China Economic Update 中国经济最新动态 Haibin Zhu Chief China Economist J.P. Morgan
Question #1 问题 #1 1. What is the biggest risk factor facing your business in the next 6-12 months? A. China s continued economic slowdown B. Economic policy of the Trump Administration C. Political/economic uncertainty in the euro area D. The pace of Fed rate hike E. Geopolitical risks F. None of the above 1. 贵公司在未来 6-12 个月面临的最大风险是什么? A. 中国经济增长持续放缓 B. 特朗普政府的经济政策 C. 欧元区的政治 / 经济不确定性 D. 美联储加息的步伐 E. 地缘政治风险 F. 以上都不是 1
Question #2 问题 #2 2. What is your expectation of global economic growth this year vs. 216? A. >.5%-pt higher B. -.5%-pt higher C. Same as last year D. -.5%-pt lower E. >.5%-pt lower 2. 你预期与 216 年相比, 今年全球经济增长速度如何? A. 增长幅度 >.5% B. 高 -.5% C. 与 216 年持平 D. 低 -.5% E. 回落幅度 >.5% 2
Question #3 问题 #3 3. What move will PBOC take in its benchmark lending and deposit rates in the next 12 months? A. Rate cut B. Rate increase C. No change 3. 你预期未来 12 个月中国央行将如何调整存贷款基准利率? A. 下调 B. 上调 C. 无变动 3
Question #4 问题 #4 4. Your forecast of USD/CNY exchange rate by end-217 is: A. below 6.8 B. 6.8-7. C. 7.-7.2 D. above 7.2 4. 请选择您对 217 年底美元 / 人民币汇率的预期 : A. 低于 6.8 B. 6.8-7. C. 7.-7.2 D. 高于 7.2 4
Question #5 问题 #5 5. Which set of China policies has had the biggest impact on your business in the past 12 months? A. Strict implementation of capital outflow restrictions B. Tighter liquidity and higher interest rates in money markets C. Tax reform (e.g. VAT reform and other tax & fee reduction measures) D. Administrative reform that removed or simplified administrative controls E. None of the above 5. 请选择在过去 12 个月中国政府出台的对贵公司影响最大的政策 : A. 采取措施严格遏制资本外流 B. 货币市场流动性趋紧和利率高企 C. 税改 ( 例如增值税改革和其他降低企业税费负担的措施 ) D. 取消或精简行政审批事项的行政体制改革 E. 以上都不是 5
Global economic update 全球经济最新动态 Gradually out of new mediocre Modest pickup in growth: Both DM and EM Gradual reflation Monetary policy normalization: Fed/ECB/BOJ 6
Global real GDP and manufacturing 全球实际 GDP 和制造业产值 %q/q, saar; both scales 4 Real GDP 3 2 1 Mfg output 212 213 214 215 216 217 Source: J.P. Morgan 7
Real consumption and fixed investment, DM 发达市场实际消费和固定投资 3 %oya; both scales Real consumption 6 2 4 1 Investment 2 Source: J.P. Morgan 212 213 S JP M 214 215 216 217 8
GDP deflator, Global 全球 GDP 平减指数 %oya (LCY) 5, 4 3 Source: J.P. Morgan 2 1 Average 1997-216 97 2 7 12 17 9
Global risk factors 全球风险要素 US Fed rate hike and US movement Tax reform and border adjustment tax Trade policy Europe French election Italy: Election/banking NPLs Brexit 1
China 217: Stability, stability, stability 217 年中国经济关键词 : 稳定 稳定 还是稳定 11
I. Stable growth outlook: JPM forecast 6.7% 经济增长前景稳定 : 摩根大通预期增速为 6.7% China: Real GDP growth China: Real GDP growth %, both scales 11 J.P. Morgan forecast 11 1 %oya %q/q saar 1 9 9 8 8 7 7 6 11 12 13 14 15 16 17 6 Source: NBS, J.P. Morgan 12
Stronger activity excluding financial sector 金融领域之外的经济活动表现强劲 China s real GDP growth %oya, both scalse 2 15 Financial service growth GDP excluding financial service 8.5 8. 1 7.5 7. 5 6.5 Source: NBS, J.P. Morgan 6. 212 213 214 215 216 217 218 13
Consumption vs. investment 消费与投资 China s economic structure 52 5 48 46 44 42 4 38 Source: NBS, J.P. Morgan % of GDP, 4Q rolling Tertiary Manufacturing 7 9 11 13 15 17 14
Rebound in trade activity 贸易活动复苏 China: Merchandise exports and imports US$ billion,sa, 3mma 22 2 Exports 18 16 14 Imports 12 212 213 214 215 216 217 15
