Update on China Business Environment and 2024 Policy Orientation中国市场近期营商环境及2024新政策导向

Author:SirmioneCGSource:原创

The responses to Moody's rating, current status of foreign investment, the latest news on China's consumer market, economic policy direction and insights into future development trends 国际信用穆迪评级下的中国投资与消费市场、外商投资现状解读,2024中国经济工作导向最新资讯及未来发展趋势洞察


01

Response to Moody’s Credit Ratings

国际信用评级及股市触及近5年低点

CSI 300 Index (000300.SS) Historical Data from: google finance
Moody’s cut China’s credit outlook to negative on December 5th due to they expect that China's economic growth will continue to slow down, the scale of real economy debt will grow rapidly, the effectiveness of related reform measures is uncertain, and the government is expected to maintain economic growth through stimulus policies. In response, the China Ministry of Finance (MoF) stated that Moody's view did not reflect the actual situation of the Chinese economy, to some extent overestimating the difficulties facing the Chinese economy and underestimating the government's ability to deepen supply-side structural reforms and moderately expand total demand. MoF stated that the Chinese government will continue to promote reforms and maintain stable economic growth. In the past few days, China's blue-chip shares hit a nearly five-year low.
信用评级机构穆迪12月5日将中国的主权信用评级展望由“稳定”调整为“负面”主要观点是预计未来中国经济增速将持续放缓,实体经济债务规模将快速增长,相关改革措施难见成效,政府将继续通过刺激政策维持经济增速等。对此,财政部回应,此次穆迪观点未能体现中国经济的实际情况,在一定程度上高估了中国经济面临的困难,低估了政府深化供给侧结构性改革和适度扩大总需求的能力。财政部称中国政府将继续推进改革,保持经济的稳定增长。近日,中国股市沪深300指数触及近5年低点。
The MoF believes that in the past, there has been no clear correlation between the trend of the A-share market and the downgrades of China's credit outlook by rating agencies. The impact on the bond market is also considered limited. Recently, Moody's and Fitch have also downgraded the credit rating of the US twice, prompting dissatisfaction from the U.S. government. The MoF pointed out that the global economic recovery is unstable, and China plays a crucial role in maintaining stable growth. The year 2023 marks the first year of China's economic recovery from the pandemic, with a year-on-year (YoY) GDP growth of 5.2% in the first three quarters. The contribution of domestic demand to economic growth continues to increase. And through a series of measures, risks on domestic debt issues have been preliminarily contained. The impact of adjustments in the real estate market on local finances is considered controllable and structural.

财政部认为过去历次评级机构下调中国主权评级或展望后,A股市场的走势并无明显相关性,对于债市方面的影响也不大。近期,穆迪和惠誉还两次下调了美国的主权信用评级,引起了美国政府的不满。财政部指出,全球经济复苏不稳定,但中国经济在全球中扮演着稳定增长的重要角色,2023是中国经济从疫情冲击中恢复的第一年,前三季度GDP同比增长5.2%,内需对经济增长的贡献不断提升。地方债务问题也得到关注,通过一系列措施,风险得到初步遏制,房地产市场调整对地方财政的影响被认为是可控和结构性的。

The performance of the A-share market following each downgrade of China's credit outlook, data from: Cailianshe


02


The Current Situation of Foreign Direct Investment

外商投资现状

On November 3rd, the State Administration of Foreign Exchange (SAFE) released data indicating that China's net foreign direct investment(FDI)for the third quarter of 2023 was negative. According to a statistical report from the Ministry of Commerce (MOC), in the context of sustained contraction in global direct investment last year and this year (global FDI decreased by 12% last year, and the data for the first half of 2023 published by the OECD showed a YoY decline of 30%), China's actual utilization of foreign capital in the first three quarters of this year decreased by 8.4% YoY. The report points out that against the backdrop of a rising U.S. dollar, the net inflow of FDI has significantly decreased. Overall, despite a cautious stance from foreign investors towards the Chinese market, the MOC emphasizes the potential and attractiveness of the Chinese economy. MOC believes that through reforms and improvements in the business environment, China will continue to attract more foreign investment.

