The economic data exceeded expectations, and the micro subjects still felt that there was still a "temperature difference"

GDP grew by 5.3% year-on-year in the first quarter, and China's economy got off to a good start.

But behind the better-than-expected economic data, there are some concerns worth paying attention to. For example, low prices, weakening consumption, insufficient effective demand, low capacity utilization, and unbalanced economic recovery, etc., the "temperature difference" between the micro subject's feelings and the macro data has increased.

According to the usual practice, after the release of economic data for the first quarter of each year, a meeting of the Political Bureau of the Central Committee will be held in late April to study and judge the current economic situation and make arrangements for the next stage of economic work. Recently, the National Development and Reform Commission, the Ministry of Finance, the Central Bank, the Ministry of Commerce and other departments have also spoken intensively to further refine and implement the macro policies in the next stage.

A number of experts told Yicai that dragged down by the low prices, the nominal growth rate of the economy is not as good as the actual growth rate, the "increase in income but not the increase in profits" of enterprises, and the low growth rate of residents' income are important reasons why the micro feeling is weaker than the macro data and the confidence of the micro subject still needs to be boosted. It is necessary to make greater efforts to promote the resolution of major contradictions, further increase the coordination and implementation of fiscal and monetary policies, and continue to optimize the policies to stabilize the real estate situation.

The economic recovery is uneven

According to data released by the National Bureau of Statistics a few days ago, GDP in the first quarter increased by 5.3% year-on-year, an increase of 0.1 percentage points from the fourth quarter of 2023. The national investment in fixed assets increased by 4.5% year-on-year, and the growth rate was 0.3 percentage points faster than that in January ~ February. However, in March, the year-on-year growth rate of some macroeconomic indicators, such as the added value of industrial enterprises above designated size, the total retail sales of consumer goods, and exports, slowed down significantly, and the decline in real estate investment expanded.

Sheng Laiyun, deputy director of the National Bureau of Statistics, stressed at the press conference of the State Council Information Office on the 16th that GDP growth of 5.3% is in line with reality, and from the perspective of accounting, it is mainly driven by the recovery of industry and the improvement of the service industry. However, we must also be soberly aware that the current external situation is still complex and severe, the country is in a critical stage of structural adjustment and transformation, and the confidence of market operators and the driving force for economic recovery need to be further strengthened. There is a clear imbalance in the economic recovery, and there is a certain degree of differentiation. For example, the recovery of consumption is not as good as production, and the recovery of micro, small and medium-sized enterprises is not as good as that of large enterprises.

In March, the total retail sales of consumer goods increased by 3.1% year-on-year, and the growth rate was 2.4 percentage points lower than that in January ~ February. Sheng Laiyun answered a question from the first financial reporter at the press conference of the State Council Information Office, saying that consumption ultimately depends on income as a support, and now the growth of income is also picking up, but in recent years, affected by the impact of the epidemic, the income level needs to continue to improve, although consumer confidence has been rebounding for several months, but the overall consumer confidence index is still below the critical value. These unfavorable factors also remind us that it is a long-term task to strengthen the foundation for economic recovery and enhance residents' consumption ability and confidence.

Zhu Haibin, chief China economist at JPMorgan Chase, said at the China Macroeconomic Forum (CMF) monthly data analysis meeting a few days ago that from the perspective of 5.3% GDP growth, the first quarter started well, laying a solid foundation for the annual growth target of 5%. However, the month-on-month growth rate of a number of economic indicators declined in March, and the sustainability of the data in the first quarter remains to be seen, and the GDP deflator has been negative for four consecutive quarters, and is expected to remain negative in the second and third quarters, reflecting the lack of domestic domestic demand and the weak pricing power of enterprises.

The GDP deflator index, also known as the GDP contraction index, is mainly used to analyze changes in the overall price level, and is the most macro and comprehensive price index indicator. A negative GDP deflator means that prices are falling, and low prices will lead to increased corporate revenues instead of profits, and corporate profitability will decline, which in turn will lead to lower consumer purchasing power.

Zhong Zhengsheng, chief economist of Ping An Securities, wrote in a research report that China's nominal GDP grew by 4.2% year-on-year in the first quarter, 1.1 percentage points lower than the real GDP growth rate, and the GDP deflator grew by -1.1%. Enterprises' revenues, profits and government revenues are all linked to nominal GDP, and low prices mean that enterprises "increase revenue but not profits", which is not conducive to the start of the industrial inventory cycle and will also exacerbate the pressure on local government fiscal revenue. From the perspective of the GDP deflator, there have been four consecutive quarters of negative growth so far in the second quarter of 2023.

Luo Zhiheng, chief economist of Guangdong Kai Securities, also believes that the nominal growth rate of the economy is not as good as the actual growth rate, which is an important reason why the micro feeling is weaker than the macro data and the confidence of the micro subject still needs to be boosted. The nominal growth rate was lower than the real growth rate, mainly due to the low price level. The sustained economic recovery and the continued low prices coexist due to the structural recovery of the economy.

The capacity utilization rate is low to be solved

In the first quarter, the acceleration of industrial production became an important force driving economic growth, but the capacity utilization rate of industrial enterprises fell to 73.6%, the second lowest in history since the fourth quarter of 2016 (only higher than the first quarter of 2020).

