This article is from WeChat official account:Chaos University (ID: hundun-university)< span class = "text-remarks">, author: Xu high (Bank Securities assistant to the president, chief economist), head Figure from: vision China

I am very happy to share with you my views on the economy and the market. Today I will talk about three aspects: China’s economic analysis and prospects; the prospect of the US dollar(important I have a deep understanding of the logic of the US dollar, so I will explain it from the perspective of the international monetary system. After making it clear, I will have a clearer understanding of many international financial topics.); , Such as foreign exchange, bulk commodities, and gold.

1. The global economy has recovered significantly, and China’s multiple indicators hit record highs

From the perspective of the PMI Economic Sentiment Index, the global economy has recovered significantly from the time when the epidemic was the most severe. The current economic situation of the United States is obviously stronger than that of Europe and Japan, and it will also form a certain degree of support for US dollar assets and the US dollar itself.

China’s monthly export data has reached a record high in the last two months.

The extent of the rebound in imports is relatively weak, mainly because the price of imports has dropped significantly. For example, the current oil price ratio goesIn the same period of the year, it was down by more than 30%. Although oil imports were actually relatively large, the value did not increase that much.

From the perspective of the physical volume of imports, China is quite strong, reflecting the obvious recovery of domestic demand.

The growth rate of exports from the three advanced economies of the United States, Europe and Japan to China is significantly higher than their total export growth rate. At the same time, the growth rate of their imports from China is also significantly higher than the growth rate of their total imports.

So, whether in the export market or import market of developed economies, China’s market share is significantly increasing.

There is an index worthy of everyone’s attention, which is the freight rate index of containers. China’s container freight index has risen significantly in recent months and has reached the highest level in the past five years. Its economic impact is more positive.

Strong quantity of imported goodsBehind the strong growth is a relatively strong domestic demand recovery. The main manifestation is the rebound in domestic investment demand.

The composition of investment is very simple, mainly three pieces: real estate investment accounts for about 1/4, infrastructure investment accounts for 1/4, manufacturing investment accounts for 1/3, and the three pieces together account for 80% of the total investment. %.

In the second quarter, driven by the six-stable and six-guarantee policy, investment has rebounded significantly, especially in real estate and infrastructure investment. Manufacturing investment is still in a state of negative year-on-year growth, but the decline is also clearly narrowing.

Another indicator is very interesting, which is the output of excavators, which has a relatively good lead in the movement of various assets around the world. The reason is very simple, Chinese investment is a very important engine of global total demand, and a better indicator of the strength of Chinese investment is the output and sales of domestic excavators.

Starting from the second quarter of this year, China’s excavator output has begun to rebound significantly, and the growth rate has rebounded to a very high level. At the same time, because the excavated soil still needs to be transported by trucks, the sales of heavy trucks have also risen sharply, setting a new high in the past 10 years.

Consumption and investment are relatively lagging behind. But the upward momentum should still be very clear.

The overall environment facing the country, in simple terms, is that the recovery of overseas economies has driven the improvement of China’s exports. Driven by the loose domestic macro policy, the investmentThe recovery of capital and the rebound of consumption growth have caused a relatively obvious upward trend in domestic demand.

In the first quarter of this year, GDP was a significant negative growth, and in the second quarter it rose by 10 percentage points to over 3%. We expect that by the third and fourth quarters of this year, the GDP growth rate will pick up further, probably reaching 5% or 6%.

Because the base left this year is very low, by the first quarter of next year, GDP growth is expected to hit a record high, about 20%; by the second, third and fourth quarters of next year, the GDP growth rate will return to 6%. The level of normalization.

This big macro background is very important for us to analyze the operation of various assets.

Because the recovery of investment is faster than the recovery of consumption, the GDP growth rate of the industrial construction industry has returned to a relatively normal level in the second quarter of this year, but the GDP of the accommodation and catering industry still has a negative growth of 20%.

However, it is believed that by the third and fourth quarters of this year, the growth rate of service industries such as accommodation and catering should have a relatively obvious rebound, and the rebound of the service industry will also drive the recovery of the entire society’s GDP. Therefore, I remain optimistic about the economic recovery from the second half of this year to the first half of next year.


2. There may be inflationary pressures next year, and extremely loose monetary policy will graduallyStep back

When the economy recovers, it must be reflected in inflation data.