国家外汇管理局于11月3日发布的中国2023年第三季度外商直接投资净值为负。商务部统计报告显示,在去年和今年全球直接投资持续萎缩的背景下(去年全球外国直接投资下降了12%,今年OECD公布的2023年上半年数据同比下降了30%),今年前三个季度中国实际使用外资同比下降8.4%。报告指出,在美元升息的背景下,外商直接投资净流入规模明显减小。总体而言,尽管外商投资者对中国市场观望态度较强,商务部强调中国经济的潜力和吸引力,认为通过改革和提升营商环境,中国将继续吸引更多外资。

Source: SAFE website. Unit: hundreds of millions of dollars.来源:外汇管理局网站

03



New Policy Orientation on Improving Foreign Investment Environment

改善外商投资环境新政策导向

President Xi emphasized in his speech at the opening ceremony of the Third Belt and Road International Forum on October 18, 2023, that the Chinese government's decisions to support an open world economy include initiatives such as establishing the 'Silk Road E-commerce' cooperation pilot zones, signing free trade agreements and investment protection agreements. He highlighted the comprehensive removal of restrictions on foreign investment access in the manufacturing sector, advancing cross-border trade in services and opening up to investment. The speech also underscored support for the development of foreign-invested enterprises in sectors such as advanced manufacturing, modern services, and digital economy, etc.

习近平主席在2023年10月18日第三届一带一路国际论坛开幕式演讲中强调,中国政府关于支持开放型世界经济的决策,包括创建“丝路电商”合作先行区、签署自由贸易协定和投资保护协定等。强调全面取消制造业领域外资准入限制,深入推进跨境服务贸易和投资开放,支持先进制造、现代服务、数字经济等领域外商投资企业的发展。

Confronted with increasingly challenging economic pressures, the Chinese government has recently implemented a series of proactive policies to enhance the foreign investment environment. For instance, by the end of November, the State Council had given its initial approval to the 'Work Plan Supporting Beijing in Establishing he National Service Industry Demonstration Zone and Expanding Opening Up.' This move signifies Beijing's launch of the most extensive opening-up measures, covering a wide range of sectors, including telecommunications, healthcare services, finance, culture and education, professional services, digital economy, as well as trade and investment.

面对日趋严峻的经济运行压力,中国政府近期出台了一系列积极鼓励政策,力求改善外商投资环境。例如国务院11月底率先批复同意了《支持北京深化国家服务业扩大开放综合示范区建设工作方案》,意味着北京启动了最大尺度的对外开放。该计划涵盖了诸多领域,如电信、卫生医疗服务、金融、文化和教育、专业服务、数字经济以及贸易和投资。

At the end of November, the Beijing Municipal Government conducted the first review of the 'Draft Regulations on Foreign Investment in Beijing,' with a particular emphasis on facilitating the seamless cross-border flow of data and funds for foreign enterprises. The objective is to enhance investment environment, incentivize foreign investments in strategic emerging industries, and support the establishment of regional headquarters within the city. Additionally, the State Council recently issued the 'Comprehensive Plan for Advancing Shanghai Pilot Free Trade Zone's High-level Institutionalized Opening, Fully Aligning with International High-standard Economic and Trade Rules', aiming on expediting the expansion of services trade, fostering high-level openness in critical sectors such as finance and telecommunications, streamlining cross-border investment and financing, as well as endorsing the establishment of fund management centers by multinational corporations.

