not GDP ,
which is declining slightly. "
It appears that some BOJ policy makers have a strong interest
in China's economic trends that are geographically close
to Japan and closely related to the economy through trade.
Two important economic indicators of China's economic indicators
were announced at the end of the year.
The government edition
of December manufacturing PMI ( Purchasing Persons Manager Index )
released on December 31 became 49.4
(down 0.6 points from the previous month),
and it has fallen for four consecutive months,
resulting in 50 splits since July 2016. (The level since February 16 ).
Furthermore,
the private-sector December manufacturing PMI
announced on January 2 was 49.7 (down 0.5 points from the same before),
falling below the 50th milestone following the government edition.
The January government version of manufacturing PMI,
which was subsequently announced, held up slightly slightly to 49.5 ,
but the private version,
which is said to be mostly included in the survey
by SMEs, continued to drop to 48.3.
(Down 1.4 points from the previous month),
it has sunk to a low level since February 16 <Figure 1>.
■ Figure 1:
Chinese manufacturing PMI government and private sector
Blue government, ash private
Note: Private media PMI has been announced
by China Media Forex since July 2015, and prior to that,
the main body of the announcement was a major British bank
(Source) China National Bureau of Statistics,
China Logistics Purchasing Association ( CFLP ), Fortune New IHS Markit
China 's private financial transmission mechanism
It seems that
( the transmission and propagation channel of monetary policy change )
is causing malfunction .
The money supply M2 announced last December
in the People's Bank of Japan on January 15 was 8.1 % YoY.
The move from the previous month, which was the lowest in the past,
moved up by only 0.1 percentage points <Figure 2>.
■ Figure 2: Chinese money supply ( M2 ) and CPI
Blue Money Supply M2, Ash-Consumer Price Index
(Source) People's Bank of China, China National Bureau of Statistics
Credit creation by private financial institutions seems to remain inactive ,
and growth in money supply has stagnated .
While the People's Bank has repeatedly lowered the deposit reserve rate
and has also provided guidance to increase lending to small
and medium-sized enterprises, such measures have not been effective .
Problems with China's Financial System
The People's Bank of Japan announced the introduction
of the Targeted Medium-Term Lending System ( TMLF )
on December 19 , last year.
The aim is to promote lending to small and medium-sized private companies ,
but it is unlikely that big results will be achieved.
China's economic slowdown is clearer ,
and the risk of bad debts for small
and medium-sized lending is greater than before .
Furthermore, there are structural problems in China's financial system .
The article written
by the Nikkei local resident reporter described the situation as follows.
"The private sector's funding difficulties are structural issues
that can not be resolved with the supply of liquidity .
Banks in China lack the screening ability of lenders
and basically lend money to state-owned enterprises .
Private companies, with the exception of some large ones,
receive a high interest rate of 10% or more
from state-owned enterprises that borrowed money
from the bank at a low rate of several%.
Authorities tightened these ' shadow banks '
and the financial position of private companies became tight .
Bankruptcy has increased and no one is lent money anymore "
( October 13 , 18 )
"The reason Chinese banks do not lend to the private sector
is that they can secure a large margin even when lending
to low- risk state-owned enterprises .
Interest rates of lending and deposit are liberalized,
and there is still a practice in which industry groups adjust
their rates for each district .
The essence of the problem
is that the stagnation of financial liberalization stagnation
has come to the fore.
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