Ouyang Xiaohong/text
One
Inadvertently, the digital economy that empowers a better life interprets new models and new business formats, but also brings growth questions.
The delivery riders who shuttle through the streets and alleys of the city are strictly bound by time. The system starts timing every time they take an order, and timeouts can mean bad reviews and reduced revenue, forcing them through stress and risk.
People who are burned out in urban office buildings and residential buildings are attracted by various apps (mobile applications). With each order, the system assigns coupons and analyzes user profiles, and they play online in a "low-priced" environment full of promotions such as discounts.
The vast number of people living in a low-cost, low-cost environment enjoy the convenience brought by the digital economy, and at the same time, they have unconsciously become part of the operating system of the economic "machine".
From waking up in the morning to check the weather forecast, getting dressed and traveling, shopping, to ordering a takeout with an app at night, driven by big data and algorithms, people's lives are increasingly dependent on apps. As a result, life is becoming more and more digital and algorithmic, but with low cost and high efficiency - these two points are the biggest "selling points" of e-commerce platforms.
The sudden rise of Pinduoduo shows that people's consumption logic has changed?
It's human nature. In November 2023, Pinduoduo Group's financial report for the third quarter ended September 30, 2023 showed that its revenue in the third quarter of 2023 was 68.84 billion yuan, a year-on-year increase of 93.9%, and the sales of its cross-border e-commerce platform Temu exceeded 5 billion US dollars, and in September, the first anniversary of its launch, the single-day GMV (gross merchandise transaction) reached 80 million US dollars.
Please note: Temu's synopsis is Team Up, Price Down, which translates to "the more people buy, the lower the price".
As of January 5, 2024, Pinduoduo (NASDAQ:PDD) had a market capitalization of $194.94 billion and a price-to-earnings ratio (TTM) of 30.81 times at $146.74 per share, while Alibaba (NASDAQ:BABA) closed at $72.96 per share, with a market capitalization of $185.79 billion and a TTM of 10.24 times.
Starting in December 2023, Pinduoduo's market capitalization surpassed that of Alibaba for the first time, attracting market attention. This could mean that more and more people are gravitating towards low-priced or "good price" goods, both at home and abroad.
Feng Jian'an, a veteran private equity investor, said: "There are a lot of things on Pinduoduo that are very cheap, and the most good fruits are a pound or two, and the most important ones are small. There are also very good antibiotic-free (biogenic) selenium-rich eggs, 30 pieces of 1800 grams and 24 yuan. ”
Now, it's not just the takeaway guys, it seems that people are directly or indirectly "trapped" in the system or platform?
"It's not that it's 'trapped' in the platform, it's a matter of income, it's not easy to make money, and saving money has become a way. Everyone wants to spend money in style, the problem is to have this capital. Feng Jian'an said.
Feng Jian'an believes that with such low prices, it may be a difficult problem to make the CPI (consumer price index) turn positive. The voiceover is that low prices and low costs are also the current growing worries. But in his view, this may also be the key to high-quality growth, low prices, low costs, more due to overcapacity, exports are advantages, internal disadvantages, because of low profits.
The November 2023 CPI data showed that prices weakened again. Considering the situation of "insufficient effective demand and overcapacity in some industries", Galaxy Securities analyzes that CPI and PPI (producer price index) may continue to operate at a low level in the first half of 2024, and predicts that the CPI in December 2023 will be -0.2% and PPI will be -2.7%, and the decline will be narrower but still negative.
In a sense, perhaps the rise of Pinduoduo has its inevitability. Ordinary residents under new technologies, new products, new models, and new formats have begun to choose Pinduoduo, which is not a new domestic demand?
This "low price" and "low cost" are not the other "low price" and "low cost". According to Zhou Qiren, a professor at Peking University's National School of Development, although the prices of general goods and services are largely determined by market supply and demand, administrative interference in the prices of key factors of production, including land prices, interest rates, exchange rates, fees for financial services, and rates for electricity, education, medical care, and other productive services, still exists extensively, seriously interfering with the investment decisions of various entities.
At the same time, low prices are not unrelated to deflationary risks, even though they are different economic phenomena. Low and low prices can be positive economic signals in some cases, indicating increased efficiency and market competition, but if these phenomena are prevalent and persist for too long, they can lead to deflation, which can negatively impact the economy.
2024 is still a year of great variability. According to the analysis of the Xijing Research Institute, China's systemic risks may enter a real stage of deep liquidation, from finance to finance, from currency to credit, from stocks to real estate, all need to undergo a deep restructuring and revaluation in order to adapt to the "high-quality development" stage of de-real estate. How to say goodbye to real estate, it took Japan 30 years, the United States 15 years, and how long does China take?
Two
The internal and external macro environment has changed, the consumption logic has changed, and the corresponding investment logic may also change.
