The nominal GDP growth rate is expected to stabilize and rebound in 2025

Release date 2024-12-11 15:00:41 Reading 0

　　used excavator for saleThe nominal GDP growth rate is expected to stabilize and rebound in 2025

　　The year-on-year growth rates of China's GDP in the first three quarters of 2024 were 5.3%, 4.7%, and 4.6%, respectively, with a cumulative growth of 4.8% in the first three quarters. The author predicts that the GDP growth rate for the whole year of 2024 may be 4.8% or 4.9%, basically achieving the target of a GDP growth rate of around 5.0% for the whole year.used excavator for sale used excavator for sale used excavator for sale

　　Objectively speaking, the Chinese economy does face significant difficulties in short-term growth. From the perspective of the three major players, the significant decline in the contribution of consumption to GDP growth is the most important reason for China's relatively sluggish economic growth. From an inflation perspective, as of the third quarter of 2024, China's GDP deflator has experienced negative growth for six consecutive quarters. From an employment perspective, in the context of accelerating population aging, we still face a high unemployment rate among young people, indicating a significant negative output gap. From a financial perspective, as of October 2024, the year-on-year growth rate of M1 has been negative for seven consecutive months, and the gap between the year-on-year growth rates of M1 and M2 is also at a historic peak.used excavator for sale used excavator for sale used excavator for sale used excavator for sale

　　Against the backdrop of significant pressure on domestic economic growth, the Party Central Committee and the State Council have introduced a series of expansionary policies since the end of September. These policies have effectively boosted the confidence of micro entities and driven the rebound of several high-frequency indicators in October. However, in order to completely overcome the current downward pressure on the economy, achieve stable and rebound economic growth, and stop the decline and rebound of prices, it is necessary to continue to strengthen expansionary policies. This is also why various sectors are highly concerned about the upcoming Central Economic Work Conference.used excavator for sale used excavator for sale used excavator for sale used excavator for sale

　　At this Central Economic Work Conference, economic growth targets for next year will be set, and the tone of macroeconomic policies for next year will be established based on the current economic growth situation and the distance between the targets. The author expects that the economic growth target for 2025 will still be set at around 5.0%. The first reason is to ensure that we achieve the goal of doubling per capita GDP from the 2020 base by 2035, requiring an implied GDP growth rate of no less than 4.6% during this period (assuming GDP growth rate is equal to per capita GDP growth rate). The second reason is that there may be a "multiple equilibrium" in the potential economic growth rate determined by the overall confidence of micro entities. Setting a relatively high growth target can help boost confidence and expectations in the current context of low confidence and expectations. The third reason is that the annual GDP growth target is the most important policy command stick. By setting higher economic growth targets, it helps to promote relevant departments to mobilize various resources to ensure economic growth.used excavator for sale used excavator for sale

　　For many years, the tone of China's macroeconomic policy has been a proactive fiscal policy and a prudent monetary policy. The author suggests that the macroeconomic policy combination for 2025 should be set as an active fiscal policy and a moderately loose monetary policy. It is suggested to set the CPI as a point target of 2%, which means that if the year-on-year growth rate of CPI does not reach 2%, monetary policy will not stop easing. Under this assumption, the author expects that there will still be two reserve requirement ratio cuts in 2025 (asymmetric, deposit taking financial institutions with high reserve ratios will cut by 50 basis points each time), 1-year and 5-year LPRs are expected to be lowered by 50 basis points (reaching around 2.5% and 3.0% respectively), and stock mortgage interest rates may be further lowered by 25 basis points. In order to reduce the impact of interest rate spread contraction on commercial bank profits, commercial banks may continue to collectively lower deposit interest rates.used excavator for sale used excavator for sale used excavator for sale used excavator for sale used excavator for sale

　　Objectively speaking, there are multiple limitations to stimulating aggregate demand through monetary policy, and in this regard, expansionary fiscal policy is more important. The fiscal policy for 2025 should be comprehensively strengthened in terms of policy caliber for 2024. The author predicts that in 2025, the proportion of the central fiscal deficit in GDP may rise to 4.0% -4.5%, and the central government may issue an additional 2-3 trillion yuan of special treasury bond for traditional infrastructure, human related infrastructure (education, medical care, pension), and people's livelihood. The scale of local special bonds may reach 4.5 trillion yuan. Based on this preliminary estimate, the increase in broad fiscal expenditure is expected to reach 9-10% of GDP, which will be rare in many years.

