Philips Securities 2013 China Macroeconomic Semiannual Report 130726

7/27/2019 Philips Securities 2013 China Macroeconomic Semiannual Report 130726

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2013 China Macroeconomic Semiannual ReportEconomic growth slowed down with the critical period of restructuring

Phillip Securities (Hong Kong) LtdBloomberg Reuters POEMS

Industry: Macro Economy

Phillip Securities Research

2013-7-26

The year-on-year growth rates of GDP wentdown quarter by quarter in 1H2013Rating: Neutral

Summary Overall, Chinas economic growth slowed down

obviously. According to the data of NBSC, as at the endof 2Q2013, GDP increased by 7.6% y-y to RMB24.8trillion. The growth rate was lower than that of past fewyears, but still maintained on quite stable level based on

the quarter-on-quarter growth rate, which increased by0.1ppts compared with 1Q2103;

The foreign reserve continued to increase by 4.17% y-yto US$3.44 trillion accumulatively in June 2013, in linewith our expectation. Now the scale of Chinas reserveranks No.1 in the world, the consistent growth of theamount represents there are more capital flowing intoChina, which will bring a larger inflationary pressure toChina and more difficulties to manage the growth ofloans;

CPI increased continually in 1H2013, by the end ofJune 2013, Chinas CPI increased by 2.7% y-y, of whichmeat index increased by 4.8% y-y while the egg indexonly rose 0.3% y-y, down largely 11ppts compared withMay. According to the historical data, the price volatilityof eggs and relative products has obvious periodicity,and the price would rebound after the large decrease,meanwhile the CPI would go up. It represents a largerinflationary pressure for China in 2H2013;

By the end of June 2013, 1-year deposit and lendinginterest rates of Chinese financial institutionsmaintained on 3% and 6% respectively. China still takesthe easing monetary policies according to currentinternal and external macroeconomic environment. ThePBOC may start to increase the interest rate if Chinasinflationary pressures increased obviously in 2H2013,meet our expectation;

According to the money supply, total amount decreasedmonth by month in 1H2012. However, the growth rate ofM1 increased largely y-y while M2s growth maintainedstable relatively. According to the data of the PBOC, asat the end of June 2013, Chinas M1 and M2 increasedby 9.06% and 14.00% y-y respectively, down 2.3 and1.8ppts respectively compared with that of May;

The FDI went up in 1H2013 due to the rebound ofoversea markets in 2012, especially in June, whichshows capital inflow in China. By the end of June 2013,Chinas accumulated FDI amounted to US$61.984billion, increased by 4.90% y-y, which was -2.37% in thesame period of last year. Newly-added monthly FDIaccorded to US$1.438 billion, up sharply 20.07% y-y;

Research AnalystXingyu [email protected]+86 21 5169 9400 105


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2013 China Macroeconomic Semiannual ReportPhillip Securities (Hong Kong) Research2013-7-26

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Deposit of residents decreased obviously in 1H2013while RMB loans of financial institutions dropped as well.By the end of June 2013, RMB loans of Chinas financialinstitutions reached RMB68.08 trillion with the y-ygrowth rate of 14.15%, as 16.03% in 1H2012. Newly-

added monthly loans decreased by 6.45% y-y in June; Chinas investment still maintained stable in general,

and the investment increased obviously in 1H2013 dueto the rebound of markets, in line with our expectation.By the end of 1H2013, Chinas investment in fixedassets in urban areas achieved to RMB18.13 trillion,increased by 20.1% y-y of which the investment inproperty development raised largely 20.3% y-y toRMB3.68 trillion;

In 1H2013 the demand of domestic consumption wasstable, representing the consumers attitude is neutral,but the y-y growth rate of total retail has increasedmonth by month since March. By the end of June, retail

sales of consumer goods reached to RMB11.08 trillion,increased by 12.7% y-y. Monthly retail sales increasedby 13.3% y-y to RMB1.88 trillion;

