As the second-largest country in the global economy, China ’s macroeconomic data for the first quarter of this year has attracted much attention. The market has responded to the deterioration of the European and American economies. If China gives a bad answer, it will inevitably impact investor confidence. The author thinks the macroeconomic data for the first quarter of 2020 given by the National Bureau of Statistics yesterday should still be acceptable. 

According to preliminary calculations, last quarter's gross domestic product (GDP) was 20.6504 trillion yuan (RMB, the same below), which was a year-on-year decrease of 6.8% at comparable prices. In terms of industries, the added value of the primary industry was 1.0186 trillion yuan, down 3.2%; the added value of the secondary industry was 7.3638 trillion yuan, down 9.6%; the added value of the tertiary industry was 12.268 trillion yuan, down 5.2%. This is the first time that China's GDP growth data has been negative since the reform and opening up.

Based on the March PMI (Manufacturing Purchasing Managers’ Index) data, The author thinks that after the full resumption of works and production, there should be better data performance. The European and American epidemic control may enter the platform period in April, and may be in a stable and controlled state in the second quarter. While China's economy is recovering faster, nearly 90% of enterprises are currently resuming production. According to conventional calculations, GDP growth in the second quarter may recover to more than 5%. Compared with negative growth in the first quarter, it is expected to achieve a V-shaped rebound.

The decline in the value added of the manufacturing and service industries is certain, but the value added of the information transmission, software and information technology services, and the financial industry increased by 13.2% and 6.0% respectively. The operating income of the Internet and related services, software and information technology services increased by 10.1% and 0.7% respectively. The business activity index of the transportation, storage and postal industry, retail industry and monetary and financial services are relatively high, at 59.3%, 60.6% and 62.9% respectively. It fully shows that the resilience of the Chinese economy has increased. The large added value of e-commerce and high-tech industries indicates that the epidemic has accelerated the digital transformation of enterprises, while high-tech industries have demonstrated stronger vitality. Despite this, consumption still shrank significantly and investment fell sharply.

What has received widespread attention is the decline in the unemployment rate surveyed in cities and towns across the country, with 2.29 million new jobs in cities and towns nationwide last quarter. This employment statistics may not fully reflect the actual situation. Judging from the situation reported by the media, unemployment data may be underestimated. Many domestic companies are currently in a state of severely unsaturated operation due to various reasons. Some employees take unpaid leave, which is currently not included in the unemployment statistics. If the work stoppage cannot be reversed in the short term, these people who are actually not working will become unemployed. In addition, there will be seven to eight million college graduates in the mainland this year that will also need employment. Local governments should take measures as soon as possible to support small and medium-sized enterprises and key enterprises in certain severely damaged industries to avoid the impact of large-scale unemployment.

Inflation data is at a high level. In the first quarter, national consumer prices rose by 4.9% year-on-year. In particular, pork prices have risen too much. Affected by the epidemic, after the demand side for pork shrinks, there will be a shrinkage on the supply side. The interaction of the two factors is still very likely to continue to push up inflation. In the first quarter, the real income of mainland residents decreased, and the ratio of per capita disposable income of urban and rural residents decreased slightly. This situation is obviously not conducive to the restoration of consumption. At present, some areas have begun to issue consumer vouchers to citizens, with certain effects. The government should consider distributing cash to specific groups of people when necessary to prevent inflation and consumption tightening from forming a vicious circle.

 Call for the central bank to purchase corporate loans.

The People's Bank of China has actively provided liquidity support for the securities market after the Spring Festival, effectively avoiding a systemic financial crisis in the stock and bond markets. The current central bank rescue phase has ended. However, some funds are still stuck in the market, making it difficult to reflect the effect of interest rate cuts to support the real economy. Enterprises issued a large number of credit bonds in the first quarter. At present, it is SMEs that need financing support most. On the whole, market liquidity is good. In the future, it is necessary to further channel the flow of funds to the real economy and support the construction of large-scale infrastructure projects.

There is still a lot of room for central bank monetary policy regulation. The LPR (Loan Base Rate) should have been lowered by 5 basis points last month, and it may be implemented next week together with the interest rate cut this month. It is expected that the reduction will be relatively large. In the first quarter, the statistics of housing prices in 100 cities in the Mainland showed that most cities saw zero or slight increases, indicating that the policy of “housing, housing, no speculation” was properly controlled. Although real estate investment has decreased, it is not necessarily necessary to lower the 5-year LPR price. Because of this amplitude reduction, the signal meaning is greater than the actual effect.

Judging from these QE-like (quantitative easing) practices adopted by the Federal Reserve, the People's Bank of China has never taken relevant measures. Therefore, there is still a lot of room for such tools. At present, the central bank has sufficient other control tools, and may not adopt such methods for the time being. The author has always suggested that the central bank consider acquiring loans for small and medium enterprises issued by some commercial banks, which can more effectively encourage commercial banks to provide financing support to small and medium enterprises.

INERI Vice President, Zheng Lei