The resonance of the micro individual with the macro picture is not unexpected. China's economic recovery is in waves and zigzags, and if systemic risks enter the stage of deep liquidation, it will not be completed overnight. In 2024, it is still necessary to fasten the "seat belt", people are starting to be budget-conscious, and the consumption style tends to be practical and quality.
In fact, although the total size of exports has not changed much, the geographical distribution has changed, which means that the pattern of consumption, investment, and exports has changed.
"The total size of our exports has not changed much, what has changed is the geographical distribution, and we have increased our exports to Southeast Asia, many of which are re-exported to Europe and the United States. Otherwise, how could Southeast Asia be able to absorb so many imported products from China. Feng Jian'an said.
According to CCTV, looking back on 2023, China's foreign trade has overcome multiple challenges such as weak foreign demand and falling prices, and has achieved an import and export scale of nearly 42 trillion yuan and an international export market share of more than 14%. In the new year, China will share with the world the new opportunities brought about by Chinese-style modernization, and continue to become an important engine for world economic growth.
According to the latest statistics from the State Administration of Foreign Exchange, as of the end of December 2023, the size of the mainland's foreign exchange reserves was US$3,238 billion, an increase of US$66.2 billion, or 2.1%, from the end of November.
Xu Lin, former director of the Department of Finance and Finance of the National Development and Reform Commission, pointed out that the current domestic economy is facing structural deceleration pressure: the decline of labor factors, the disappearance of the demographic dividend, the net decrease in the labor force population aged 15-60 year by year, and the continuous increase of more than 10% in labor costs in the past 10 years.
In Xu Lin's view, when the factor of production resources are affected, if the efficiency is improved, it can make up for its shortcomings, but there is no obvious efficiency improvement, and the growth rate of total factor productivity declines. "In addition, the international trade order has changed, exports have been blocked, and the investment market is permeated with pessimism. He said.
In reality, capital is still tangled and market confidence is insufficient. A closer look at the sentiment of the A-share market, which heated up at the end of 2023, has cooled down again at the beginning of 2024.
In the first week of 2024, or due to the negative impact of the Fed's meeting minutes not being as "dovish" as market expectations, the global stock market is sluggish, the European and American stock markets are down, and the Nasdaq index is falling sharply.
On the first trading day of the new year, the Shanghai and Shenzhen stock markets opened down, and on the same day, the Shanghai Composite Index fell less, and the ChiNext Index fell 1.87%. In the next three days, A-shares continued to be sluggish, and the Shanghai Composite Index closed at 2,929.18 points on January 5, down 1.54% in the first week of the new year. From January 2 to 5, the Shenzhen Component Index and the ChiNext Index were in the negative for four consecutive days, with weekly declines of 4.29% and 6.12% respectively.
However, on January 5, large-cap stocks performed relatively strongly, such as the banking sector, the big four banks rose about 2%, including the two heavily weighted oil and coal stocks also closed higher, which made the Shanghai Composite Index fall less.
On the evening of January 5, the People's Bank of China and the State Administration of Financial Supervision and Administration issued the "Opinions on Financial Support for the Development of the Housing Rental Market", which clearly supports the structural reform of the supply side of housing rental. Financial support for the development of the housing rental market should highlight the key points and aim at the shortcomings, mainly in large cities, focusing on solving the housing problems of new citizens, young people and other groups, supporting all kinds of entities to build, renovate and operate long-term rental housing, revitalize the stock of housing, and effectively increase the supply of affordable and commercial rental housing. The Opinions will come into force on February 5, 2024.
In addition, it is worth mentioning that the resumption of PSL (Collateral Supplementary Loan) after nearly a year has released, what signals have been released?
In December 2023, the three policy banks added 350 billion yuan of supplementary loans, and the PSL balance increased to 3.25 trillion yuan, the first net increase since February 2023.
In 2024, in the context of the uncertain path of fiscal development and the demand for improving capital efficiency, PSL restart can continue the steady growth of the previous additional issuance of treasury bonds, and use the "three major projects" such as urban village transformation to make up for the gap caused by the market clearance, and support the "good start" of the economy at the beginning of the year.
In terms of monetary policy, Soochow Securities believes that the PSL operation has the effect of putting the base currency, and the overall capital side of the recent New Year's Eve remains loose, and the expectation of RRR reduction may not be high, but the deposit rate adjustment is superimposed on the fluctuations of macro data such as manufacturing PMI, and the timing of the MLF (medium-term lending facility) interest rate cut may be advanced to the first quarter of this year.
According to the analysis of Huabao Securities, the current domestic economy is still in the process of slow repair. The Central Economic Work Conference pointed out that it is necessary to adhere to the principle of seeking progress while maintaining stability, promoting stability through progress, establishing first and then breaking down, accelerating the construction of a new development pattern, and striving to promote high-quality development. Follow-up policies are expected to be further strengthened, consolidate and enhance the positive trend of economic recovery, and continue to promote the economy to achieve qualitative and effective improvement and reasonable quantitative growth.
