中国宏观策略-注意差距：为什 么中国不会过热

1、Mind the gap: Why China wont overheatChina Inside OutDespite the rebound, China is still running below full speed, which means a negative output gap and less risk of overheatingDigitalisation and a more skilled labour force can lift growth in productivity, countering demographics and the debt drag w

2、hile implementation of Beijings new technology plan should boost productivity and the potential growth rateNo risk of overheating: Data from the first few months have shown China growing at over 30% in year-on-year terms. Does this mean the economy will overheat?We dont think so. Stripping out the b

3、ase effect, as COVID-19 was widespread this time last year, we estimate underlying GDP growth to be 5.4%, below pre-pandemic levels of 6%. Moreover, the recovery remains uneven, with private consumption lagging given rising unemployment. From a fundamental perspective, we expect GDP growth to remain

4、 below its potential growth rate in H2 2022 and beyond. In other words, there will still be a negative output gap (actual growth minus potential growth), which implies that the risk for broad-based inflation will remain remote.Our non-consensus view: In contrast to the widespread view that Chinas po

5、tential growth rate has been slowing rapidly and is heading to around 5% amid a shrinking labour force and a rising debt burden, we expect this measure to stay above 6.5% in15 April 2021EconomicsChinaQu HongbinCo-Head Asian Econ Research, Chief China Economist The Hongkong and Shanghai Banking Corpo

6、ration Limited HYPERLINK mailto:hongbinqu.hk hongbinqu.hk+852 2822 2025Erin XinEconomist, Greater ChinaThe Hongkong and Shanghai Banking Corporation Limited HYPERLINK mailto:erin.y.xin.hk erin.y.xin.hk+852 2996 6975Madhurima Nag Associate Bangalorethe coming years. There are three main reasons for o

7、ur more positive view: First, the countrys massive investment in tertiary education in the last several decades is starting to bear fruit. The number of university graduates per year should continue to grow, topping 10m in the coming years, more than twice the number in 2007. As a result, growth in

8、the countrys human capital stock should accelerate significantly, more than offsetting the impact from a growing number of retirees.Second, our comparative analysis suggests China still has plenty room for lifting productivity through capital deepening (i.e. increasing the capital stock per worker).

9、 A heavy debt burden will likely be a constraint for many state-owned enterprises, but not for private firms because most of them arent overly leveraged (see Chinas dual track economy, 29 May 2017). A recent shift in policy back towards industrial upgrading and levelling the playfield for private co

10、mpanies should boost investment.Third, the countrys innovation capacity has been expanding fast in recent years as it has filed more global patents than any other country and reached levels of R&D expenditure similar to developed economies. The 14th Five-year Plan pledged to10-21 May 2021HSBC 8th An

11、nual China ConferenceRegister nowre-double the effort to boost R&D spending and foster innovation, making innovation a bigger growth driver in the coming years. That said, increased geopolitical tensions, particularly with the US, pose downside risk in regards to continued technology development. We

12、 believe that Beijing should, and will, likely strengthen its trade and investment links with the rest of the world to mitigate these risks in the years ahead.Disclosures & DisclaimerThis report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the

13、 Disclaimer, which forms part of it.Issuer of report: The Hongkong and Shanghai Banking Corporation LimitedView HSBC Global Research at:https:/ HYPERLINK / Not overheating yetDespite the rebound, China is still running below full speed, which means a negative output gap and less risk of overheatingD

14、igitalisation and a more skilled labour force can lift growth in productivity, countering demographics and the debt drag while the implementation of Beijings new technology plan should boost productivity and the potential growth rateExtraordinarily rapid growth rates, but wheres the heat?For China,

15、its been a first in, first out story with growth recovering back to pre-pandemic levels at the end of 2020. And the momentum has continued into this year. Data from the first few months have shown extraordinary growth rates of over 30% in year-on-year terms. Meanwhile, the global recovery is underwa

