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Double Circulation Promotes High Quality Development Of China'S Economy, And Capital Market Ushers In Medium And Long-Term Prosperity Opportunities

2021/2/10 12:45:00 0

Global Finance And Economics Connection ICBC International Project: Double Circulation Promotes High Quality Development Of China'S EconomyCapital Market Ushers In Medium And Long Term Prosperity Opportunity

Under the background of the new crown pneumonia epidemic, the global economy will suffer a serious impact in 2020, and the financial market once fell into turbulence. In order to deal with the negative impact of the epidemic, countries around the world have launched large-scale quantitative easing policies and fiscal stimulus plans to help the economy tide over the difficulties and stabilize market expectations.

According to the world economic outlook report released by the International Monetary Fund, the global economy will shrink by 3.5% in 2020. As the epidemic situation has been effectively controlled, China has become the only major economy in the world to achieve positive growth, with economic growth of 2.3% in 2020.

In the global downturn, China's economy has made such achievements hard. At the end of the year and the beginning of the year, global financial connect launched a special program to invite Cheng Shi, chief economist of ICBC international, to interpret the economic situation and market trend of China and the world in 2021.

Nanfang finance and Economics: you recently mentioned that the core feature of economic growth in 2021 is the combination of strong rebound and weak recovery. How to understand this strong rebound and weak recovery?

Cheng Shi: Strong rebound and weak recovery are the core features of the first year of global economic recovery. Strong rebound means that compared with the base in 2020, the global economic growth will show a very strong post epidemic rebound state in 2021, and more than 90% of the global economies are expected to have positive growth compared with the GDP in 2020. If we change the base to 2019 and compare the GDP growth in 2021 with that in 2019, we will find that the global economy will be in a weak recovery compared with that before the epidemic. Our calculation shows that if the GDP scale of 2021 is compared with that of 2019, it can be found that the economic situation of more than 80% of the world's economies in 2021 may not be as good as that in 2019 or before the epidemic.

Southern finance and Economics: in May last year, the central government proposed for the first time the construction of a new development pattern of domestic and international dual circulation and mutual promotion. You said recently that the dual cycle is an active choice in line with the objective law of economic development. Can you make an analysis of this?

Cheng Shi: Double circulation is an important strategic choice for China's economy to open up a new situation under the unprecedented great changes in a century. We think it is an inevitable choice for China's economy, which can be interpreted from three aspects: first, it is an active choice. In the past 40 years of reform and opening up, China's economy has been a beneficiary of wind and rain type globalization. However, at present, the global economy is in a great change that has not happened in a hundred years. Protectionism, populism and isolationism have caused great drag on global economic growth. The world has changed, and China should take the initiative to make some changes. Our active choice is double cycle.

Second, this active choice is also in line with the objective law of economic development. We have done a study on the economic history of the United States, and an important conclusion is that judging from the development history of other countries, especially some economies with better market-oriented economic development, in China's current state of development and facing the similar background that China is now facing, they will make a dual cycle choice. In other words, other important countries in history have made similar choices at a historical juncture like China.

Third, it is also a popular choice in line with the trend of world economic development. Globalization has undergone great changes, from the flat globalization with the United States as the only core in the past, to a multi-level globalization based on regionalization. In this context, China's internal circulation to drive the development of regional economic integration is also in line with the objective direction of economic globalization.

Southern finance and Economics: in the context of the whole double cycle, will economic development also face some pain points or blocking points?

Cheng Shi: This problem is very important, and it is also a key problem to be solved in the process of constructing the double loop mode. In fact, vice premier Liu He devoted a lot of time to explaining the important problems existing in China's economic and industrial structure, that is, there are a large number of breakpoints, difficulties and neck problems.

So to build a double loop, there are actually two things to do. The first thing is to turn China's economy into a closed loop of internal circulation. In this process, some important breakpoints and difficult problems in the industrial structure are solved. For example, in the field of raw materials, in the field of high-end CNC machine tools, in the field of large-scale manufacturing, in the upstream field of semiconductors, there are many bottleneck problems that can not be broken through temporarily in technology. The second thing is that after solving these breakpoints and difficulties, China's economy is not going to be complacent, but to push the internal and external circulation of China's economy to a higher level of equilibrium after completing its own closed-loop.