After the impact of the epidemic in the first quarter of this year, we have seen very obvious deflationary pressure on inflation data, especially the producer price index PPI. Now, the deflationary pressure has been significantly reduced. The manufacturing PMI purchasing price index is a relatively good leading indicator.

We see that the decline in PPI is significantly narrowing. It is expected that PPI should turn from negative to positive next year, and deflation should disappear by then. Compared with PPI, CPI has been relatively high, and this year has been in a relatively moderate inflation situation. So in the future, the deflationary pressure brought about by the epidemic has subsided, and next year I think I may see some inflationary pressure.

In this context, it is impossible for house prices not to rise. Among the 70 large and medium-sized cities, the proportion of cities where housing prices have increased month-on-month, new houses have exceeded 80%, and second-hand houses accounted for more than 60%. Compared with the first quarter when the epidemic just broke out, the proportion of cities with rising housing prices is clearly rising.

If we look at the growth of total social financing, the first quarter and the second quarter have clearly risen, and the year-on-year increase has reached a new high in almost 15 years. This reflects that in the face of the epidemic, monetary policy has entered a crisis-responsive state of extreme easing.

The deflationary pressure is reduced and the pressure of rising housing prices is beginning to rise. It should be expected that the country’s previously extremely loose monetary policy will gradually withdraw. This retreat is not a return to a tighter state, but a return to a normal loose mode. Therefore, the growth of total social financing has slowed down, but the absolute number of increase is still relatively high.

Although the economy is recovering, the pressure on the domestic job market is still not low. Judging from the urban unemployment rate survey, the unemployment rate in February this year should be a high point, reaching 6.2%. It has declined in recent months, but it is still 5.7%, which is still much higher than the level before the outbreak. The need for macroeconomic policies to stabilize employment is still very high.

So, the tone of monetary policy and fiscal policy, including the overall macro policy, will still be relatively loose, but not as loose as in the first quarter. This tone continues to ensure the stability of the economy and the job market, and further reduces the unemployment rate.


Three. There are problems in the international monetary system, but the US dollar’s ​​central position cannot be shaken

Next, I will discuss a problem that everyone is more concerned about, which is the US dollar.

I see the cityThe market even has some opinions about whether the United States has to give up the dominance of the dollar in order to revive its manufacturing industry. If you have a deeper understanding of the US dollar, you should know that such a statement is groundless and untenable.

Some basic characteristics of the current international monetary system:

Currency is not supported by any physical objects. The stability of the currency value is based entirely on the credibility of the central bank. To put it more bluntly, it is based on people’s confidence in the currency. If there is no confidence in the currency, the currency is worthless.

Currently, there are two main exchange rates of international currencies: floating exchange rates and fixed exchange rates. Floating exchange rates are implemented among most currencies.

The U.S. dollar is at the center, and it is estimated that it will be difficult to shake in the next few decades.

However, there are indeed some problems in the international monetary system, making people always question the current monetary system. There are three main points:


1. The system is inherently unstable

The foreign exchange reserves of countries around the world now add up to 10 trillion U.S. dollars. Among them, the US dollar accounted for more than 60%, the euro accounted for about 20%, and the Japanese yen accounted for about 5%. Other currencies, including the RMB, accounted for a negligible proportion.

This will bring about a problem called the Triffin Problem, which was put forward by an economist in 1960: The US dollar will circulate throughout the world, not for nothing. To let the world use U.S. dollars to buy goods as a payment tool is to use U.S. dollars in exchange for goods and services, which is manifested in the US trade deficit.

As the issuer of the international reserve currency, the United States is bound to have a large trade deficit in order to distribute the US dollar to the world. Once the trade deficit is large, everyone will worry about whether the United States will be able to maintain the stability of the US dollar, maintain economic stability, and maintain currency stability. This will shake people’s confidence in the dollar, and thus the status of the dollar.

This problem is not only for the US dollar, any sovereign country will encounter it if its currency becomes an international reserve currency. It has endogenous instability.


2. The central position of the dollarHere comes inequality

To use the words of former French Presidents Charles de Gaulle and Destin in the 1960s, the United States has “excessive privileges,” which means that the United States uses its own currency to pay for imports.