16、y as vaccines are rolled out and global fiscal stimulus provides a tailwind for growth. Understandably, all this activity brings the question of whether this will mean China will overheat. In our view, this concern is likely overblown. Firstly, sequential growth momentum is slowing and will continue

17、 to decelerate in the rest of the year, in our view.Secondly, from a structural perspective, China is more likely to be running below its potential growth rate, creating a negative output gap and reducing the risk of overheating.For one, Chinas rapid growth in Q1 is the result of a low base given th

18、e shock of COVID-19 last year. While the key activity data show growth rates of over 30% y-o-y, the recovery remains uneven. To remove the base effect, we look at the two-year compound annual growth rate to gauge the pace of the recovery. Industrial production has picked up and even exceeded pre- pa

19、ndemic levels of growth but the demand side, like manufacturing investment and retail sales, has still not fully recovered.Chart 1. Growth recovery remains unevenChart 2. Y-o-y and q-o-q sa GDP growthforecast10 % y-o-y86420Industrial production (in volume terms)Service production index (in volumeFix

20、ed asset investment (in value terms)Retail sales (in value terms)20151050-5-10%Forecastterms)Jan-Feb 2019Jan-Feb CAGR (2 years, 2020 & 2021)Mar-16 May-17 Jul-18 Sep-19 Nov-20 Jan-22GDP y-o-yGDP q-o-qSource: CEIC, HSBCSource: CEIC, HSBCGrowth trajectory in 2021Without a full recovery back to pre-pand

21、emic levels across all areas of the economy, it is hard to justify the argument theres full-blown overheating going on. Moreover, some outperforming sectors are even set to slow slightly. Property investment, which reached double-digit growth in Q320, is likely to see demand falling as policymakers

22、grow wary of a sharp rise in prices. Beijing has rolled out macro-prudential measures such as tightening up financing access for real estate developers (e.g. the “three red lines” policy) and increased restrictions at the local level such as on second-home purchases. This will in turn keep property

23、investment from overheating this year, in our view (see Chinas Property bubble concerns, 30 March 2021).Meanwhile, sectors that have lagged will pick up this year as domestic demand stabilises at home and global demand recovers. The recent NBS PMI readings (latest was for March) have shown a pickup

24、in momentum in both manufacturing and services after the lifting of restrictions during the Chinese New Year holidays to help contain the spread of COVID-19. However, we expect household consumption to only recover gradually as persistent labour market pressure has kept levels of precautionary savin

25、gs elevated and a full rebound in income growth has yet to occur. Income growth has only reached about 80% of pre-pandemic levels (economy wide average), while migrant workers have fared even worse as their income growth has only reached 40% of pre-pandemic levels. The employment indices in the manu

26、facturing sector have tentatively moved back to borderline growth levels while services have stayed in contraction.Thus, more solid growth in the labour market is still needed before we will see a full recovery in incomes and domestic consumption.Meanwhile, manufacturing investment should see a pick

27、 up on the back of stabilising domestic growth, strong exports, and high capacity utilisation rates. Yet, there is some downside risk due to a compression in profit margins in the near term given the recent surge in global commodity prices. This is more likely to impact downstream sectors as firms m

28、ay not be able to fully transmit increased input costs onto consumers. This in turn could dampen their demand for capex spending this year. Thus, given an uneven recovery, full blown overheating is unlikely.Chart 3. PMI readings rebounded in MarchChart 4. Income growth recovery hasstagnated65 Index6

29、0555045Index656055504516% y -o-y , nominalotal Disp. Wage and Business Property &IncomeNBS Non-Manufacturing PMINBS manufactuirngInc.salaryincomeAssetfromIncome TransferNBS Construction PMINBS Services PMI2019 FY2020 Q32020 Q42020 FYSource: CEIC, HSBCSource: CEIC, HSBCBut what about pot

