The economy is improving, but worries remain

HSBC China released data that China's HSBC manufacturing PMI initial value in October was 50.9l, which was better than expected and hit a seven-month high. The preliminary reading of China's manufacturing output index was 51.0, the highest in six months. Linked to the recently released third-quarter economic growth data of 7.8% (7.7% in the first quarter, 7.5% in the second quarter), the stabilization and recovery of the Chinese economy seems to be confirmed. However, many analysts are still very cautious, and pessimists even believe that the economy is mainly driven by investment and real estate, and structural adjustment has been left behind, which means that the future economic structure may further deteriorate, and the sequelae of "quasi 4 trillion" may become more and more more serious.

Ye Tan, a well-known financial analyst, expressed this concern when she participated in a TV program recently. She believes that China's real estate bubble, overcapacity and other issues have not been addressed and resolved under the mild stimulus of the government in recent times. For several years, the economic outlook without substantial reforms is not optimistic.

Looking back at the economic data, the growth rate of real estate investment and the area of land purchased by enterprises increased The data related to real estate development, such as Su, jumped up at the beginning of 2013, and kept running at a high level for the next 9 months. It can be seen that after the demand and supply of real estate were suppressed in 2012, 2013 can be described as a "retaliatory" growth. . Housing prices in first-tier cities and hotspot cities continue to soar. Statistics show that housing prices in some cities have increased by more than 20% year-on-year.

From an investment point of view, Peng Wensheng, chief economist of CICC, wrote in an article that the main driving force behind the improvement in economic growth came from investment. "The contribution rate of gross capital formation to GDP was 55.8%, driving GDP growth by 4.3 percentage points, an increase of 0.2 percentage points compared with the first half of the year. In the third quarter of this year, the contribution of investment to GDP was the strongest in the same period in the past three years." But he also It is pointed out: "The increasing role of investment in driving GDP is consistent with the obvious acceleration of the year-on-year growth rate of fixed asset investment in the third quarter, which mainly reflects the stimulating effect of the previous stable growth policy on investment, which is more of a short-term phenomenon."

From the perspective of foreign trade, the carriage that used to drive the economy the most is still sluggish. According to Peng Wensheng's calculations, net exports in the third quarter drove GDP by -0.5%. A careful analysis shows that the weak external demand is difficult to improve in the short term, the recovery in the United States and Europe has been repeated from time to time, and the good days of emerging markets have come to an end, and demand has dropped sharply.

In this environment, the economy needs to continue to shift from being driven by external demand to being dominated by domestic demand. However, the current problem is that domestic demand is dominated by investment, especially government investment. Its return on investment has not been as good as it used to be, and it has put more pressure on the government's debt and squeezed the investment space of private capital. Recently, the media reported that the investment plans of Sichuan and other provinces and cities in 2013-2014 are in the trillions, which shows that this kind of thinking is still deeply rooted.

Looking to the future, a gradually stabilizing economy and moderate inflation have given policy-makers time and room to maneuver for economic reforms, avoiding the risk of a hard economic landing or runaway inflation. "The state of China's economic operation in the last two or three years has clearly reminded us that the biggest test facing China's economy is how to deal with the challenge of the continued slowdown in the potential economic growth rate. In order to achieve long-term sustainable economic growth, the long-term driving force for my country's economic growth is We should shift from the original extensive dependence on investment and export trends to relying on the improvement of total factor productivity in the future. To achieve this change, the only effective way is reform. It is necessary to release total factor productivity through reform, and improve total factor productivity through reform. To make up for the decline in the potential growth rate, so as to achieve sustainable economic development." Tang Jianwei, senior macro analyst at the Bank of Communications Financial Research Center, pointed out.

At the upcoming Third Plenary Session, all parties are looking forward to the introduction of a comprehensive reform framework and plan. Some analysts believe that the government will announce reform frameworks and guidelines covering almost all important areas. However, some analysts believe that those who hold this expectation will be disappointed, because it is unlikely that the new government will come up with a comprehensive package of reforms at once. More realistically, the plenary will announce the overall reform framework.

In any case, China's economic worries have become increasingly serious, and "reform" has become a consensus. The question now is how to implement it. The Shanghai Free Trade Zone can be said to be the first drink of this round of reforms, but from the current point of view, the intensity is not as good as expected. Entrepreneurs need to pay close attention to the reform trend of the Third Plenary Session to see the trend clearly.