New heated debate cycle: a microscope to find the economic cycle turning point, find it?

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Lead: in the current economic exactly what stage of the river of the economy?

Wen | Li Thunder Source | Lee Thunder Finance and Investment, ID: lixunlei0722 Edit | Poker investor, please indicate the source

recently, we quite lively discussion of the economic cycle, which since last year’s sharp rise in commodity prices, industrial profits rebounded and GDP stabilized and so are not unrelated.
However, in my view, both from the perspective of the short cycle period or long period of view, the current round is not the beginning of a new economic cycle.
Access to finance and economics literature over the years, can be found every year, many scholars claim that the year will be a new economy, a new cycle, the starting point of the new financial or capital markets bull …… starting point is a landmark, or a landmark.

However it turned out that over the years more and more narrow economic fluctuations, social structure is becoming more stable, the price volatility of capital markets and real estate markets have begun to narrow, and what the turning point did not occur.
The reason why we find so many every year historic “turning point” because of the short-term fluctuations too seriously, mistaken as waves wave.
In this paper, population mobility, productivity and efficiency aspects of capital formation, volume and price of industrial relations and the national economy, etc., to analyze the current economic exactly at what stage in the economic river.

population mobility and economic downward trend inflection point forming

observe the three countries with economies in transition success – economic growth changes in Germany, Japan and South Korea
cases, they are found in industrial added value accounted for the decline of GDP, economic growth rate halved growth.
For example, 1950-1969, the German average GDP growth rate reached 7.9%, after the industrial added value to GDP ratio started to decline from the highest 53%, GDP growth in 1970–1979 annual average dropped to 3.1%, the corresponding rate of urbanization
the annual growth rate fell to 0.16% from 1.02%.
Japan and South Korea and Germany, the economic slowdown accompanied by a sharp slowdown in the reduction of the number of floating population and urbanization.

China’s migrant population downstream of the first appearance in 2015, 2016 continue downward.
According to the National Bureau of Statistics, 2016, my country’s new migrant workers in cities the number of farmers to reduce the 160 million people, which also means that my country’s urbanization rate to enhance the slowdown.

In addition, the annual increase of the number of migrant workers, from 12 million in 2010 fell to 50 million in 2016.
Why substantial decline in the growth rate of migrant workers do?
On the one hand, and the continued outflow of rural labor force leads to a reduction related to the number of transferable; on the other hand, the growth rate of private investment declining, thus falling demand for low-end labor-related.
In 2011, the contribution of the secondary sector to GDP began to decline, which is consistent with the number of new migrant workers peak in time.

source
: national Bureau of Statistics

appears

population mobility inflection point, peak Kuznets cycle as long economic cycle (also known as construction period, the real estate cycle) also have some relevance, such as in 2010,
China’s real estate development and investment growth reached 33% of the peak, the number of new migrant workers to achieve consistent peak; by 2015, the number of people –25-45 age group of buyers, car main crowd began to decline, beginning with the number of migrants
consistent decline in time.
Real estate and cars are China’s two largest engine of economic growth, from this point of view, these two engine power is clearly not as good as last year; a longer period of time from the point of view, the average annual growth rate since 2011 in real estate development and investment in passenger
the average annual growth rate of car sales, less than 2001– third of the decade of 2010.

due to population aging and population mobility has weakened long-term irreversible, meaning that Chinese economy is in a downward pressure on long-term growth, economic dip process is far from over.

upfront investment is overused production cycle difficult to open

Since June last year, PPI in consecutive starts to rise after more than four years of negative growth, which means production capacity
increased utilization of capacity utilization should lead to capacity expansion, this is because: first, when capacity utilization rises, meaning that production tends to be insufficient, so the company will increase investment, expand production capacity; secondly, when for the expansion of production capacity
while increasing investment, investment will first form the current demand, then the next issue is the production capacity, and therefore, investment (demand) increased capacity utilization and a positive correlation.