11月底北京市政府对《北京市外商投资条例(草案)》进行了首次审议,重点关注为促进外资企业数据和资金跨境流动便利。旨在优化北京的外商投资环境,鼓励外商投资战略新兴产业,支持在市内设立区域总部和投资公司。日前国务院还印发了《全面对接国际高标准经贸规则推进中国(上海)自由贸易试验区高水平制度型开放总体方案》,聚焦加快服务贸易扩大开放,推动金融、电信等重点领域高水平开放,提升跨境投融资便利化,支持跨国公司设立资金管理中心等等。

The Political Bureau of the CPC Central Committee held a meeting on December 8 to set the general tone of economic work in 2024: "Enhancing opening up to outside, fortifying foreign trade and investment, propelling high-quality development, and aspiring to become a technological powerhouse. In the realm of macro policies and economic development, there is a proposal to cautiously reinforce proactive fiscal measures, with a focus on expanding domestic demand, bolstering the resilience and security of industrial and supply chains, and advancing ecological and green, low-carbon development. After three days of market fluctuations, China's blue-chip shares showed a marginal uptick, increasing the likelihood of a market reversal this week. Following the Central Political Bureau meeting, an economic work conference will be convened, and these two pivotal meetings are expected to chart the course for future policy directions, exerting a critical influence on reshaping market expectations.

中共中央政治局于12月8日召开的会议内容,涵盖了对2024年经济工作的总体要求:加强对外开放,巩固外贸外资基本盘,推动高质量发展,科技强国。宏观政策和经济发展方面,提出适度加力积极的财政政策着力扩大内需,提升产业链供应链韧性和安全,深入推进生态建设和绿色低碳发展等。沪深两市连续三日震荡,之后小幅上涨,本周变盘的概率就更大了。政治局会议后,将召开经济工作会议,这两大会议将指明未来政策方向,对扭转市场预期十分关键。


CSI 300 Index (000300.SS) Historical Data from: google finance

04

Why China’s economy will continue to grow

中国经济为何会持续增长

According to the latest report from McKinsey, China's consumer market is entering a new era. Consumer data from the 2nd and 3rd quarters indicate that the era of double-digit growth in China's retail industry has come to an end. Retail sales in the third quarter increased by only 3%, and the recent ‘Double 11’(Singles’ Day) sales showed a mere 2% growth compared to the same period last year. This deceleration is evident in categories such as cosmetics (3%), clothing (4%), and home appliances (0.8%). Consumer confidence remains near historic lows since April. During the 'Double 11’, some categories experienced growth driven by discounts and promotions, while others declined. Live streaming played a crucial role, with traditional e-commerce experiencing a slight decline, while live streaming grew by approximately 20%. High-end brands performed well, with some brands lowering average selling prices amid intense promotional activities. Analysis indicates that success is closely linked to innovation and flexible responses to market dynamics.

根据麦肯锡的最新报告,中国消费市场正在进入一个新时代。第二和第三季度的消费数据表明中国零售业的两位数增长时代已经结束。第三季度商品零售额仅增长了3%,而最近的“双十一”购物节仅比去年同期增长了2%。这种放缓包括化妆品(3%)、服装(4%)和家电(0.8%)等类别。消费者信心方面,维持在自4月以来的历史最低水平附近。双十一受到折扣和促销的推动,某些类别经历了增长,而其他类别则下降。直播在其中发挥了重要作用,传统电商略有下降,而直播则增长了约20%。高端品牌表现出色,部分品牌在激烈的促销活动中降低了平均售价。分析显示,成功与创新和对市场动态的灵活响应密切相关。

Data from McKinsey

The report maintains a cautiously optimistic outlook for the future of the Chinese economy, anticipating robust growth in the retail sector, positioning China to become the world's largest growth market. Driven by urbanization and rising income levels, the number of mid to high-income households and affluent urban centers is expected to increase in the coming years. The service industry, particularly in the realms of tourism and entertainment, ranks high in growth rates according to McKinsey's recent survey of Chinese consumers. After years of constrained mobility, there is a renewed enthusiasm for travel and socializing in restaurants and bars. The catering industry has shown robust growth, with a 19% increase reported to date, marking a 14% YoY growth in the 3rd quarter compared to 2022.