　　If monetary and fiscal policies can achieve the above levels, the GDP growth rate in 2025 is expected to show a trend of initially low and then high. The annual GDP growth rate is expected to reach 4.7-5.0%, and the GDP contraction index is expected to rise from -0.8% in 2024 to around 0.5% in 2025, which means that the nominal GDP growth rate in 2025 is expected to increase by 1 percentage point compared to 2024. From the specific trend of the troika, the growth rate of residents' consumption and fixed assets investment is expected to rise to around 5.0%, the growth rate of exports may decline significantly in the second half of 2025, and the contribution of net exports to economic growth will be significantly weakened.

　　In the above scenario, the RMB/USD exchange rate is expected to fluctuate broadly around the central level of 7.2-7.3 in 2025, with an upper limit of 7.0 and a lower limit of 7.5. The effective exchange rate of RMB is also expected to remain roughly stable at the current level.used excavator for sale used excavator for sale

　　In addition to discussing economic growth, this Central Economic Work Conference will also discuss preventing and resolving systemic financial risks.

　　In terms of local debt, the 6-4-2 debt repayment plan is expected to partially alleviate the pressure on local governments to repay principal and interest, which will to some extent help alleviate the triangular debt problem between local governments, financial institutions, and private enterprises, and help local governments allocate more funds to local economic and social development. However, the local debt pressure in the central and western regions and the northeast region will still exist. In the future, to comprehensively solve the problem of local government debt, the central government still needs to increase leverage appropriately, and financial institutions need to bear part of the debt cost (mainly through debt restructuring).used excavator for sale used excavator for sale used excavator for sale used excavator for sale

　　In terms of real estate, the "four cancellations, four reductions, and two additions" measures introduced on October 17th have already led to signs of stabilization in the real estate market, but further efforts may still be needed. The two core issues in the current Chinese real estate market are that housing prices in core areas of first tier cities are still declining, and that top private developers are facing a dual impact of liquidity and insolvency. To address the first issue, it is recommended that Beijing, Shanghai, and Shenzhen follow Guangzhou's example and completely lift purchase, loan, and sales restrictions in one go. To alleviate the second issue, it is suggested that provincial local governments increase their assistance to leading private developers. If these two policies are implemented, the prices of second-hand houses in the core areas of Beijing, Shanghai, Guangzhou, and Shenzhen are expected to stop falling and even slightly rebound by 2025. The prices of second-hand houses in second tier cities are expected to stop falling. The liquidity crisis and insolvency crisis of some top private developers are expected to be alleviated. The probability of a systemic risk outbreak in the real estate market is expected to significantly decrease.used excavator for sale used excavator for sale used excavator for sale

　　In terms of the stock market, the entry of long-term investors such as local social security funds and insurance asset management is expected to increase in 2025. The possibility of establishing a Chinese style stabilization fund in the future cannot be ruled out. The China Securities Regulatory Commission will continue to improve the governance mechanism of listed companies and relevant stock market systems, and the number of delisted listed companies is expected to significantly increase. In 2025, the Shanghai Composite Index is expected to fluctuate within the range of 3200-4000 points, and some index funds, industry ETFs, and high dividend blue chip leaders are expected to perform well.used excavator for sale used excavator for sale used excavator for sale used excavator for sale used excavator for sale

　　In the bond market, the yield of China's 10-year treasury bond is expected to fluctuate in two directions around the central level of 1.8-2.0%. On the one hand, the relatively weak economic fundamentals prevent the yield of 10-year treasury bond from rising significantly. On the other hand, if China's stock market performs well next year, considering that institutional investors generally oversold bonds and underwritten stocks, the trading surface of investors' increasing stock holdings and reducing bond holdings will put the yield of 10-year treasury bond bonds under rebound pressure.used excavator for sale used excavator for sale

　　used excavator for saleIn summary, if we set a target of 5.0% economic growth, with sufficient stimulus in monetary and fiscal policies, and further increase policy efforts to prevent and resolve systemic financial risks, then China's nominal GDP growth rate can stabilize and rebound by 2025, and the performance of the stock market and the renminbi exchange rate is worth looking forward to.used excavator for sale used excavator for sale

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