30、ential growth?In our view, structurally speaking, Chinas growth drivers not only remain resilient, but some are even gathering more steam. The recovery will continue to broaden, though we estimate growth is only set to reach roughly 5.6% y-o-y in H2. While this is a healthy clip, it is unlikely to c

31、ause significant overheating as this is likely below Chinas potential growth rate, and thus will create a negative output gap (actual growth minus potential growth).There are several methods to estimate potential growth. One method is to find trend growth through filtering methods, such as taking a

32、Holden Prescott (HP) filter of output. Another method is to look at potential growth from a bottom-up perspective looking at the drivers of economic growth, which is our preferred method. For this, we use the Cobb-Douglas production function (see appendix) to estimate growth through an economys comp

33、onents which consists of labour, capital, and total factor productivity (TFP).Chart 5. China experienced a negative output gap in 2020 due to COVID-19Chart 6. The output gap and inflation tend to track with a slight lag in inflation growth16 % y -o-ypt6420-2-4-68 ppt% y -o-y6420-2-4-625

34、20151050-5-10-15808590950005101520 Output gap (RHS) Trend growth with COVID-19 (HP filter) real GDP, % y-o-y, actualTrend growth without COVID-19 (HP filter)-878 83 88 93 98 03 08 13 18Output gap - HP FilterPPI (RHS)GDP deflator (RHS)CPI (RHS)-20Source: CEIC, HSBCSource: CEIC, HSBCWe see more likeli

35、hood of downward than upward pressure on inflation in the near termUsing either method, we see theres a relationship between the output gap and inflation. A negative output gap is usually reflected in lower inflationary pressure with a noticeable lag as inflation changes trail economic activity as d

36、emand or supply may be operating below ideal levels (chart 6). With the negative economic shock from COVID-19, the negative output gap widened, and considering the impact will lag, this is more likely to put downward pressure on inflation as opposed to upward pressure in the near term.However, as Ch

37、ina recovers, does this mean that actual growth will overshoot potential growth? In our view, no. Structurally speaking, growth drivers continue to support potential growth and keep it at resilient levels. Additionally, we expect growth will only reach 5.6% in H2, which is lower than pre-pandemic le

38、vels (2019: 6.0%).Often there is the argument made that Chinas potential growth is slowing. Using the same HP filter method, indeed the trend growth has fallen, but there is a known problem of end point bias (where data points around the end of the sample have a larger impact on trend growth) using

39、HP filters.Thus, it may not be the best for observing the current potential growth levels as it has likely been pulled down by shocks towards the end points of the data samples. Inclusion of the COVID-19 economic shock brings trend growth down to under 4.5% while the omission of the shock would brin

40、g the trend growth closer to 6% (though this may also face downward bias given slower growth in recent years due to external factors such as US-China trade tensions) (chart 5).In our view, taking a theoretical approach by looking at the structure of the economy, we can get a more reliable estimate o

41、f potential growth. We break down each individual growth driver later in the report, but our key takeaway is that structurally speaking, potential growth has stayed resilient in recent years and is likely well above the 6% level.Some people observe that it is natural for Chinas GDP growth to slow do

42、wn towards levels of other developed nations. However, this look at it from a headline GDP perspective, and overlooks that fact that on a per capita basis, China is still relatively behind. Compared to other nations that were able to graduate from the middle income stage of development, they had rea

43、ched a sufficiently high level of labour productivity before GDP growth began to slow.Chart 7 shows the decade average of labour productivity against the US level for major developed countries against the average GDP growth for the period. We see that in other developed nations, like Japan and South

44、 Korea, their average annual GDP growth rate did not slow to below 6% until they had reached over 40% of the US labour productivity level. While China has now reached a GDP per capita of over USD10,000 (since 2019), it is still only 16% of the US level.Thus, there is still room and even a need for C

45、hinas growth to continue to keep up at a high level. From this perspective, the argument that China has developed sufficiently and will now slow substantially is likely premature. Rather, China has a need for a sufficiently fast pace of development in order for it to continue to catch up with more d