According to Zhong Zhengsheng's analysis, the low level of capacity utilization reflects the potential risk of overcapacity, and the existing idle capacity will inhibit new investment, which is often accompanied by a series of problems such as the decline in the price center, the decline in the expected rate of return of the industry, the rise of debt and financial risks, and the increase in foreign-related trade disputes.

He said that judging from the capacity utilization rate of sub-industries announced by the Bureau of Statistics, there is obviously a shortage of capacity utilization in the equipment and high-tech manufacturing industries, which is precisely the manufacturing industry that has been supported by policies and has grown rapidly since 2021. Moderate capacity redundancy helps to balance the relationship between "efficiency" and "safety", but it will also affect the pace of capacity reduction and delay the timing of market clearance.

According to international standards, a capacity utilization rate between 79% and 90% is considered desirable, above 90% means there may be a risk of undercapacity, below 79% means there is a risk of overcapacity, and below 70% is considered overcapacity.

According to the data released by the National Bureau of Statistics, only two industries had a capacity utilization rate of more than 80% in the first quarter, namely oil and gas extraction (91.7%) and chemical fiber manufacturing (85.6%), and three industries with a capacity utilization rate of less than 70%, namely food manufacturing (69.1%), automobile manufacturing (64.9%) and non-metallic mineral products (62%).

On April 17, Jin Xiandong, director of the Policy Research Office of the National Development and Reform Commission, responded to the problem of low capacity utilization. He said that capacity utilization is an indicator that reflects the relationship between production and demand in the short term, which is affected by factors such as demand and profitability. Judging from the historical data of China in recent years, the quarterly fluctuation of capacity utilization rate is relatively large, with the capacity utilization rate in the first quarter being relatively low and the fourth quarter being relatively high, which is related to factors such as the Spring Festival holiday.

Jin Xiandong believes that for the issue of production capacity, it is necessary to proceed from the economic law and look at it objectively and dialectically. Under the conditions of a market economy, the balance between supply and demand is relative, the imbalance is universal, and a moderate increase in production over demand is conducive to market competition and the survival of the fittest.

Recently, there has been extensive discussion about whether there is overcapacity in China's new energy and other industries. Kim Hyun-dong said that the global demand for new energy vehicles in 2030 will be more than three times the global sales in 2023, which will be a common opportunity for the development of all countries. The sustainable development of China's new energy industry and the continuous provision of high-quality production capacity not only meet its own high-quality development needs, but also make important contributions to the global response to climate change and green and low-carbon transformation.

Steady growth continues to strengthen

After China's economy got off to a good start in the first quarter, how to resolve the hidden worries and contradictions in the process of economic recovery and how to promote the sustained economic recovery have become major issues of concern to all walks of life.

A few days ago, the National Development and Reform Commission, the Ministry of Finance, the Central Bank and other macroeconomic authorities spoke intensively. Yuan Da, deputy secretary-general of the National Development and Reform Commission and director of the Department of National Economic Integration, said that in the next stage, we will do a good job in pre-research and planning for major policies according to the changes in the domestic and foreign environment and the needs of the development of the situation, such as in-depth research and planning on how to establish first and then break down, and accelerate the development of new productive forces according to local conditions. At the same time, we should strengthen economic monitoring, forecasting and early warning, normalize the pre-research and reserve of macroeconomic policies, strengthen cross-cyclical design and counter-cyclical adjustment, and prepare effective policy tools to deal with the impact of various shocks.

He stressed the need to make greater efforts to promote the resolution of the main contradictions. We will actively expand domestic demand, speed up the issuance of investment from the central budget and the issuance and use of special bonds by local governments, implement a new mechanism for public-private partnerships, and expand the consumption of automobiles, home appliances, mobile phones, and other goods, as well as cultural and tourism services. Comprehensively use measures such as expanding demand, optimizing supply, deepening reform, and adjusting reserves to promote price operation at a reasonable level. We will further deepen reforms in key areas and implement action plans for attracting and utilizing foreign investment more vigorously. Do a good job in the employment of key groups such as college graduates. Effectively and effectively deal with risks and hidden dangers in key areas.

Since the beginning of this year, high hopes have been pinned on the proactive fiscal policy. Wang Dongwei, Vice Minister of Finance, said on the 22nd that in the next step, the Ministry of Finance will focus on six aspects, including fully supporting industrial innovation led by scientific and technological innovation, focusing on supporting the expansion of domestic demand, actively supporting the improvement and enhancement of people's livelihood and well-being, ensuring food and energy security at a higher level, promoting the coordinated development of urban and rural areas, and strengthening budget implementation management and financial operation monitoring.

In terms of monetary policy, Zhu Hexin, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange, said on the 18th that a series of monetary policy measures introduced in the early stage are gradually playing a role, and the national economy continues to pick up and has a good start. There is still room for monetary policy in the future, and we will closely observe the effect of the policy, the recovery of the economy, and the realization of the target, and make good use of the reserve tools at the right time.

Luo Zhiheng analyzed that it is necessary to further increase the coordination and implementation of fiscal and monetary policies, especially to prevent the policy contraction after the "bright" economic data in the first quarter, continue to maintain the stability and continuity of the policy, and it is necessary to continue to optimize and increase the policy of stabilizing the real estate situation.

(This article is from Yicai)