observe the US and Japan, the relationship between the expansion of production capacity utilization and productivity and found that the latter have a certain leadership, does this mean that China will have a next capacity expansion, and bring
production cycle turn?
If a simple analogy United States and Japan, the problem is simple.
China and the United States and Japan, but a significant difference is that the economic differences in the ability of government, namely the ability of Chinese government intervention in the economy is far stronger than the United States, that China’s economic growth from 2008 subprime mortgage crisis after the rapid rebound can be seen by.
Data show that in 2016 China’s non-private investment in fixed assets accounted for about 32% of GDP, the US government investment accounted for about 4% of GDP.

source
: Wind, and Thailand Securities Institute Shengxu courtesy

seen from the figure, 2009 – 2010, China’s four trillion public investment to stimulate economic growth, and the formation of a new massive after 2012
capacity.
However, due to the overall decline in demand growth, PPI China and OECD countries after a relatively coincidence, in 2012 there was the dividing line between one another gap increases.
After 2013, China’s domestic fixed asset investment, the growth rate of investment in the secondary industry dropped significantly (inhibition of new capacity), infrastructure investment growth remain high, indicating that the government’s counter-cyclical economic policy of a strong and effective so that the actual economic growth
outweigh the potential economic growth rate, but at the same time lead to the whole society rapidly rising debt ratio, asset bubble expanding.

Looking back at history and found that our response to the subprime mortgage crisis, the implementation of the 2009–2010 two-year investment in strong stimulation; after the start of monetary tightening, but the second half of 2012, in order to achieve steady growth, and
start pulling investment in infrastructure, it continues to this day.
Therefore, when the market is not clearing, in the case of a cyclical economy did not reach the bottom, to a new round of rising cycle is unrealistic.
As the founder of Juglar cycle theory says: the only reason depression is prosperity, there has never been a depressed economy is not normal.
China’s economy has experienced three decades of high growth, the growth rate is normal under the steps, but whether it is because in order to achieve the goal of “steady growth” in long-term investments to take counter-cyclical stimulus policies, countercyclical lead to “free cycle”?

Looking back at history, we can find our national capital formation “efficiency” in reducing year by year, especially after 2007, the gap between the fixed asset investment and fixed capital formation is increasing, indicating that as fixed
asset investment growth, its effect on the economic pull of falling.
Moreover, investment by revenue, debt burden and many other constraints, the old routine will encounter new bottleneck.

source
: Wind, and Thailand Securities Institute Shengxu courtesy

from the historical development of the United States and Japan, the economic point of view, investment in fixed assets formation capacity, productivity lagged investment cycle period of 1.5-2 years.
As the investment demand is first formed, and therefore capacity utilization cycle, FAI basic synchronization cycle period and a length of 5-7 years.
However, productivity and economic cycle period is not necessarily synchronous, since the economic cycle is determined by the demand, with a little strict formula: = demand capacity utilization / capacity (supplied).
Clearly, productivity is a measure of supply capacity, and capacity utilization is the result of both supply and demand.

This year, the European economic recovery positive, increasing Chinese exports in external demand form the basis for the expansion of supply, it is still difficult to change the domestic overcapacity pattern fundamentally, because the intensity of the current round of Europe’s economic recovery is not
large, while domestic consumer demand is still insufficient to increase consumer demand, the need to improve the income level of low-income groups, this is not an easy thing, relying only on the supply side constraints are not driven by demand, so supply-side structural reforms will be
long-term and arduous task, no demand is no cycle.

“shrinking amount of price rise” – economic rebound rather than just reversing

As we all know, the technical analysis of stock market volume and price are usually analysis, general
, the stock market is Jiashengliangzeng turn a good performance, the amount of parity first, if price rise is the amount of shrinkage, the rebound is usually not for long.
This year, the overall profitability of my country’s manufacturing industry has shown a significant rise, which is also seen as evidence of the rise of a new economic cycle many scholars.
However, since this round of reform focused on the supply side of the upstream industry, production by inhibiting the upstream industry price elasticity is much higher than the downstream, which appeared in raw material prices too fast, squeeze corporate earnings situation, such as rising coal prices on
a pressure electricity prices and the like.

Since the beginning of the supply-side structural reforms last year, the capacity to effect produced is very obvious, which is similar to the stock market generally stable management practice – to suspend issuing new shares.
Such initiatives can play a role in easing the market’s decline, but was proven countless times in history, and can not change the trend of decline.
Only when the market bottomed out, the so-called reverse appear.

