The global economy has passed “day and night line,” Why am I still optimistic about China? “811 exchange rate reform” made her famous, CRE chief Zhang Yu and we did a dialogue

Wen | Pang Chun Xi, Zhu Yu, the article is an interview with CRE poker capitalists, chief macroeconomic analyst Zhang Yu.

2015 In the summer, hot as usual.
Hall Stock Exchange’s still packed with uncle aunt figure, the crowd was issued with amazing sound, large screen green people tightness of breath.
A-share market after a sudden sharp rise in the year, “diving”, Shanghai and Shenzhen “thousand shares hit bottom,” hundreds of stocks temporary suspension of self-help.

In the Institute’s office, Zhang Yu turn on the computer is ready to start the day’s work, see the appalling index on the screen, can not help thinking: no entry had better things to catch up ah.

The stock market “June snow” market has not ended, the central bank on August 11, suddenly announced “the reform”!
The official statement is: to further improve the RMB against the US dollar exchange rate quotes, market-oriented and enhance its benchmark.
That is to say, from that day onwards, the central bank no longer guide the development of the RMB exchange rate, but the pricing power to part of the market, the market transition from full price taker to price the participants.
The news came out, opening the yuan exchange rate depreciated 1 136 basis points, close to 2%.

Since it is a central parity pricing reform, and that can not fit a pricing model it?
Zhang Yu keenly perceive the “exchange rate reform” could bring tremendous change and opportunity, racing against time to collect all relevant information, build a model, check over and over again.
Finally, after “811 exchange reform” Soon, “the central parity fit model” turned out, Zhang Yu made her famous.

In this paper an exclusive interview with CRE Securities chief macroeconomic analyst – Zhang Yu, to teach you to see the secret behind the global game, and the infinite potential of Chinese society.

This article is divided into five parts:

1 “811 exchange rate reform” made her famous, “funded debt dollar” research champion.

2. political, economic, categories of assets, internally and externally, “threading”

3. three
segment, saying clear why I remain optimistic about China

4. comparison of the Sino-US exchange rate, do not set the rules of the game wrong

5. global economy has passed “line day and night” to teach you to see the secret behind the great power game


“811 exchange reform”
war fame,

“funded debt dollar” research champion

< / p>

I have the time to study internship experience rich, has done investment banking, consulting, and been to foreign-funded enterprises, the financial sector,
the marketing department and finance department have to understand.
The final decision to “macro research” as the direction of their own career development, because of two important opportunity.

The first turning point was when I was in school, is Professor Gong six courses we teach “Advanced Macroeconomics”, inspired my interest in “macro research”.

The second opportunity that I formed its own thinking on career planning in the process of continuous practice, I personally think that the career mode can be roughly divided into two categories, one category is “standardized”
process-oriented, such as investment banks, need to follow the requirements of the Commission, there is a fixed process, then such advice, has its own paradigm of the methodology; the other is “non-standardized” open-ended, such as type of business innovation or research
type of people who do research, what kind of report is good?
Difficult to have a precise standard.

Personally, I prefer “non-standard” work, one reason is that I am a strong curiosity of people, like the unknown and challenges, do not like to repeat day after day of work.
Secondly, select “non-standard” work, may be more difficult in the early days, it may not be able to obtain substantial gains in a short time, but with experience, with the self-learning and evolution, will make their own
career in a constant state of appreciation, do not worry about new entrants after the easy alternative. this is especially important for women in the workplace.
So I was a tangle of people, half of curiosity section, there are also other half insecure part, I think very clear, so I can not Ningba the same time can have a sense of security to deliver their own youth work is probably the macroeconomic research

determine the general direction of “macro research”, is about to do “buyer” research or “seller” study, also done a choice, ultimately I feel fit to do “seller” research.
Mainly because doing research in the early will grow faster, work intensity and a greater challenge will be, probably two years to complete the others need four years to accumulate experience of “seller.”

The same is done study, standing in demand “buyer” and “seller” is not quite the same.
“Buyer” research based on “results-oriented investment”, even if the investment logic speak again sound, good earnings useless.

