China'S Economic And Capital Market Outlook Deserves Attention.

The bottom of this round of economic development is cyclical rather than structural. We see that the main force that has dragged down the economic downturn has been triggered by the decline. It is not because the economic structural adjustment is in place, the old and new power has reached a balance, which determines that this L type has its fragility.

Look forward to future reforms.

I think it is nothing but courage to return to common sense. The idea of reform is to move property rights, relax the regulation of the service industry, and reduce taxes on a large scale to change the expectations of enterprises. In the promotion of backward industries, private enterprises and state-owned enterprises should treat fairly, establish new cadre assessment and incentive mechanisms, maintain the neutrality of monetary policy, have integrity and strengthen the protection of private property rights.

For inflation, we tend to think that it may be generally mild. We should see that the rise in inflation is coming to an end. CPI may linger for about 2.5.

There is no doubt that fiscal and monetary policies can not solve the problems faced by the Chinese economy. The way out for China's economy lies in reform.

But we can not help asking why the success of reform at all times and in all countries is a small probability event, because what kind of political and economic conditions do we need to succeed in the reform? If we observe the logic of such a political economy, what is the progress of China's reform at present?

The reform was a political economy, which I first raised in August 2014.

Finally, the view of large class assets is nothing more than fiscal, monetary and exchange rate reform. Large class assets are nothing more than stock market, housing market, bond market and commodities. Our view is that the stock market needs to "recuperate" and the future performance is the main.

Those who can really go through the concussion must be those who can continue to exceed their expectations.

For the bond market, we are cautious in the short term. The housing market is divided. Last year, we pushed the house to the house. At this point, the price of housing is spreading from the first line to the two or three line. The rising period of the house price is generally 17 months. At the end of this year, the housing prices of the two or three tier cities are also meeting the top. Housing prices will enter a slow rising period from the fast rising period.

We believe that the US dollar is still in a strong cycle, but it should be a phased peaking. We still maintain a judgement of the Federal Reserve raising interest rate this year. For a simple reason, first, the United States is still weak recovery. Second, Yellen is the Democratic Party, the November election, third, Yellen is "dove pie", often put everyone dove.

For commodities, this year's volatility will be very large. I have two judgments on commodities, the first is rebound, not reversal.

Second this rally is a confirmation of the bottom.

A little more about the logic of the above views.

Roughly in April 2015, our team first proposed the "economic L type, the bull market has the top".

After 2 months, A shares reached the top of the 5000 forecast in 2014, followed by the L trend of macro economy.

I can give you a report, from 2014 to the first quarter of this year, our GDP growth rate is "7.3, 7.4, 7.2,7.2, 7, 6.9, 6.8,6.7" so you see, the economy is basically gradually touches the bottom L trend.

Why do we judge that the economy is L? Why is the future of China's economy going to be at such a bottom for quite a long time?

Although we pay attention to China's growth slowdown since 2008, the financial crisis has been divided into three waves. The 2008 and 2009 financial crises have been washed down. In 2013, 2010 and 2013 tightened overseas regulation, and 2014 and 2015 were mainly three forces.

The first is to see China's real estate investment bid farewell to the era of high growth in 2014 and 2015. The growth rate from the past 20% years was only 1% at the end of last year, and in 2015. In December, it was "-0.9" and dropped more than 20 points.

Real estate investment accounts for 23% of China's fixed assets investment, 1/4, and related investments in the real estate chain account for half of China's fixed asset investment.

So the official data in 2014 and 2015 are too smooth and true. We suspect that China's economy has experienced a rapid decline in the past two years.

We found that after "930, 330" constantly improving the financial conditions of purchase, we saw in the second half of 2015 that real estate sales, prices and investments had improved. In 1-4 months, we saw that real estate investment rebounded to 9.7 in the month of 7.2,4, so we can see that the "drag" power of real estate is beginning to drain.

Second, the US dollar index rose from 80 to 100 in May May to 2015 2014, and a direct result was a sharp fall in commodity prices.

Oil fell from 80 to 27.

The corresponding is to see China's extensive inventory, our stock fell to a low level in history.

With the weakening of US dollar at the beginning of this year and the rebound of commodity prices, the drag on China's economy from "going stock" is coming to an end.

These are second dragging forces.

What is the third? The strength of the US dollar over the past two years is due to the fact that we are unable to open the market. The renminbi has taken the initiative to anchor the US dollar and become the second largest currency in the world.

At the same time, the euro, the pound and the yen have depreciated by 20%-30%, and the newly emerging financial currencies have been derogated by 50%, but the anchor of the renminbi has basically been anchored in a straight line.

So one result you see is that the terms of trade of Chinese exports can deteriorate.

When the weak recovery pattern of the whole world did not change significantly, China's exports in 2014 were 6% growth. In 2015, it was a negative 2.8% growth. This year's growth is negative again. This logic is very clear.

With the weakening of the US dollar at the beginning of this year and the stability of the RMB, we can see three forces dragging down China's economy. Real estate investment, inventory and export were peaked at the beginning of this year respectively.

So we judge the future.

It has peaked periodically, but it is not a structural peaking because China has not yet succeeded in restructuring its structure successfully.

This is a general observation of China's economy.

It is worth noting that in the 2014 and 2015 economic downturn, we adopted a loose monetary policy.

Against the backdrop of economic downturns, we see that "M2" is 12.3% in 2014, 13.3% in 2015, and 13.3% in the first quarter of this year.

The economy is downward, the money supply is upwards, and the middle part of the gap is the over proliferation of money.

Because of the excess of money, we see the rise in generalized prices. The stock in the first half of 2014 and the first half of 2015, the house in the second half of 2015, and the commodities in the most recent year are essentially monetary phenomena.