Nanfang finance and Economics: you have mentioned that the double cycle will open up the future of high-quality development of China's economy. For the development of China's capital market, it will enter a new stage. Since 2020, there have been a lot of measures to open up the financial market. What do you think of the future of China's capital market?

Cheng Shi: We have studied the development history of the whole global capital market, especially some mature capital markets. We have come to an important conclusion that the capital market has never been a barometer of economic growth, but a barometer of economic growth. The performance of the whole capital market in the medium and long term and the support for the real economy in the medium and long term are not related to the economic growth rate, but to the performance of the overall economic growth quality.

We believe that one of the goals of China's economic double cycle is to continuously improve the quality of China's economic growth. In the future of double cycle promoting China's high-quality development, I believe that the capital market will also make positive feedback, and the capital market will usher in a medium and long-term prosperity opportunity. This is also one of the key reasons why we see so many foreign capital increasing their positions in Chinese assets.

Nanfang finance and Economics: from an investment perspective, in 2020, under the impact of the epidemic, the performance of China's stock market is very strong. Why can we get such a report card?

Cheng Shi: The most important feature of capital market is that it does not buy the past or the present, but the future. In fact, the most important thing is that the whole Chinese capital market has been performing so well in the past. In fact, the most important thing is that the whole Chinese economy is accelerating its transformation from the extensive resource consumption economic growth mode to a new state of high-quality development with more scientific and technological content and more emphasis on solving the short board problems of industrial structure. Why will the capital market react more strongly in 2020? The important reason is that we see that the new epidemic has actually accelerated the transformation of China's economic model. That is to say, although the epidemic has brought growth losses to the global economy, including China's economy in the short term, on the other hand, it has also pressed the "fast forward" button for the transformation of China's economic model.

Nanfang finance and Economics: compared with last year, what are the characteristics of this year's market that deserve investors' attention?

Cheng Shi: I think it will continue this year. One of the positive changes that occurred last year is that global capital will revalue the entire Chinese assets. The high-quality development of the dual cycle will provide positive incentives for the asset valuation of China as a whole, which will also make the global capital continue to flow into China and increase its position in China last year.

As an investment bank in Hong Kong, ICBC international can see that this trend is constantly strengthening. In fact, it will provide a very good external assistance for the whole Chinese capital market.

From an internal point of view, the opening up of the entire financial sector has accelerated in the past, now and in the future, which in fact helps the global asset allocation to further increase China's position. The multi-level market reform of China's capital market, as well as the orderly promotion of financial opening to the outside world, are conducive to the further improvement of the relative position of China's assets.

Third, some key elements conducive to China's assets, especially China's capital market, will continue or be further strengthened in 2021. These factors include the leading position of China's economy relative to the global economy. Last year, China's overall economic growth was leading the world. According to the forecast of 2021, both our own, IMF and World Bank forecasts believe that China's economy is still ahead of the world, which provides a solid foundation for the relatively strong performance of China's capital market. On the other hand, the exchange rate of RMB against US dollar and RMB against a basket of currencies are relatively strong, which helps to strengthen the strength of the whole RMB assets in the medium and long term. On the basis of the above three points, we believe that the upsurge of Global Holdings of Chinese assets in 2020 will be further deepened and continued in 2021.

Nanfang finance and Economics: at the beginning of 2021, the exchange rate of RMB against the US dollar has risen above the 6.5 level, and some people even think that it will rise above 6.3 or 6.2. Do you think it is possible?

Cheng Shi: I don't think the number is the key. The key point is that the RMB is relatively stable and the foundation of its relative strength is further consolidated. For the prediction of specific points, different institutions actually forecast differently. The 6.2 and 6.3 you mentioned are already relatively conservative forecasts in the market. There are many medium and long-term forecasts that it will even rise below 6. It has been a consensus in the market that RMB will perform relatively strongly in the future. The only difference now is, where is the peak of this round of appreciation?

The specific position is not very important, because it is not only determined by the RMB, but also by the status of the US dollar. As a special bilateral exchange rate between RMB and US dollar, on the one hand, it is affected by the economic fundamentals of RMB itself, on the other hand, it is also affected by the US dollar index. In the past year, especially in the past eight or nine months, the US dollar index has continued to depreciate. The US dollar index has dropped from the highest 102 points to the lowest 90 points, or even exceeded 90 points. Such a devaluation situation may have some continuity in the context of the change of president of the US government. This will provide another dimension of support for the RMB exchange rate.