The “seller” Research is not the case, Wang Guowei there are three realms of life, I dimensionality reduction in application vendor work, I think it can be summed up with three levels: the first level is “possible
for other people to save time. ”
The couple started going to row basically this state, combing through data and some simple research, at least for the customer and for the chief purpose of saving time.

The second level is “to provide incremental data”, this time asking you to be able to see other people do not see the “data” and “angle.”
Can do this level, you can basically reach the level of endeavor or a help.

The third level is “to provide incremental logic” to achieve this level researchers often already very mature, “chief”, and to use their own logic to guide customers to complete the idea.

The fourth level is higher than that, “statecraft, persons can not not Hony,” the economist-level work outside the seller.
Many independent-minded predecessors, can provide broad policy recommendations in order to promote social progress through its own research and remarks.

I also followed the line after the first three levels came step by step, and the fourth level is my dream.

As the “seller” researcher, mainly located to provide incremental information and logic may demand side consumption funds, growth funds, insurance, public offering, it may be long-term investors or short-term fluctuations in the value of earnings
It will be different according to their own position and risk preferences, choose the information they need to supplement their own investment research logic, eventually form their own maps.

Every investor segments will have their own special expertise, they may not have so much time to study the macro information, so our value lies in this – let us focus more on their fine
sub-sectors, the macroeconomic research to a more professional team to do it.

Simply put, use three words can be highly summarized our work – sum up the past, explain the present, to predict the future.
About “predict”, although difficult to be absolutely accurate, but I always remember to bring my pipe led by Dr. Kiyotomo entrants often say that sentence, “Even if the prediction accuracy rate of only 50%, better than completely
dark in the front row. ”
I think we do macroeconomic research purposes, is summed up in history, describes the moment in the process, improve the ability of people in the dark before the line as much as possible.

Many people first heard my name since August 11, 2015 of” 811 exchange reform. ”
I was still tube Dr. Kiyotomo team, responsible for the whole “study abroad” section, which contains the exchange rate study.
Exchange rate before the study itself has a strong theoretical and policy, so in this area is very focused experience.
Yu Yongding was already there, so experts Guan Tao “bead front,” left to the younger generation of breakthrough has been very small.

But the “811 exchange rate reform” gave the opportunity to our young field of a lifetime.
Government level, “the reform” for everyone a new thing, “the reform” a very important part is the “middle price formation formula”, but the formula itself was not published, but also the strictest confidence

At that time the central bank to cite only one example in May 2016 released the “first quarter monetary policy report” in reference to the reform, the formation of a “central parity of RMB pricing mechanism” – according to ”
the day before the closing rate + a basket of currencies exchange rate changes. ”
It was just a brief description of the language a bit.

If you only rely on simple language to describe these want to make a precise formula is a certain difficulty, need to go through many rounds of trial and error, to try various coefficients of correlation.

I was the whole market down the first person to calculate “the central parity fit model”.

this model is still in use, not in the central bank
in the case of intervention
, Day of the model, monthly average error is within 30 bp.
In the case of night disc is not disturbed, we will be able to know about the next day’s central parity of the night before; in the case of a bumpy night plate before opening day, about 7-8 points will certainly know.

This methodology I set up after the currency reform, to many financial institutions, including banks, futures companies have done, including training.
Prior to the reform of the exchange rate, we analyze the idea is to look at the fundamentals of the exchange rate – how about the economy?
Again pushed back the central bank will not adjust the central parity.
Because at that time the central parity with the market is not related entirely regulated by the central bank.
But after the reform, with a very clear formula, the entire mechanism of the RMB exchange rate can be very quantified, systematic observation, from which roughly estimate the central bank “counter-cyclical factor.”

At the beginning of 2016, I was in the market’s first proposed the concept of a “wave filter factor”, since at that time the name refers to it is part of the regulation, which became the central bank and changed its name officially recognized
as a “counter-cyclical factor.”