Public vs. private investment 公共投资与民间投资 Fixed asset investment 25 2 15 1 5 Source: J.P. Morgan %oya, 3mma Private FAI Public FAI -5 213 214 215 216 217 16
Recovery in nominal GDP growth 名义 GDP 增速反弹 Nominal GDP growth %oya 3 25 2 15 1 Tertiary GDP 5 Manufacturing 7 9 11 13 15 17 Source: NBS 17
II. Stable credit risk outlook 信贷风险前景稳定 Top concern: corporate debt, concentrated in SOEs & overcapacity sectors total social debt (% of GDP) Corporate debt Household debt Government debt 15. 111.1 19.6 118.9 125.2 13.2 141. 149.7 88.7 9.2 23. 26.4 27.2 29.3 32.9 35.5 39. 44.8 18.1 17.5 42.1 4. 49.7 49.3 49.3 51.4 55.2 59.3 58.7 58. 7 8 9 1 11 12 13 14 15 16 Source: PBOC, NBS, J.P. Morgan 18
End of PPI deflation and recovery in corporate profits PPI 通缩结束及企业盈利复苏 China PPI and industrial profits %oya, 3mma. both scales 8 6 4 PPI Industrial profits 2-2 -4-6 -8 213 214 215 216 217 25 2 15 1 5-5 -1 Industrial enterprise profit growth by type %oya 1 215 216 217 ytd 75 5 25-25 SOE Collective Share-holding Foreign Private Source: NBS, J.P. Morgan Source: NBS 19
PPI-reflation also reduced real lending rate PPI 再通胀降低实际贷款利率 Real interest rates % 15 Adjusted by PPI 1 5-5 6 Adjusted by CPI 8 1 12 14 16 Source: NBS, PBOC, J.P. Morgan 2
III. Stable CNY outlook 人民币汇率前景稳定 CNY exchange rate vs. TWI Source: Bloomberg Daily CFETS index 7. USD/CNY 12 6.9 1 6.8 98 6.7 6.6 96 6.5 94 6.4 92 Jan 1, 16 Apr 1, 16 Jul 1, 16 Sep 3, 16 Dec 3, 16 Mar 31, 17 21
Capital outflow 资本外流现象 China s FX reserve China: Implied capital outflows USD trillion, eop 4 3 USD billion 5-5 215 216 Based on FX reserves 217 2-1 1 4 6 8 1 12 14 16-15 -2 Source: PBOC, J.P. Morgan Based on FX reserves and PBOC other asses Based on PBOC FX position Source: SAFE Source: PBOC, J.P. Morgan 22
217: Internal and external uncertainties 217 年面临的内部和外部不确定性 23
Uncertainty 1: Housing market outlook 不确定性 1: 房地产市场前景 China: House prices RMB per square meter, both scales 15, 13, 11, 9, National (1 cities, LHS) Tier-2 cities (LHS) Tier-1 cities (RHS) 7, Tier-3 cities (LHS) 5, 8 1 12 14 16 4, 35, 3, 25, 2, 15, 1, 5, Commodity building floor space and real estate investment %oya, 3mma, both scales 4 Floor space sold Real estate investment 4 3 Floor space started 3 2 2 1 1-1 -1-2 -2-3 -3 211 212 213 214 215 216 217 Source: Soufun, J.P. Morgan Source: NBS, J.P. Morgan 24
Mixed message regarding inventory/supply 房地产市场库存 / 供给释放出不同信号 China: Residential housing inventory China s real estate market months 25 2 Tier 1 Top Tier 2 Low Tier 2 tier 3 mn sqm, both scales 8 Floor space under construction 6 2 15 15 4 1 1 2 Floor space completed 5 5 Dec 1 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 2 4 6 8 1 12 14 16 18 Source: Soufun, CREIS, J.P. Morgan Source: CEIC 25
Government incentive 政府激励措施 China government revenues Trillion yuan Land sale revenue 25. Real estate-related taxes Government revenue (ex. Real estate) 2. 15.1% 15. 14.8% 1. 5. 3.5%. 213 214 215 216 Real estate market % of GDP Real estate sector 8 6 4 2 Land sale revenue 99 1 3 5 7 9 11 13 15 13 12 11 1 9 Source: NBS, J.P. Morgan The numbers refer to % oya growth of each revenue component in Jan Nov 216 26 Source: NBS, J.P. Morgan
