The most powerful response to Moody's downgrading China's credit rating has been to boost economic growth
In early December, Moody's, an internationally renowned rating agency, announced that it would downgrade China's national sovereign credit rating from stable to negative in the past. In fact, Moody's national credit to the United States was downgraded from stable to negative in November. It is equivalent to Moody's downgrading of China's credit rating, and it is not specific to China, in fact, there has been a similar downgrade of the United States.
In Moody's rating report, in Brother Dao's view, there are two very important pieces of information that deserve our attention. One message is that from 2026 to 2030, that is, during our 15th Five-Year Plan period, the economic growth rate will be roughly 3.8%. After saying this speed, most Chinese people find it emotionally difficult to accept. I think that's a very important message.
Of course, Moody's talks about downgrading China's credit rating from stable to negative, and for good reason. His main argument is that China's economy is currently being dragged down by the two burdens of real estate and local government debt. These two burdens have not yet seen very effective and decisive measures to resolve them, so Moody's believes that in 2024, they will also cause further drag on China's economic growth, and even if not handled well, it may also be a long-term burden for China's economic growth to decline further in the future.
When faced with Moody's downgrading China's sovereign credit rating, from the perspective of Chinese feelings, most people may not be as easy to accept as Brother Dao. But from Moody's report, we also need to do some learning calmly.
At least the problems caused by the drag caused by the development of real estate and the drag caused by the development of local government bonds that Moody's talked about have a certain resonance with many economists in China today. In addition, in the past two years, we have seen a significant decline in the development of the private economy, investment and other aspects of growth.
After the release of economic data in the first quarter of 2023, Brother Dao analyzed at that time that the three biggest drags on China's economic growth are real estate, local bonds, and the private economy. Looking back at the above three aspects at the end of 2023, it seems that none of them have shown a significant improvement in the situation.
Looking at some economic growth data released by the National Bureau of Statistics, our GDP growth rate in the first three quarters was 5.2%. In fact, the data for the first three quarters of 2022 is only 3%. If we take the data of these two years as an annualized basis, the economic growth rate in these two years is less than 4.2%.
After the statistics for the third quarter came out, Brother Dao also said that he expects to achieve the growth target of 5% at the beginning of the year in 2023, and it should be said that there is no big problem, and it is even said that it is not ruled out that the annual economic growth rate will be between 5.1~5.2%. But let's not forget that in 2022, our economy grew by only 3% in total.
This means that even if we achieve a growth of 5.1% or 5.2% for the whole year, it is a little more than 8% when combined with last year's 3%. To put it simply, you can understand that China's economic growth rate last year and this year is actually a little more than 4% annualized.
Speaking of this data, it is why we should calmly face Moody's to adjust our economic growth rate to 3.8% from 2026 to 2030. Many people may find it unacceptable. However, if we look at the annualized growth rate of China's economic growth in recent years, it is true that it has fallen from the 6% and 7% that everyone was used to in the past, and it is only a little more than 4% at present.
If the trend of real estate adjustment does not change, the current challenges faced by local bonds have not been fundamentally reversed, including the confidence of private entrepreneurs and private enterprises, and even if this trend continues, you will find that China's economy has faced the challenge of declining growth in the medium and long term from the curve of the annual annualized growth trend since 2012.
A major theme for China's economy in 2022 is steady growth. At the end of 2022, when analyzing China's economy, Brother Dao once said that although it is important to stabilize growth in the short term, the challenges and pressures facing stable growth in the medium and long term are also very arduous.
In the face of Moody's report, we can only really improve the economic growth rate, and solve the problems of real estate, local bonds, and private economic development.
Brother Dao believes that the stock market, the real estate market price adjustment, prices and other factors that affect public confidence have been reversed one by one, when everyone has confidence, everyone is willing to consume and invest in the future, China's economy has really risen, this is the most powerful response to the Moody's report.
In the end, China's development is for the benefit of the Chinese people, and everyone is more concerned about the tangible improvement in living standards brought about by China's development.
And Brother Dao is full of optimism and hope for the economy in 2024. This is by no means an emotional impulse or passion. Rather, it is a combination of real data research and rational cognition and judgment.
If you have a certain foundation in economics and finance, you can find the logic and context only from the draft agenda of "Spring Ploughing: 2024 New Year's Private Meeting".
The "Spring Ploughing: New Year's Private Meeting" held every year by Brother Dao since 2019 has come to the 6th session. Spring Ploughing: The theme of the 2024 New Year's Private Sharing Party is set as "Phoenix Nirvana, Reborn from the Fire: Welcoming a New Round of Asset Price Increases", and the meeting time is scheduled for January 15-19, with one hour of thematic sharing every night.
[Draft Agenda]
On January 15, fiscal easing and monetary loosening: China and the world ushered in a new round of rising tide and lifting all boats
On January 16, the real estate optimization map: be wary of the new round of house price increases and differentiation that is brewing
On January 17, embracing transformation: the technological revolution illuminates the fast lane of the future capital market
On January 18, Noji Tailai: Focus on pro-cyclical, high-growth, low-valuation core assets
On January 19, follow the trend: big data and artificial intelligence change the financial ecology, and quantitative funds rise!
January 20, Q&A
You can send a private message to sign up for the "Spring Ploughing: 2024 New Year Private Meeting", and let's welcome a new round of asset price increases together!