Macroeconomic outlook report for the second half of 2022 From citic securities

The following is the Macroeconomic outlook report for the second half of 2022 From citic securities recommended by recordtrend.com. And this article belongs to the classification: Chinese economy, research report.

In the past six months, the global economy has suffered a huge impact from a combination of many factors. The Ukrainian crisis, repeated epidemics, rapid interest rate hikes by the Federal Reserve and other factors have led to a downward revision of the global economic growth expectations, and the economic cycles of various countries are divided, and they are generally faced with the risks and challenges of stagflation or even recession. These factors may further evolve in the second half of the year, and the impact on the economy may be extensive and far-reaching, such as the shortage of energy supply, the food crisis and the destruction of the global industrial chain. The above external environment superimposes the adverse situation of the large-scale rebound of the epidemic in some key cities in China since March. China’s economy showed great pressure in the second quarter, which may lead to a significant gap between the economic growth in the first half of the year and the target set at the beginning of the year.

However, China’s economy has also shown its tenacity to move forward with difficulties. The Chinese government has issued a package of policies and measures to stabilize the overall economic market. We believe that these policies and measures are highly targeted, strong and sustainable, and the policy effects have initially appeared. In the second half of the year, with the spread of normalized nucleic acid testing, the coordination between epidemic prevention and control and economic growth will be better, The package of policies to stabilize growth will fully release its effects. With the gradual increase of positive and favorable factors, China’s economy will catch up in the second half of the year and try to make up for the economic losses in the first half of the year as much as possible. We expect that the second quarter will be the low point of the year, the economy will rise in the second half of the year, the single quarter economic growth level in the third and fourth quarters will return to strength, and the whole year is still expected to achieve a relatively reasonable and high growth level in the world.

Global: the economic cycles of various countries are divided, and the growth rate is expected to be generally revised downward. The Ukrainian crisis has had a profound impact on the operation of the global economy, and has spread to energy supply, food security, financial system and industrial supply chain. We expect that international energy and food prices will remain high during the year. At the same time, considering that the repair of supply chains in the United States and other developed economies is still slow, the global inflation situation is still grim. At the same time, under the background of the general tightening of monetary policy by central banks around the world, attention should still be paid to the risks of overseas financial markets.

The Ukrainian crisis caused the downward revision of global economic growth expectations. The chain reaction triggered by the Ukrainian crisis may even last into the next few years. First of all, the Ukrainian crisis will exacerbate the global energy security problem. While Russia’s pillar industries are seriously impacted, the problem of energy shortage will also drag down the European economy. Secondly, financial sanctions disrupt the global financial order. The abuse of swift system sanctions will reduce its credibility and accelerate the process of de dollarization. Finally, the global supply chain in the post epidemic era has further deteriorated. The embargo, route decoupling and trade protectionism policies have seriously affected the stability and growth of Global trade.

The global inflation situation will remain grim. Since 2022, the situation of high global inflation has not been significantly improved. We expect that the international energy and food prices will remain high in the second half of this year. At the same time, the Ukrainian crisis has also brought broader price increases by affecting the prices of key raw materials in the new energy and semiconductor industry chain. At the same time, the repair of supply chains in the United States and other developed economies is still slow. In the face of the risk of wage price spiral, we expect that the decline of inflation in the United States will be relatively limited during the year, and it will not be able to return to the target range of monetary policy of the Federal Reserve. The global inflation situation is still grim.

Financial risks are gradually exposed under the ebb tide of global liquidity. As fighting inflation has become the core task of the current stage, the Federal Reserve has quickly entered the tightening cycle of monetary policy. The Federal Reserve raised interest rates by 75bps in June and will continue to tighten monetary policy rapidly in the future. Within this year, it may raise the federal funds rate to around 3.25%-3.5%, which will have an impact on global liquidity by superimposing the already started reduction process.

The pace of the ECB’s exit from the easing policy has also been significantly accelerated. It will end its net asset purchase on July 1 and plans to raise interest rates by 25bps at the interest rate meeting in July. It is expected that the European Central Bank may raise interest rates by 50bps at its interest rate meeting in September, formally withdraw from the negative interest rate policy, and continue to raise interest rates in the future. Under the background of monetary policy tightening by central banks around the world, risks in overseas financial markets are increasing day by day.

Tackling stagflation and avoiding recession have become common challenges for overseas economies. The continued high inflation level in the United States has affected the profit margin of enterprises through rising costs. The continuous decline of corporate profits will affect the growth rate of capital expenditure. At the same time, high inflation has also hit the consumer confidence of the U.S. residential sector. As an important pillar contributing to U.S. economic growth, the gradual weakening of the two will drag down the economic operation. The overall U.S. economy is also at risk of turning into recession in the future, and the recession risk is gradually approaching under the sharp interest rate increase of the Federal Reserve. In addition to the United States, other western developed countries, affected by the energy problem, also have obvious cost push inflation, which may face the risk of “stagflation”. Emerging economies and developing countries, constrained by the vaccination rate and the relatively backward public health system, have a weak recovery of economic momentum, and are significantly affected by the external environment. The constraints of imported inflation and tight financial conditions coexist, and the possibility of stagflation is also high.

