Zhong Zhengsheng: China's economic growth rate may drop to 5% in the fourth quarter, and cross-cycle adjustment is particularly important

Reporter Wang Yu

Zhong Zhengsheng, chief economist of Ping An Securities, said a few days ago that the high point of China's economy may have passed, and China's economy will be "peaked and consolidated" in the second half of the year. He expects that the economic growth rate may fall back to 5% in the fourth quarter, so the policy should take precautions and do a good job of cross-cycle adjustment.

Zhong Zhengsheng said at an event hosted by the Shanghai Institute of Finance and Law on Friday that from the perspective of a two-year compound growth rate, all economic indicators in the first half of the year were basically upward, but by July, the main economic indicators were generally slowing down. This provides the best illustration of the growth stabilization policy at the July 30 Politburo meeting.

"GDP in the fourth quarter is likely to fall back to 5%, and even some institutions are more pessimistic, thinking that it is below 5%, so the policy should be precautionary, otherwise, the pressure to stabilize growth at the end of this year and early next year will be very prominent." He said.

According to data from the National Bureau of Statistics, China's gross domestic product (GDP) increased by 12.7% year-on-year at comparable prices in the first half of the year. From a quarterly point of view, the first quarter increased by 18.3% year-on-year, and the second quarter increased by 7.9%.

From the perspective of specific indicators, Zhong Zhengsheng said that in the first half of the year, China's industrial production and export growth rate exceeded that before the epidemic, but with the weakening of the pulling effect of exports, coupled with the impact of production restrictions and lack of core factors, industrial production is facing downward pressure. In terms of investment, manufacturing investment failed to continue the trend of accelerating recovery in the second quarter, and from the perspective of forward-looking indicators, the growth of manufacturing investment in the third quarter may enter the platform period; real estate investment has shown weakness from all levels such as sales, construction, construction, and funding sources. In addition, the recovery in consumption tends to stagnate.

"Since most of the consumption of non-durable goods and services has irreparable characteristics, the growth rate of total retail sales of social consumer goods should not be measured by the two-year average." From January to July, the cumulative growth rate of total retail sales of consumer goods was 8.8%, which is not too slow compared with the growth rate of 8% in 2019, but the growth rate of consumption has entered the platform period since April. Clearly, consumption needs more facilitators. He said.

Zhong Zhengsheng believes that promoting consumption will become a medium- and long-term challenge. "China is currently just one step away from moderate aging." He said, "The low consumption tendency of the elderly has become a medium- and long-term factor dragging down China's consumption growth, and it needs to be dealt with by the construction and improvement of the pension insurance system." "At the same time, in the face of high housing prices, the optional consumption of young people gives way to housing savings, and the optional consumption of middle-aged people also gives way to the housing savings of the next generation." The meeting of the Central Financial and Economic Commission focused on the study of solidly promoting the issue of "common prosperity", and it is its due meaning to improve the income level and consumption capacity of residents.

On August 17, the tenth meeting of the Central Financial and Economic Commission pointed out that it is necessary to adhere to the people-centered development thinking, promote common prosperity in high-quality development, correctly handle the relationship between efficiency and fairness, build a basic institutional arrangement for the coordination of primary distribution, redistribution and tertiary distribution, increase the intensity of taxation, social security, transfer payments and other adjustments and improve accuracy, expand the proportion of middle-income groups, increase the income of low-income groups, rationally adjust high incomes, ban illegal incomes, and form a large middle- The two small olive-shaped distribution structures promote social fairness and justice, promote the all-round development of people, and enable all people to make solid progress towards the goal of common prosperity.

Zhong Zhengsheng also talked about his views on the recent meeting of the Political Bureau of the Central Committee to "do a good job in cross-cycle adjustment of macro policies", he said that cross-cycle adjustment is different from counter-cyclical adjustment, cross-cycle adjustment is more focused on medium- and long-term economic operation, more consideration is given to the lagging effect of policies, so that macro policy tools can be used more relaxedly to iron out economic fluctuations, which is more conducive to the "stability and long-term" of China's economy.

"Prospective adjustments can be softer than stress adjustments, and 'preventing problems before they happen' is more effective than waiting until symptoms deepen before taking a strong drug." After China's "first-in,-1- first-out" control of the COVID-19 pandemic last year, in order to avoid a further rapid rise in macro leverage, it is a good example of seeking monetary policy normalization before developed Economies in the West. He said.

Zhong Zhengsheng stressed that cross-cycle adjustment should not only make a fuss on the demand side, but also work the supply side. "It is not only necessary to use traditional macroeconomic policy tools (fiscal and monetary policy) in a restrained and rhythmic manner, but also to release more dividends from institutional reform and better enhance total factor productivity, so as to achieve a higher level of dynamic balance between demand-driven supply and supply-created demand." This is also in line with the spirit of emphasizing high-quality development in the 14th Five-Year Plan. ”