The Asian crisis broke out because Southeast Asian countries borrowed too many foreign debts and were unable to repay them. However, the United States uses its own currency to pay for imports, and it uses its own currency to borrow money internationally, so there is no problem of being unable to repay its foreign debts. It only needs to let the Federal Reserve start the printing press a little more to pay off the foreign debt. Moreover, the foreign debt of the United States mainly exists in the form of U.S. dollars, so a depreciation of the U.S. dollar will reduce the level of U.S. foreign debt.

These privileges can bring more than a trillion dollars in revenue to the United States in a few years. In fact, “excessive privilege” can be described with another more familiar concept, that is, the United States collects seigniorage from the world.


3. Asymmetrical external imbalance adjustment pressure and subsequent global imbalance

As shown in the figure, this is the current account surplus of several major economies in the world, which can be simply understood as trade deficit or surplus. It can be seen that the US trade deficit is very large. Because under the current monetary system, as an international reserve currency issuer, there is no automatic mechanism to adjust its imbalances, which makes its imbalances exist for a long time. As a country with a trade surplus, such as China, the accumulation of foreign exchange reserves and the US dollar will not encounter any problems. Therefore, there is no automatic adjustment mechanism for this imbalance between the surplus countries and the United States, and the global trade imbalance will become more and more serious.

This kind of imbalance will not happen under the gold standard. But it will happen under the current Jamaican system.

With so many doubts, is the current international monetary system necessary to change? There are four possible solutions, which seem to be possible to replace the current international monetary system. butAfter analysis, we know that there is no way to replace the current international monetary system in the foreseeable future, let alone a new currency to replace the central position of the US dollar.


First, is it possible to return to the gold standard?

Especially when the price of gold continues to rise, this kind of voice is often heard, saying that the US dollar is over-issued and the US dollar’s ​​reputation will be lost. But returning to the gold standard is absolutely impossible.

The total amount of global gold is now close to 200,000 tons, and the annual gold mining volume is 2,000 tons. The annual growth rate of gold stock is less than 2%.

And what is the annual global growth rate of GDP? Since the year when the subprime mortgage crisis was unusual in 2009, the real global GDP growth rate has been about 3% to 4%.

The growth rate of the money stock is 1 to 2 percentage points lower than the real economic growth rate, which means that if the gold standard is used, there will be long-term negative price growth in the world-deflation.

In addition, gold is used as currency in the world, and the exchange rate between currencies is fixed. This makes it impossible for countries to hedge against different economic conditions through exchange rate changes.

On this point, the euro has taught us a good lesson. When the southern European countries faced Germany’s very strong export competitiveness, they found themselves unable to compete with Germany. A large number of industries were destroyed by Germany and they could only engage in consumption, real estate, and assets. The bubble finally broke out in the European debt crisis.

When countries that are not completely the same are tied together and the same currency is used, the differences between countries will become larger and larger, and eventually there will be a tendency to fall apart. So the Eurozone has not stabilized so far, and it has not completely escaped the possibility of failure.

Therefore, if someone fudges on returning to the gold standard and says that the price of gold has risen, that person will either simply do not understand the situation, or be unpredictable, or bothAll kinds of.

Secondly, can the special drawing rights (SDR), or paper gold, which was relatively popular some time ago, replace the US dollar?

The answer is no. SDR is not technically a currency at all, it is more like a credit line between countries. For example, if a country received 100 billion SDR from the International Monetary Fund IMF, it does not mean that 100 billion SDR is currency, but that 100 billion SDR can be exchanged for a basket of currencies when needed.

SDR is too small. Its current total is only 5% of global foreign exchange reserves. Moreover, SDR is a financial instrument issued by the IMF. In the IMF, the United States has a veto power. If the SDR is to replace the U.S. dollar, the United States must veto it.

Third, the great economist Keynes of the year anticipated the possible problems of the monetary system and proposed to establish a global bank to initiate a development based on 30 commodities International currency, this currency is called Bancor.

This is of course a great idea, but the political resistance is enormous. The issuance of Bancor means the establishment of a global bank. How to distribute the global seigniorage tax received fairly to each country is obviously difficult. And will the United States be willing? Therefore, the possibility of a super-sovereign international currency is very small.


Fourth, multiple currencies are at the center.