In 1H2013, the growth of Chinas trading slowed down,especially in 2Q. By the end of June, Chinas monthlyimports and exports decreased by 0.7% and 3.1% y-y toUS$147.19 and 174.32 billion respectively. Monthlytrade surplus recorded to US$27.13 billion, down14.47% y-y largely. The total amount of import andexport achieved to US$2 trillion, up 8.6% y-y;

Currently Chinas economic scale maintains stablegrowth and ranks the antecedence in the world, but stillfaces serious challenges according to the quality of

economy, especially under the background of the slow-down of economic growth. The main emphasis of thework for Chinese central government are trying tomaintain the overall growth level, control the inflationarypressure, especially control the growth of loans andprevent the systematic risks from shadow bank.

Fig 1. Quarterly growth rate of Chinas GDP by the end of 2Q2013

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4

68

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14

16

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Growth rate (%)yoy Quarterly GDP of China

Source: NBSC, PSR

Fig. 2. Monitoring signals of macroeconomic climate index by the endof May 2013

Source: NBSC

Fig. 3. Foreign exchange reserve of China by the end of June 2013

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

0

500

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4000

Jan/06

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Sep/12

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Growth rate yoyReserves (US$ Bil) Foreign exchan ge reserves (Left)

Growth rate yoy (Right)

Source: PBOC, PSR

Fig. 4. Growth of Chinas CPI by the end of June 2013

-30

-20

-10

0

10

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60

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Growth rate of CPI yoy Total Food

Meat Eggs

Source: NBSC, PSR

Fig. 5. Chinas basic interest rates in July 2013

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1

2

3

4

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6

7

8

Jul/04

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Jan/13

Jul/13

Rate (%) 1-year deposit rate

1-year lending rate

Source: PBOC, Bloomberg, PSR


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Fig. 6. Chinas money supply by the end of June 2013

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Feb/02

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Feb/12

Feb/13

Growth rate (%)yo y

M1 M2

Source: PBOC, Bloomberg, PSR

Fig. 7. Chinas FDI by the end of June 2013

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2

4

6

8

10

12

14

16

-80.00

-60.00

-40.00

-20.00

0.00

20.00

40.00

60.00

80.00100.00

120.00

140.00

Jan/07

May/07

Sep/07

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Value (US$ Bil)Growth rate yoy Monthly FDI (Right)

Growth of ccumulative FDI (Left)

Growth of Monthly FDI (Left)

Source: MOFCOM, PSR

Fig. 8. RMB loans and personal saving deposits of China by the end ofJune 2013

-500

0

500

1000

1500

2000

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

Jan-06

Jun-06

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Quantity (RMB Bil)Growth rate yoy Monthly newly added RMB loans (Right)Deposits of Residents YOY (Left)

Total RMB loans YOY (Left)

Source: PBOC, PSR

Fig. 9. PMI and New Order Index in China by the end of June 2013

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60

70

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IndexPMI New order index

Source: NBSC, PSR

Fig. 10. Investments in fixed assets in urban areas and propertydevelopment in China by the end of June 2013

0

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1000.000

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b/06

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Growth rate yoyRMB Bil Monthly fixed assets in urban area (Left)

Monthly investment in property development (Left)

Growth of accumulaitve investment in fixed assets in urban area (Right)

Growth of accu mulaitve investment in property development (Right)

Source: NBSC, PSR

Fig. 11. Retail sales of consumer goods in China by the end of June2013

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Growth rate yoyRMB Bil Monthly retail sales of consumption goods (Left)

Monthly retail sales growth of consumption goods (Right)

Source: NBSC, PSR

Fig. 12. Monthly imports and exports of China by the end of June 2013

-40

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US$ BilGrowth rate yoy

(%)

Balance of foreign trade monthly(Right)

Import monthly (Left)

Export monthly (Left)

Source: China Customs, PSR


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Philips Securities 2013 China Macroeconomic Semiannual Report 130726