According to Lu, political commissar of statistics in a recent report, from February 2016 to April 2017, 21 industry profit growth has accelerated, at the same time, demand for the expansion of the industries 24,
the contraction of industry supply as many as 29.
“If we exclude the impact of supply factors, not difficult to find industrial profits rebounded in the first quarter of 2016 and the first half of 2017, is subject to real estate investment has to be pulled and export demand. However, excluding the supply factors of industrial profit growth
never break the box section since 2015, the growth rate of the month of June only about 6%. “

this year, in the upstream business in overall sales continue to accelerate, not because of supply side reforms
policy change to increase the supply of behavior, such as in May-June 2017, there are 21 industry profit growth to accelerate, the demand for expansion of the industry is still 24, and reduce the supply of contracted industry to 17 – mainly due to upstream mining
feed industry (coal, petroleum, iron ore, the mining industry and other non-ferrous metals) expansion somewhat, but since the observation period was too short to constitute sufficient grounds “Jiashengliangzeng” in.

Look data from July, the industrial added value up sharply down from 7.6% in June to 6.4%, in addition, investment growth in the troika fell to 6.8%, the highest consumption growth
low export growth since March of this year fell to 7.2%, indicating large fluctuations in monthly data, not enough to reflect the overall trend.
Therefore, I have always stressed, do not use a microscope to study macroeconomic trends.

cyclical fluctuations depending on demand, while demand for energy to be released, must be achieved through income distribution system.
China’s population dividend reduction has begun, the stock of the economy has entered the era of the dominant revenue structure of residents gradually solidified leverage residents increased dramatically, up from 18 percent in 2008 to around 45%, thus consumption with high growth
to a certain degree of difficulty.

From 1– consumption structure in July of view, low consumption growth in the low-end, high-end consumer is still growing rapidly, but the overall consumption growth showing downward trend.
For example, according to the National Bureau of Statistics data, in July auto sales year on year growth of 8%, but sport utility vehicles (SUV) sales grew 18.6%, the growth rate increased by 0.9 percentage points from the previous month.
Another example, this year Maotai sales growth is expected to be 17%, but the overall liquor sales close to zero growth.

source
: Wind, and Thailand Securities Institute Fan Jinsong, Shengxu courtesy

it can be seen from the chart, in 2010 China’s liquor sales growth of 39%, far more than 18% of nominal GDP growth, too
far more than the same period Maotai 22% sales growth.
Why growth Maotai liquor sales growth and sales growth of GDP and complete “decoupling” of it?
Is it because of the national health awareness, control of high-end liquor drink liquor or the favoritism?
I believe that, either because of health awareness, or subject to the provisions of eight, are very difficult to change the “wine culture” in China for thousands of years to form.
The actual reason is that in 2010 this round of investment incentives, the poor in the upstream industry to downstream industry price transmission problem does not exist, total retail sales of social consumer goods grew 18.3% over the previous year.
In addition, private investment to follow up on, a substantial increase in real income growth in low-income groups.

Thus, the size of the population growth in the consumption to reflect the real “amount” of change in economic cycles, upstream of the “price” (the PPI) is not transmitted to the downstream of the “price” (the CPI), has been described
this round of economic rebound in the “price” of the problem; Second, in the upstream industry, “volume and price” does not fit, but also indicates that short-term economic recovery; and finally, the total demand perspective, because the total domestic demand = domestic consumption
+ domestic investment plus net imports, because there is no strong support consumption, the Chinese economy still faces “price level amount of shrinkage,” the pressure, that is, overcapacity remains a long-term factor in the future economic growth downward.

From the “new normal” to “all the way along the” strategy proposed, to “supply-side structural reforms”, in fact, are based on objective judgment on the stage of economic development of China, which is to be solved
the core problem is excess capacity, excess capital and the structure of supply and demand, income and industrial structures and other structural imbalances.
If you turn a blind eye to these long-term problems, only to predict cyclical turning point monthly data on short-term changes, no doubt with a microscope to study the trend.
The reason it is most likely future trend misjudgment, that is too much focus on yourself and it ‘s age, time series prediction according to the present excessive weight weight.

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