The U.S. dollar is an international reserve currency, and the renminbi can also be an international reserve currency. Everyone will act as an international reserve currency to share the interests of the United States. Is there such a possibility? Yes, but it will be difficult in the foreseeable future.

Because the use of currency has a network effect, making the threshold for new currencies challenging the incumbent reserve currency. Just like the telephone network has been laid out, many people are using it, and a large number of people can be contacted. At this time, a new telephone network is to be built next to it, and everyone is invited to switch from the existing network to the new network. How big is this cost and how difficult is it to attract old network customers?

If the renminbi is to replace the U.S. dollar, it must be much better than the U.S. dollar to motivate people to make such a conversion. It is basically impossible now. If the RMB is going to challenge the US dollar, I think it should be something in the middle of this century.Questions. It may be too early to discuss.

In addition to these four solutions, there are also the newly emerging blockchain technology and digital currency.

Is it possible for digital currency to replace the sovereign currency issued by modern countries? Impossible, because the issuance of currency is a very profitable business, and the national seigniorage revenue is very considerable. Which country is willing to hand over its seigniorage? This determines that the decentralized non-sovereign digital currency will be continuously suppressed by the state and can only live in a gray area.

Furthermore, blockchain technology is amazing, but it faces a dilemma between decentralization and performance. If you want to go to the center, the information must be distributed across the entire network, which requires a long time to spread. So bitcoin transactions are very slow. You order an order, and after an hour, the order has not succeeded.

But if you want to improve performance, you must build some centers, which loses the advantage of decentralization. It is impossible to have both.

The basic conclusion is that both blockchain and digital currency are in the early stage of exploration. Theoretically speaking, compared with the previous four possibilities, the first four possibilities are still there, but they cannot be done in reality; in theory, neither digital currency nor blockchain has the ability to challenge current international currencies. ability.

So, under such a general background, let us analyze the exchange rate of the US dollar and it will be clearer.

The U.S. monetary policy is now extremely loose, and the Federal Reserve has issued a large amount of currency. Most of these currencies were re-deposited into the Fed’s accounts by commercial banks in the United States, and did not actually flow into the real economy. The main manifestation was the liquidity held by commercial banks, thus ensuring the stability of commercial banks and other financial institutions.

Because there is no real flow into the real economy, the possibility of inflation is relatively low. The Fed is very experienced in controlling the U.S. dollar. If there are any signs of out-of-control inflation, the MidlandThe Chu will definitely recover the currency in time.

There is also a key indicator-US dollar index futures. The US dollar index is the weighted average exchange rate of the US dollar against a basket of currencies.

The height of the dollar index reflects the strength of the dollar. It can be seen from the value difference of futures that the trades that bear the US dollar are now very crowded. The current short US dollar trading is very crowded, and historically it often means that the US dollar is close to a staged bottom.

From a long-term perspective, using the logic of the international monetary system to analyze, the U.S. dollar will still maintain a central position for a long time; in the short-term, the U.S. dollar is close to a phased bottom. Looking at the dollar’s ​​future momentum at this point in time, it will not be particularly pessimistic.

4. US stocks have further upside potential, and gold prices are showing signs of peaking and falling

Based on the previous content, we will make a simple outlook on the international financial market.

First, let’s talk about RMB. The index correlation between USD and RMB is very high.

When the U.S. dollar weakens, it means that the U.S. dollar is depreciating against various currencies, and naturally, it will also depreciate against the RMB. In turn, the renminbi will appreciate against the dollar. So in recent months, as the U.S. dollar index has fallen significantly, the yuan has appreciated against the U.S. dollar.

However, at the current weaker dollarIn terms of degree, the appreciation of the renminbi against the dollar is not enough. In fact, when the renminbi appreciates against the U.S. dollar, the renminbi depreciates against many currencies, and other currencies appreciate more against the U.S. dollar. The renminbi is weak against the euro and a basket of currencies.

The very important factor behind the weak appreciation of the renminbi is probably the suppression of the renminbi exchange rate caused by the Sino-US trade war. The trade war has suppressed the exchange rate of the U.S. dollar and the RMB. Therefore, from the perspective of forward exchange rates, the devaluation of the RMB against the US dollar is actually on the rise.

Let’s talk about US stocks again. U.S. stocks have fallen more in recent days, so there are some voices in the market asking whether U.S. stocks have begun to burst like in 2001 when the IT bubble burst and U.S. stocks are at the historical peak.