The fact that we will capture in a relatively early stage to these factors, established its own research system.
Our system has three distinct characteristics: First, clear, quantifiable.
There may be specific to the fluctuations in the number of bp everyday, in the original system is totally can not see.
The second is to build a framework for the analysis of RMB exchange rate system inside and outside the plate linkage.
Third, the RMB exchange rate related to the fundamentals and sentiment indicators do some filtering, Fourth, the application of the theory of the RMB exchange rate in China has also done some exploration fit.

After the currency reform, there are some old index is no longer applicable to the existing operational framework, but thinking the market will have a certain inertia, so many people are still using.
Analytical framework requires an iterative exchange rate, the RMB exchange rate index tracking too, so how will we be linked with the capital when building their own research index arbitrage foreign investment in China, among other factors are taken into it.
The reason

From the point of view of long-term framework, the exchange rate is only the result of the economy, not the economy.
In other words, the exchange rate is the pricing between different countries in the economic fundamentals.
An example of a cross-border capital flows to the US dollar and the yuan move: I had a dollar into RMB investment to China with the spot exchange rate, get some income in the investment period.
After the expiration of the investment, then the forward contract exchange rate into US dollars.
It was compared with the cost benefits borrow a dollar and get this period, that is, in a measure of arbitrage.
In this case the “spot rate” and “forward rate” – involve exchange rate expectations; there “in China’s income side” comparison of the two and “America’s debt end”, that is, China and the US interest rates

From 2016 to the present, to predict the market,” central parity “model about two, this is my set, there is a Yu Yongding
the teacher put forward.
Fit two models are good, the results are close, but the methods used are not the same.

When I joined the line, often heard experts say that the older generation of Chinese economy has huge long-term potential!
This sentence was a good feeling empty, not very well understand this, and now a long time to do research, more and more recognized by this sentence, like a child my parents told you to change the fate of the college entrance examination, it is long
great to know the validity of that sentence.

First of all, because our countries are a lot of administrative control of the industry in the future just a little let go of some, can release very large space industries, such as education and health care.
Instead, like the United States has sufficient free and open market, potential to be released is very small.

Second, we have a lot of “elements” have not been fair price, there is no flow.
It has now been priced only city-owned land, an amount which is actually very little.
Farmers in the hands of a large number of homestead and the collective construction land management, are still not free to flow and pricing, which is what “silent factor”!
This part of the elements once released, will enhance farmers bring much wealth?
They are the strongest propensity to consume whole Chinese people, will directly promote China’s future consumption upgrade.

Over the past 20 years, China’s “urbanization” around the core elements of real estate, we thought of urbanization, the first reaction is zoned areas beginning levy, it led to a large market of real estate;
the core elements of the future urbanization is people, “city of the population” and “consumption of urbanization”, although there are certain core city group of real estate development opportunities, but in the future more of urbanization is driving the consumer market upgrade.

Third, the magnitude of our population from the point of view, China currently has a population of over 1.4 billion, of which about 670 million are urban population, urbanization future if this figure raised to 1 billion it?
670 million people and 10 million people driven by domestic demand, not at an order of magnitude.
But there is a very important precondition, that make up the social security system, social security only to keep up, and we dare consumption.
China’s domestic market is huge body mass, because the land and the labor force is very abundant.

three elements mentioned above – “decentralization”, “transfer factors” and “urbanization of the population” in the moment of planning policy have already been reflected, together with
measures to reform state-owned enterprises, China’s economic resilience and the potential is very strong.

China city of the future outlook is” four growth pole “to drive around the city group.
“Four growth pole” is in Beijing, Tianjin, Guangdong, Hong Kong, Yangtze River Delta and Chengdu-Chongqing region, the core of the city on behalf of China to participate in global competition, benchmarking Manhattan, New York and Tokyo and other cities.
“Four growth pole” around the city group will bring a new round of “cluster effect”, including resource and upgrade industries.
The third tier cities, especially resource-dependent cities, will encounter more obvious “old and new converts kinetic energy” problem.
With the “interoperability” of rapid development, those able to attract a large number of logistics companies to form a “logistics center” traffic node city, will usher in a new development opportunities.