China: catching up in the second half of the year, economic growth is expected to pick up. Since March, some key cities have been impacted by the epidemic, resulting in a rapid decline in short-term economic prosperity. It is expected that the economic growth rate in the first half of the year is not small compared with the target set at the beginning of the year. In the second half of the year, we believe that with the spread of normalized nucleic acid testing, the coordination between epidemic prevention and control and economic growth will be better, and the package of policies to stabilize growth will also fully release its effects. With the gradual increase of positive and favorable factors, China will catch up in the second half of the year and try to make up for the economic losses in the first half of the year as much as possible, so as to achieve a relatively reasonable and high annual economic growth level in the global perspective. We expect that the second quarter will be the low point of economic growth in the year, and the economy is expected to rise in the second half of the year. The single quarter economic growth in the third and fourth quarters will return to a strong level. In the long run, China still has high growth potential and will still be the largest contributor to global growth. We also stressed that for the economic operation in the second half of the year, the growth rate at the time point is more important than that of the whole year.

It is expected that the coming second quarter will be the low point of the annual economic growth. Affected by the local epidemic in some key cities, the economic boom in April was significantly down, and all data indicators fell sharply. Especially in the sub regions, the economic data of the Yangtze River Delta and Northeast China, which were most severely affected by the epidemic, fell significantly. However, since the middle of April, the national epidemic has been further and effectively controlled. At present, Shanghai has achieved social clearance, and has fully resumed work, production and the city. The national economy has also begun to enter the process of recovery. From the data of logistics and people flow, there was a marginal recovery in May compared with April, and it is expected that various economic indicators in June will also increase significantly month on month. From the perspective of quarter, it is expected that the second quarter will be the low point of the whole year, and then it will rise.

The package of steady growth policies in the second half of the year will fully release the effects. With the initial effective control of the epidemic situation in some parts of the country, it has provided space for the implementation and promotion of the counter cyclical macroeconomic policy. At present, the steady growth policy is in full swing. Among them, the monetary policy toolbox is sufficient to play the dual functions of aggregate and structure. It is expected to promote the recovery of social and financial growth in the second half of the year; During the year, the financial strength was significantly increased, and the special bonds continued to be promoted; The important position of real estate in China’s economy has not changed. At present, many cities have adjusted their policies to reasonably meet the needs of residents for improved housing; In addition, the policy will also support the release of consumption potential, strive to open up the blocking points and smooth the logistics cycle, and emphasize the priority of employment policy, focusing on solving the operational difficulties of small and medium-sized enterprises. As monetary, fiscal, real estate, expansion of domestic demand, smooth circulation, relief of small and medium-sized enterprises, stable employment and other policies form a joint force, the stable growth policy will fully release its effects and help the economic recovery.

The inflation problem may be further interpreted in the second half of the year. Affected by the complex and severe international situation, the crude oil price may continue to run at a high level, which will push up the overall price center; At the same time, the issue of food security has become an important issue of common concern in the world. The easy rise and difficult fall of food prices and the intensified fluctuations may also have an impact on China’s price situation; In addition, affected by the pork cycle, the low price of pork in the current year has passed, and it is expected that the current drag effect will turn into a driving effect in the second half of the year. On the whole, we expect that the year-on-year reading of PPI will decline under the drag of tail raising factors, and CPI may break through 3% in the third quarter. However, looking back on the previous rounds of imported inflation cycles in China, it can be judged that China’s macro-policy control ability is increasing, which will effectively deal with the current imported inflation pressure.

Despite the short-term pressure, it should be noted that China will still be the largest contributor to global growth. On the one hand, China has a potential growth rate of more than 5% during the “fourteenth five year plan”, and the growth space is still large; On the other hand, considering that China currently ranks first in the world in terms of trade volume, has obvious advantages in the quantity and quality of labor, and has a complete industrial chain layout, its important role in the global industry cannot be replaced in the short term. Although in difficult years, mainstream international institutions tend to underestimate the resilience and rebound momentum of China’s economy, we believe that we should not lose confidence in China’s economic growth. We expect that with the support of the policy of stabilizing growth, the supply-demand cycle will be quickly repaired, the economy is expected to achieve a slight year-on-year growth in the second quarter, the GDP growth rate in the third and fourth quarters will rise, and it is expected to achieve a high level of about 6%, and the annual growth rate is still expected to reach about 5%.

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