Judging from the history of the past two decades, when the U.S. peaked, there was an environment of high interest rates. Now, after the outbreak of the epidemic, the Fed’s monetary policy is extremely loose, so it is an ultra-low interest rate environment with zero interest rates; and the Fed has to pass the so-called average inflation target value to maintain loose monetary policy for a long time.

Therefore, the possibility of U.S. stocks hitting a big peak is relatively low.

When U.S. stocks fell in March this year, it was obvious that the liquidity of the U.S. dollar was tightening. A very important indicator to measure the liquidity of the dollar is the TED spread. The higher the spread, the greater the shortage of dollars in the US financial market. In March this year, the US dollar TED spread reached a high level.

In September, although the U.S. stock market fell to a certain extent, the TED spread was very stable, and the liquidity of the U.S. dollar was still abundant.

Based on these and other analyses, the current decline in US stocks is more of an adjustment, and should not be a concept of a historical big top. After the adjustment, U.S. stocks still have room for further upward movement. After all, the U.S. monetary policy is very loose, and the U.S. economy is also undergoing continuous recovery.

Look at the global stock market again. It can be seen that the global stock market trends are actually quite synchronized. The core driving factor here is the US stocks. When US stocks go down, it will naturally bring some downward pressure on A shares.

So the A-share market has been relatively weak in the past two days, and it has nothing to do with the decline in the US stock market.

The transmission path of the influence of U.S. stocks on A-shares is mainly through northbound funds. The A-share market and the Hong Kong market are directly connected. The funds flowing into the A-share market from the Hong Kong market are usually called NorthFunding.

The rate of change of the stock of funds in the north is actually clearly ahead of the A-share stock index. Therefore, when the U.S. stock market is falling, it is natural that the growth rate of northward funds is weakening, and the upward momentum of the A-share market is naturally insufficient.

The financing balance of A shares, that is, domestic funds, and the rate of change of the CSI 300 can be seen very clearly. The change of financing balance lags behind the A-share index.

So, to analyze from the perspective of predicting market trends, northward funds are a better indicator than domestic financing balances. But now, the growth of funds going northward is relatively weak.

Since July, the northward capital has lacked a trend of inflows and has been in a turbulent state. The overall calculations still have a small outflow, which has caused the A-share market to be in a turbulent market.

However, it is believed that with the recovery of the global economy and the recovery of the U.S. economy, including the continued easing of U.S. monetary policy, it is expected that there will be regaining of capital from the north during the year. So we still hold a relatively optimistic view on the future trend of A shares, but there may be some adjustments in the market in the short term.

Lastly talk about gold. Gold can no longer become currency, it can only be understood as a commodity with a kind of hedging properties. The growth rate of the price of gold is determined by commodities, and sometimes its increase will deviate from commodities. This deviation is a manifestation of gold’s hedging properties.

Since the beginning of this year, commodity prices have experienced negative growth overall.

However, the price of gold rose more during the same period, which pulled the gap between gold and commodities to a historical extreme. When it reaches the historical extreme, it is more likely to converge to the mean in the future.

So, our basic view on gold is that the price gap between gold and commodities should have a high probability of converging, and this will be manifested as a peak and fall in the price of gold.

Actually, looking at the data, it can be seen that in the past month, the price of gold has shown signs of peaking and falling. At the same time, the US dollar index basically bottomed out in stages.

In short, for the global economy, the analysis logic is very simple. The global economy is recovering like the Chinese economy. In the process of recovery, the economic performance of the United States in developed countries has been relatively better. Therefore, although the U.S. monetary policy has been looser in the short term, and the outbreak in the U.S. in June and July was worse than in European countries, the U.S. dollar has weakened to a certain extent, but this does not mean that the U.S. dollar will fall sharply all the way. Sexual bottom.

From the perspective of asset allocation, the allocation of risky assets is a better choice than the allocation of safe-haven assets. Risky assets are stocks and commodities, and safe-haven assets are bonds and gold. It is a better choice to allocate stocks in the current environment.

The above is my overall analysis, thank you!


This article is from WeChat official account:Chaos University (ID: hundun-university)< span class = "text-remarks">, author: Xu high (Bank Securities assistant to the president, chief economist)