Assessing the state of the economy.pdf

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1、01March2012EconomicsResearchhttp://www.credit-suisse.com/researchandanalyticsChina:AssessingthestateoftheeconomyResearchAnalystsHardlandingriskisgone,butreboundisweakDongTao•Thereisavisibleimprovementintheoverallliquiditycondition,exceptinthe+85221017469propertysec

2、tor,comparedtothreemonthsago.Butregulatorsarenowdong.tao@credit-suisse.comrestrictinglendingtolocalinfrastructureprojects,causingaslowdowninnewcredit.•Challengeshavearisen,however,astheorganicdemandforloansseemssurprisinglyweak.Webelievethattheconstraintoncredithas

3、nowshiftedfrompolicyquotatodemandlimitation.•Despiteimprovedliquidity,therehasnotbeenmuchimprovementingrowthmomentum.Demandforcapitalgoodsandrawmaterialsremaineddepressed.Retailsalesstayedflattish.Exportorderswerebetterthanexpected.Theriskofahardlandingseemsgone,bu

4、tasharpreboundingrowthisunlikely.•Policymakersseemedtobemuchmoreconfidentabouttheirabilitytomanagetheeconomy.Theyarewillingtotakeactionstostimulatetheeconomyifnecessarybutthinkthecurrentpaceofgrowthiswithintheirexpectationandacceptable.•Wedonotexpectmeaningfulmonet

5、aryeasingtobelaunched.RRRisexpectedtobecut1-2timesmore,butthatisatechnicalmovetoneutralizethede-factoliquiditytightening.•Inflationislikelytodeclinetowardsthe3%levelbutshouldstarttoreboundlaterthisyear,fuelledbywageinflationandpricederegulation.Negativerealinterest

6、ratesmayreturn,andtheriskofratehikesremains.Wehaverevisedour2012CPIinflationforecastto3.7%from4.4%.•Thepropertysectorhasremainedtheswingfactor.WedonotbelievethatBeijingwilleaseitshousingpolicyuntilMarch2013.Smallerdevelopersarelikelytofaceliquidityproblems.Mergersa

7、ndacquisitionsaremorelikelythanadrasticpricefallthisyear,inourview.•Financialturbulenceremainsourkeyconcernthisyear.Riskonlocalgovernmentdebthasdeclinedasbanksrollovertheirloans.Propertytrustfundsareenteringtheirpeakrepaymentseason.InformallendinginChinastilllooksh

8、ighlyvulnerabletous.Exhibit1:Whathasimprovedandwhathasnot?LiquidityImprovedNotimprovedDemandImprovedNotimprovedBanklending√Capitalgoods√SMEliquid