In the external market, U.S. interest rates and the U.S. dollar index fell rapidly. The yield on the 10-year US Treasury note, which is the anchor of global asset pricing, ended 2023 at 3.88%, down 110 basis points from its peak of 4.98% on October 19, 2023. According to the analysis of Galaxy Securities Research Institute, the yield to maturity of China's 10-year treasury bonds fell from 2.72% to 2.56% during the same period, and the corresponding interest rate differential between China and the United States narrowed from the inversion of -220 basis points to -130 basis points. The U.S. dollar index fell to 101.38 at the end of 2023, a significant decline from the peak of 107.07 on October 3, 2023, and the corresponding exchange rate of the U.S. dollar against the yuan returned to within 7.1 from above 7.3.
As for the Fed's last meeting minutes in 2023, which were not as "dovish" as market expectations, BOCOM International Research analyzed that the meeting minutes showed that the committee was more confident in the progress of inflation decline, and believed that the current interest rate had peaked, and the softening of the wording of the corresponding interest rate hike in the statement reflected the end of the current round of interest rate hike cycle. Although the minutes mentioned that interest rates may be cut in 2024, there is still great uncertainty, especially the economic growth situation may reverse the expected path of interest rate cuts, and the judgment of interest rate cuts still needs to be cautious.
However, the market's bets on rate cuts have not cooled significantly, and the interest rate path implied by the interest rate futures market still suggests that the Fed will start cutting rates in March 2024 and cut rates 5-6 times throughout the year.
With the narrowing of interest rate differentials between China and the United States, the PBOC's possible interest rate cut arrangements, including market bets that the Fed will start cutting interest rates in the second quarter, will market sentiment pick up and investment confidence will be revived?
"The most important variable affecting the global economy and financial markets at present is that the US dollar has entered an inflection point in its two-year cycle of violent interest rate hikes," Xijing Research Institute analyzed, "The market consensus expects the US dollar to enter a rate cut cycle in the second quarter of 2024, which indicates that investors are not optimistic about a soft landing for the US economy." But there are certain risks associated with a bearish view of the US economy. ”
A-shares have had a bad start to the year, and there is still uncertainty about the performance of the whole year in 2024, but most investors believe that the expectation of a US dollar interest rate cut has been opened, the external liquidity environment has improved significantly, and the trend of A-shares in 2024 will be better than in 2023.
Aijian Securities believes that the overall weak characteristics of the market have not changed, and the pre-holiday rise belongs to the stock index over-falling technical rebound is a high probability event, therefore, it is expected that the short-term stock index wide range is difficult to avoid, pay close attention to the movement of the RMB exchange rate and the popularity index, and grasp the market rhythm to control the position of the selection of individual stocks.
Three
The confusion of capital lies in the fact that in the process of clearing risks, the recovery of real economic growth corresponding to the capital market will inevitably have twists and turns.
At the same time, the low-price, low-cost environment driven by big data and algorithms will also pose new challenges to the new growth model of the new economy if it continues to do so for a long time.
"The reason why the report of the 20th National Congress of the Communist Party of China proposes high-quality development is because economic growth can no longer be driven mainly by the increase in capital intensity, and the rapid growth of debt makes it difficult to sustain the model of relying on capital investment. Li Xunlei, chief economist of Zhongtai Securities, said that the central government places great emphasis on high-quality growth and economic transformation.
"In the past 15 years, 42% of China's GDP growth has come from investment-driven, that is, capital formation, while the proportion of other countries' economic growth has been driven by investment, which is about 20%. But it's also hard to change this model right away, because it's a long-term development and an advantage that has been the hallmark of the government's role in resource allocation for many years." ”
He believes that the biggest problem at present is the lack of effective demand. As for the market, after three years of adjustment, the valuation level of A-shares has entered the value investment range, and the capital market may be able to bottom out.
So, when an economy is faced with low prices, low costs, and overcapacity, including lack of consumer confidence, how should it carry out high-quality development and boost the confidence of the capital market?
Clearly, this is a complex challenge. The possible strategy is: high-quality development of economic structure and demographic structure. This means focusing on promoting industrial upgrading, improving efficiency and quality (including improving the governance level of listed companies), focusing on environmental protection and sustainable development, and promoting market and institutional reforms.
The low-price, low-cost growth model can bring price advantage and market share improvement in the short term, but in the long run, it may lead to a decline in quality, a weakening of innovation ability, and a loss of economic vitality. Therefore, there is an urgent need for concerted efforts to achieve healthy and sustainable economic growth by promoting innovation and consumer awareness.
Only in this way, whether it is the primary market or the secondary market, capital may be able to achieve good returns in an environment that attaches equal importance to quality and efficiency, and promote the steady development of the economy from the inside out.