46、eveloped economies. In the following sections, we break down the structural components of potential GDP growth using the standard factors of production. Human capital growth is set to continue increasing while capital deepening (we explain more about this later in the report) has sufficient capacity

47、 to increase.Chinas increased focus on innovation and technology development will also be a key driver for sustained productivity growth in the coming years.Chart 7. Chinas labour productivity is still much lower than the US levelreal GDP, % y -o-y121086420020406080100120140GDP per capita as % of US

48、 ChinaUnited KingdomJapanKorea, Rep.GermanySource: World Bank, CEIC, HSBC, There are six markers for each country as each denotes a decade in the period from 1960-2020Human capital: Working smarterDuring COVID-19, some headline grabbing figures showed that new births declined by 15% due to the impac

49、t of the pandemic compared with an average birth rate of over 1% in the previous five years. This adds to some longer standing concerns around Chinas demographic shift.There is no doubt that the population is aging and shrinking, but in our view, these concerns are likely overblown as this will not

50、necessarily translate into a significant decline in the labour force.True, the total working age population (we define this as those aged between 15 to 64) has modestly fallen since 2014, and the UN projects a fall of roughly 0.5% per year in the next 15 years (red line in chart 8). However, this ov

51、erlooks the fact that Chinas human capital has actually been increasing year on year due to a more educated work force that is replacing retirees. We estimate that for every two older-generation workers with less than eight years of schooling who retire, there will be 1.9 younger generation employee

52、s with over 12 years of schooling to replace them (see Fewer workers, more engineers, 11 October 2019).A more highly-skilled labour force means increased productivity for firms and boosts the potential output due to more innovation and a better utilisation of skillsets. When adjusted by mean educati

53、on years, the labour capacity has been increasing steadily (blue line in chart 8) contrary to the headline figure of only looking at total working age population.Chart 8. Human capital growth has not peakedChart 9. STEM fields dominate university education1,6001,4001,2001,00080060014000millionmn peo

54、ple-education y ears2030 203020112014120001000080006000400040 % of total graduates/post-graduates 3530252015105PhilosophyEconomicsLaw Education LiteratureArt History Science Engineering Agriculture MedicineManagement02000 2005 2010 2015 2020 2025 2030 2035Population (15-64)Population (15-59) Populat

55、ion allPeople-skills (15-64) (RHS)Source: CEIC, UN, NPC, HSBC, Marker denotes peak year. Projections are form 2020 onward.GraduatesPost-graduatesSource: Wind, HSBC, Data is from 2018. University graduates in this chart do not include vocational school graduates. STEM = Science, technology, engineeri

56、ng and math.To make our projections on future labour growth, we use the UN median population probabilities. For mean education, we use the 14th Five-year Plan (FYP) target of at least 11.3 mean years of schooling by 2025. The previous FYPs have set mean schooling targets of roughly 0.5 additional sc

57、hool years for each successive FYP, which is what we use to project mean schooling by 2035. Taken all together, this would give us a peak labour capacity until at least 2030 (blue marker in chart 8).Thus, in the medium term, the human capital component of potential growth is set to increase over the

58、 next decade. Moreover, there are other factors that could push labour capacity higher such as increased support for health care or a faster increase in average schooling years or increased specialisation of labour.This year there will be another record breaking number of university graduates, at ov

59、er 9m. Looking at the subject breakdown of Chinas graduates, roughly 40% are concentrated in the science and engineering fields, suggesting a highly specialised and growing labour force. This not only helps to increase potential growth from a labour capacity perspective, but also helps to complement

60、 Chinas drive for increased technology development.Furthermore, China has had a long standing drive for increased urbanisation which has helped to drive up labour productivity as more rural farmers obtain higher paying and more productivity- generating jobs as well as gain new skills. The urbanisati