Nanfang finance and Economics: the epidemic has brought a huge impact on the global economy. We all hope that the vaccine can help the global economy out of the shadow in 2021. However, the rebound of the epidemic in many countries has caused worries. What do you think of the global economic trend in 2021?

Cheng Shi: The whole new epidemic situation is constantly repeated, the impact on the whole global economy is deepening. Our benchmark judgment is that, judging from the judgment of the global health organization, the epidemic situation may be entangled for the whole human society for a period of time. Therefore, it is difficult to hold very optimistic expectations for the future of the global economy. As has been discussed earlier, the global economy will present a pattern of strong rebound and weak recovery in 2021.

In 2021, the global economy will also face a series of uncertain challenges brought by repeated outbreaks. This challenge will have more and more complex impacts on the structural and regional dimensions of the global economy. Personally, I still think that we can't be too optimistic about this epidemic. At present, we haven't seen the situation of the complete end of the epidemic. In this context, we should have a certain understanding of the future risks.

Nanfang finance and Economics: what is the biggest resistance in this economic recovery? Is it an epidemic? Or some other factors?

Cheng Shi: I personally think the most important impact of the new outbreak on the world is that it makes the whole world more complex. In fact, a single risk is not a big problem for human economy and society. But what are we afraid of? It is systemic risk, which is the complex situation caused by the infection, resonance and interaction of different risks.

From the perspective of economics, single risk can be solved by a single policy, but if we are faced with a complex situation of systemic risk, we need different policies to match policies. This requires a very large philosophy of policy regulation, and also requires us to have a more clear, rational and in-depth understanding of the future.

Southern finance and Economics: in order to mitigate the impact of the epidemic on the economy, governments of various countries have launched large-scale fiscal stimulus plans, and major central banks such as the Federal Reserve and the European Central Bank have also launched unprecedented easing policies. Will the policy keynote be adjusted in 2021?

Cheng Shi: With the coexistence of strong rebound and weak recovery of global economic fundamentals in 2021, from the perspective of policy, there is also a new feature, that is, the coexistence of broad policies and tight regulation. In 2021, the overall economic recovery is relatively weak. At this time, the stimulus policies can not be withdrawn quickly, and some policy care is needed. On the other hand, the global economy has shown a strong rebound compared with that in 2020, and the whole easing policy will be tightened marginally from the direction of regulation. In other words, although the absolute range of policies is relatively wide, it has not done more than last year. In fact, global monetary and fiscal policies will become more prudent, and even some relatively tight changes will occur.

At present, the world, including China, is paying attention to the normalization of monetary policy, taking into account the problem of slowly withdrawing from the state of ultra loose. This requires a very strong grasp. At the central economic work conference at the end of last year, in fact, an important conclusion was put forward, that is, policies should not be changed sharply. On the one hand, we should consider that we should gradually and prudently withdraw from the ultra loose policy pattern in the long run; on the other hand, we should also take care of the current economic recovery.

Nanfang finance and Economics: for many people, 2020 is a dark year. What do you think of 2021?

Cheng Shi: Night gives us black eyes, we need to use it to find light.

We should recognize this public health crisis dialectically. In the short term, it has pressed the world's "pause button" and brought about the growth loss of the global economy in a free fall. However, we should see that in the long run, it has also pressed the "fast forward" button of the world economy, accelerated the formation of the inflection point of the world economic trend, and accelerated the transformation of the global economy and China's economy from the offline mode to the online mode, from the traditional economic development state to the traditional economic development state A new state of sustainable development.

In the transition process, the track is in the rapid switch. Different industries, different industries, are facing new changes after the epidemic. Great changes have taken place in the world, and a new trend has been formed. Some tracks will be obviously faster than in the past, and some are gradually slowing down. Investors need to seize the opportunity of accelerating the world change brought by the epidemic situation, and speed up the switching of their investment track, from an old deceleration track to an accelerating track.

For China, the dual cycle has actually brought about the shift of the focus of the policy resources of the whole China's factors of production, which in fact means that China's future success path, whether it is investment or business, or personal choice, is undergoing important switching and transformation. Therefore, we should grasp the formation of new trends and make some choices.

How not to miss the opportunity of transformation brought about by this crisis is to grasp the macro trend, especially the key changes of industrial structure, especially some economic development concepts advocated by the state, to stand on the direction closer to the future star sea.

 


 

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