该报告对中国经济的未来展望是谨慎乐观的,预计零售业将保持稳健增长,中国有望成为全球最大的增长市场。由城市化和收入水平上升驱动,中高收入家庭,以及高收入城市的数量,预计将在未来几年内增加。服务业,特别是旅游和娱乐领域这两个领域在麦肯锡最近的中国消费者调查中的增长率排名靠前,经过多年的受限流动性,人们对旅行和在餐厅和酒吧社交的热情重新燃起。餐饮业增长强劲,截至目前已增长19%,第三季度较2022年同比增长14%。
A recent commentary in the South China Morning Post suggests that despite facing certain challenges, the fundamentals of the Chinese economy remain strong, and it is poised to achieve its growth targets. The commentary delves into the reasons behind the sustained growth of the Chinese economy, asserting that the ongoing industrial development in China will help navigate the current downturn in the real estate sector and demographic pressures. On the fiscal front, China has not experienced significant inflation, and real interest rates remain higher than those in the United States and Europe, providing greater room for monetary policy adjustments. China's fiscal net assets are positive, with government debt-to-GDP ratio at around 110%, while Japan and the United States have ratios of 260% and 120%, respectively.
南华早报日前一篇评论认为,尽管面临一些挑战,中国经济基本面仍然良好,将实现其增长目标。评论探讨了中国经济持续增长的原因,认为中国的工业发展将帮助度过当前的房地产行业低迷和人口压力。财政方面,中国并未出现明显的通货膨胀,实际利率仍高于美国和欧洲,这使得中国在货币政策方面有更大的调整空间。中国的财政净资产为正值,政府的债务与国内生产总值之比约为110%,而日本和美国政府的比例分别为260%和120%。

The commentary also points out that if China no longer relies on the real estate industry, the country's economic growth will hinge on the green economy and digital economy. According to data from private equity firm KKR, these two sectors contributed 4.7% to China's GDP growth rate in 2022. China holds a leading position globally in industries representing the Fourth Industrial Revolution, such as green energy, digitization, industrial robotics, and artificial intelligence. Even the prolonged China-U.S. trade tensions have not hindered China's growth, as bilateral trade reached a historic high of around $700 billion last year. Lastly, China continues to undergo automation and urbanization. Despite facing challenges like an aging population, its long-term growth is not expected to be significantly constrained.

评论还指出,如果不再依赖房地产行业,中国经济的增长将依赖于绿色经济和数字经济。根据私募股权公司KKR的数据,这两个领域在2022年对中国GDP增长率的贡献率达到了4.7%。中国在绿色能源、数字化、工业机器人、人工智能等代表第四次工业革命的行业中处于世界领先地位。即使长时间的中美贸易战也没有抑制中国的增长,中美贸易在去年达到了约7000亿美元的历史新高。最后,中国仍在进行自动化和城市化,虽然面临人口老龄化等挑战,但其长期增长不会受到明显限制。


Breakdown of China GDP growth, 2022 data from KKR

Unlike Moody's, Citigroup upgraded its outlook last week for investment-grade bonds issued by Chinese entities from underweight to market weight. Citigroup stated the bonds hold certain value and are expected to outperform similar bonds in the US due to higher yield differentials. This adjustment in perspective aligns with the Central Political Bureau's recent emphasis on the overall direction of economic work for 2024, such as strengthening opening up and advocating a moderately intensified proactive fiscal policy, signal a favorable outlook for China's market and its future economic self-recovery capabilities.
与穆迪不同,花旗集团上周将中国发行人的投资级债券展望,从低配上调为市场配置,称中国的投资级债券有一定价值,预计将因更高的利差跑赢美国同类债券。而本月初中央政治局对2024年经济工作的总基调:加强对外开放,适度加力积极的财政政策等要求也释放了有利于中国市场未来经济自我修复能力的讯号。
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