Uncertainty 2: Financial stability tightening and unintended policy consequence 不确定性 2: 金融稳定面临挑战以及意料之外的政策后果 Increase in market interest rates; strengthened MPA framework %p.a. 3.9 3.7 1 month 3.5 3.3 7 day 3.1 2.9 1 day 2.7 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 %p.a. 3.3 3.1 1-year 2.9 6-month 2.7 3-month 2.5 May 2, 16 Jul 8, 16 Sep 13, 16 Nov 19, 16 Jan 25, 17 Source: CEIC, J.P. Morgan Source: CEIC, J.P. Morgan 27
Explosion in interbank business 银行同业业务呈爆发式增长 Interbank assets OBS WMP and AUM of mutual fund subsidiary Rmb trn 7 6 5 Claims on non-bank financial institutions (LHS) Claims on other banks (LHS) % Share of total assets (RHS) 4 3 2 1 6 7 8 9 1 11 12 13 14 15 16 % 3 25 2 15 1 5 Trillion yuan, outstanding 2 Off-balance sheet (OBS) WMP AUM of mutual fund subsidiary 15 1 5 14Q4 15Q1 15Q2 15Q3 15Q4 16Q1 16Q2 Source: CEIC Source: CEIC, WIND, J.P. Morgan Equity Research 28
Separation between monetary stability and financial stability operations 货币稳定操作和金融稳定运行相互分离 Lending rates in China % pa 8 Average bank lending rate (general loan) 7 1-year benchmark lending rate 6 5 Prime lending rate 4 Jan 13 Jul 13 Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Market-based interest rates a et based te est ates % p.a 3M SHIBOR 4.5 7-day repo 4. 7-day SLF 3.5 3. 2.5 2. 7-day reverse repo 1.5 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Source: PBOC Source: Bloomberg, J.P. Morgan 29
Higher vulnerability in regional banks 地区性银行存在较高的脆弱性 Figure: Banks market share by category % of total bank assets Large commerical banks Joint stock banks Regional banks Others 1 8 6 4 2 3 4 5 6 7 8 9 1 11 12 13 14 15 Source: CBRC Off balance sheet wealth management products % of total assets 25 2 214 215 1H16 15 1 5 Big 4 banks Joint stock CBs Regional banks Source: JP. Morgan Equity Research Non-standardized assets (NSA) % of total assets 25 2 15 1 5 Source: Bloomberg, J.P. Morgan 215 1H16 Big 4 banks Joint stock CBs Regional banks (Interbank liability + bond issued)/total liabilities (Interbank liability + bond issued) / total liabilities % 4 35 3 25 2 15 1 5 Source: J.P. Morgan Equity Research 214 215 1H16 Big 4 banks Joint stock CBs Regional banks 3
Uncertainty 3: US-China trade relationship (risk is mitigating) 不确定性 3: 美中贸易关系 ( 风险正在减弱 ) Figure: US trade deficit with China USD bn Trade deficit with China as % 4 % of total US trade deficit 6 35 US trade deficit with China 5 3 25 4 2 3 15 2 1 5 1 2 22 24 26 28 21 212 214 16 YTD Source: US Census Bureau (NOV) Figure: China s trade surplus with US USD bn China's trade Trade surplus with US as % of % 3 China's total trade surplus 3 surplus with US 25 25 2 15 1 5 2 4 6 8 1 12 14 16 2 15 1 5 Source: US Census Bureau Source: China customs board 31
US-China trade relationship 美中贸易关系 US gross trade balance decomposition (% share) US trade balance (value added) RoW 32.5% China 27.% China 46.6% RoW 49.2% LatAm 4.6% EMEA EM 5.6% EM Asia ex. China 1.6% LatAm 3.9% EM Asia ex. China 14.2% EMEA EM 5.8% Source: OECD, J.P. Morgan Source: OECD, J.P. Morgan 32
US-China trade relationship (cont d) 美中贸易关系 ( 续 ) Decompose made in China Europe 7.% DVA 67.9% FDV Asia ex. China 19.% RoW 9.7% US 3.% Source: OECD, J.P. Morgan 33
US-China trade relationship (cont d) 美中贸易关系 ( 续 ) Decompose made in China Canada 2.% RoW 5.% DVA 85.% FVA 15.% Europe 4.% Asia 4.% Source: OECD, J.P. Morgan 34
Q&A 问答 35
Disclosures 36
Disclosures 37
Disclosures 38