We often say that Europe and Japan have negative interest rates. All of you, China's one-year deposit interest rate is only a few points. China's CPI has been 2.3, the National Bureau of statistics has not adjusted the weight of 2.7, we have negative interest rates.

Under the background of negative interest rates and excessive money, we must make large class asset allocation. If we can sell stocks in the first half of 2014 and the first half of 2015 and buy houses in mid 2015, we won't have to go to the United States to see Buffett this year, and Buffett will come to China to see you.

It shows the rise of this generalized price.

We have also noticed a phenomenon. Since the second half of 2015, the scissors gap between M1 and M2 has widened. We can see that China's three major sectors, enterprises, especially real estate enterprises, have significantly increased deposits in local governments and greatly improved their cash flow, but the savings deposits of residents have decreased significantly.

So we doubt it.

This round of deleveraging is based on leveraging residents and leveraging local governments.

Let's not say that it is right or wrong.

This round of rising real estate, hot real estate and the replacement of local debt, we see that residents are adding leverage, M1 and M2 check its widening, indicating that a large amount of money hoarding in real estate and development and local government hands has not been pmitted to other fields, and the whole currency's storage and flow rate has declined, so you generally see this situation, the economy is very difficult to sustain recovery. Such a fast growing currency, such a surging currency, has limited effect on promoting economic growth, that is, when monetary policy is faced with structural problems, it is the "middle line" of employment.

The negative effects begin to appear. The deterioration of the investment structure is behind the deterioration of the financing structure.

We see that private investment and private financing have been squeezed.

Residents' consumption has begun to squeeze apart from real estate related businesses.

In currency

At the same time, the broad price increases and CPI inflation expectations begin to rise.

We tend to think that the future is generally a mild inflation. This round of inflation is rising as monetary policy gets around the middle line. The return of commodity prices should be the end of the CPI's rapid rise. The CPI rally is coming to an end. The future is the overall inflation.

The rise of housing prices, in general, is closely related to the supply of M1 currencies. This means that this round of housing prices and prices has not ended and may be coming to an end. We suspect that in the second half of this year, with the release of real estate regulation and demand in two or three tier cities, it should be possible to reach the end of the second half of this year or the three tier cities in the second half of this year or the end of this year.

We see that the relationship and correlation between M1 and stock index have been destroyed. We suspect that the current stock market is mainly affected by the reduction of risk preference.

It may be related to the expectation of reform and the adjustment of long-term economic growth prospects.

In 2009, when I was in the service of the development research center of the State Council, a leader of the State Council was assigned to a task of the research center. Is it possible for China to cross the middle-income trap? At that time, our research team came to a very important judgement that China should increase its stage of pformation.

But our public policy has been trial and error in recent years. In 2009, we tried to solve China's problems through 4 trillion fiscal stimulus, and played a certain role in coping with the international financial crisis, but left behind a lot of excess capacity.

In 2010 and 2013, it tried to "clear" and "go to capacity" through tight money, but the shadow banking began to rise. In the 2014 and 2015, the excessive currency and the easing of money pushed up the general price increase.

Finally, at the two sessions of 2015 and December this year, the Central Committee proposed that the supply side reform will be the main focus in the future. I am confident that with the expansion of the supply side reform, the Chinese economy will "visit the dawn", but I also believe that reform is not a fairy tale.

The most urgent need to study is the reform itself, who is responsible for reform, what is the goal of reform, and how to smooth the damage and beneficiaries of reform.

This is a proposition of political economy.

Where is China's potential? It lies in the rise of consumption and service industries.

We see that with the upgrading of the consumption of housing and the farewell to the era of high growth, China will usher in a period of great development of service industry and consumption. The experience of Korea, the United States and other countries has clearly told us this fact.

What kind of service industry will rise? Related to high-end manufacturing, such as finance, research, software, information and education, culture, medical care and so on.

Therefore, under the benchmark situation, we believe that China's service industry will usher in its great development period.

Unfortunately, we see the fact that China's service industry is lagging behind in the world's major economies.

The proportion of China's service sector in GDP is small in the world's major economies.

We look at the competitiveness of the service industry again. China's trade in goods has a huge trade surplus, but China's manufacturing services trade has a huge trade deficit, indicating that China's service industry is low in international competitiveness.

Why? Look at the structure of investors in China.

China's manufacturing industry solved this problem in 90s. The proportion of China's manufacturing investment is 10% of state-owned enterprises, and 80% to 90% of which are private enterprises and foreign-funded enterprises. Unfortunately, the proportion of 60% to 80% of the service industry in China is mainly state-owned. This is why the development of China's service industry is lagging behind and the competitiveness of China's service industry is low. We believe that China's economy has great potential, and the release of this potential needs a new round of reform and opening up.

For the stock market, the whole future direction should be to recuperate.

I have several judgements that 2000 rise to 5000 is a bull market, and 5000 points fall into a bear market.

The bear market has been in the market for a year. In the future, it should be from a "fast bear" into a concussion market. In this shock market, the risk free interest rate is hard to fall and the risk appetite is hard to rise. The whole market will return to the fundamentals, that is, the achievement is the king and the real growth is to be found.

In the concussion market, what kind of plate will surpass this market? We can see the electricity and TMT of 2002, 2003, steel, automobile, 2012 and 2013, that is, the performance can exceed the expected positive growth, so the "bottom to top" opportunity has come.

We think the bond market should be trimmed for a short time.

The US dollar is at a peak stage and is still in a strong cycle. Commodities will fluctuate this year.

For a long time in the future, China's economy is L, and this L type is still fragile. We need to restructure new growth momentum and platform through reform.

This is the main point that I would like to report to you today.