Sino-US exchange rate comparison,

do not set the wrong game < / p>

coming year “global assets
configuration “the most important signal level is – US 10-year bonds and two-year bond yields appear upside down, which is forward-looking US recession signal.
This indicator appears upside down it means that the bank’s balance sheet deterioration, we risk aversion reflects the pessimistic expectations for the economy, at the same time, doing the will of private investment is suppressed.

From the relationship between supply and demand, the demand compared to supply is a more front indicator, we are the first to see demand fall, began to shrink the supply side.
One of the difficulties is doing commodity demand changes difficult to estimate, from the economic indicators, there are some leading indicators can be used as a reference, such as the US PMI, OECD leading indicators, US investors sentiment index, consumer confidence
index of Michigan consumer confidence index and so on.
Among them, “the US debt 2–10-year yield spread” is a more important leading indicators.

Why is the US debt looking at the short end of a 2-year rate of return?
Because the US debt market, 1-year and 1-year or less are regarded as money market, and then further on is the 2-year period, regarded as a more standard indicators.
Federal difference between US interest rates are expected to cut interest rates or with a two-year note lost funds rate to measure the current period.
In particular, within the Fed’s decision-making time it was to see “US debt 2–10-year yield spread” this target.

However, this economic logic does not hold in China.
Our interest rate pricing is not as fully market-oriented like the United States, China is still in the build their own “interest rate corridor” in the process, has not fully completed.
Because of this, the adjustment of domestic interest rate policy, the conduct of monetary, credit and bond markets of the three not so fast, we set up the short end of the corridor mechanism has not the United States so flexible and effective.

at the long end of the problem: the United States of China’s long-term debt and long-term debt, the meaning behind it is not the same.
US long-term debt is purely market-oriented pricing, its structure is the holder of globalization: 30% of the Fed, 30% of global primary debt wealth funds and external storage configurations, and 20% to 30% of some big investment
by 6% to 7% of the bank.
China’s situation is –66% of government bonds in the hands of the bank.
This structure means that our national debt interest rates will be highly dependent on bank behavior.
This also explains why the 2017 introduction of a new information management rules for banks, the bond market will have such a big impact.

There is also a different point, the US 10-year bonds with 50 years the average growth rate of GDP is very close.
But in China, the number of relatively large gap between the two, a 20-year average of GDP growth probably 13% to 14%, but the 10-year Treasury rate is only 5% to 6% level.

In fact, the 10-year Treasury rate and the average GDP growth rate of long-term economic unity in there long period, is very meaning of economics – the cost of a dollar loan in debt needed to end, and with
the output obtained an investment dollars should be equal.
Why is China two numbers much worse it?
Perhaps our economy end there are some redundant construction, economic growth in this part does not completely reflect on capital gains; at the same time to guide monetary policy has been liberal bias, the current interest rate reflects the scarcity of financial resources of economic growth had not corresponding scarcity of

Currently the US debt analysis and analysis by the Treasury or two completely separate frame.
Look at the domestic 10-year bond rates they can not fully market-oriented enough from the pricing point of view, because the price of domestic interest rates.
Mainly to see the supply and demand of funds or, better leading indicator is “social integration of M2-year gap”, or deposit on behalf of M2 money supply end, the financial community on behalf of end funding needs.
If the funds as goods, it’s just supply and demand should be its price (that is, 10-year Treasury rate) related.
This indicator can lead two quarters, we use it to roughly determine the inflection point of interest, but in the corresponding section still need assistance experience.


the global economy has passed “day and night line”,

teach you see the great power game behind

to 2015, 2016 was a turning point, the world are experiencing a large
changing times, on three themes – “financial” or “entity”, “cooperation” or “differentiation”, “fair” or “efficiency.”

30 years ago in 2015 between,
It is based on global
“Cooperation and Development” as the first prerequisite, while encouraging “efficiency first” and “financial innovation.”
In this environment, access to high capital gains, as well as opportunities for additional income redistribution.
After 2015, neither the US nor Europe, emerged signs of the rise of “populism.”

No tags for this post.