The Situation In China'S Manufacturing Industry Is Gradually Improving The "Loosening" Of Monetary Policy.

The first half of the economy achieved a gratifying 6.7% growth rate, laying a solid foundation for the second half of the economy.

The price index also shows that China's manufacturing sector is gradually improving and the overall economy is stabilizing.

In 2016, China's economy has entered the second half.

The latest statistics released by the National Bureau of statistics show that China's July

An increase of 1.8% over the same period, a three month low in the past three months, a six month low of 1.7%, a seven consecutive month narrowing, and a 0.2% increase in the ring.

We can see that the first half of the economy achieved a gratifying 6.7% growth rate, laying a solid foundation for the second half of the economy.

The price index also shows that China's manufacturing sector is gradually improving and the overall economy is stabilizing.

However, there is a big difference between the macro data in the pition period and the micro perception of the industry and enterprises. The industry downturn is spreading, and private investment growth is weak.

It is worth mentioning that although the export growth in July (growth of 2.9%), mainly benefited from the devaluation of the RMB, but the harsh environment of the international economic situation makes the outlook for external demand in the second half of the year still unoptimistic.

It is worth noting that China's imports (down 5.7%) deteriorated more than expected in July.

Earlier, the market predicted that the price of raw materials in the international commodity industry would rise or push China's import growth to improve. At the same time, with the landing of a large number of infrastructure projects, domestic demand will be improved in July, effectively boosting imports.

But the continued decline in imports has undoubtedly increased the concerns of the market.

In addition, in the first 7 months, state-owned enterprises imported and exported 2 trillion and 50 billion yuan, down 12%, accounting for 15.5% of China's total foreign trade.

Among them, exports were 789 billion 870 million yuan, down 6.8%, accounting for 10.4% of total exports; imports 1 trillion and 260 billion yuan, down 14.9%, accounting for 22.5% of the total value of imports.

The competitiveness and debt level of state-owned enterprises continue to worke the concerns of the outside world.

The foreign trade situation is broadly in line with the current trend of the whole manufacturing industry.

In July, the PMI of manufacturing industry was 49.9%, falling into the economic contraction zone.

Judging from the sub item indicators, the most important index to measure the prosperity degree of Enterprises -- production index in July was 52.1%, down 0.4 percentage points from last month, and the new order index that inspects the potential of enterprises is 50.4%, which is 0.1 percentage points lower than that of last month. This shows that the vitality and market demand of enterprises are obviously decreasing.

According to the size of enterprises, the PMI of small and medium enterprises is 48.9% and 46.9% respectively, down 0.2 and 0.5 percentage points from last month, down two consecutive months.

This can be explained from one side. The acceleration of China's commercial system reform, the continuous increase in the number of business registration, and the reduction in the operating rate of enterprises.

The market's expected deviation in economic performance is also shown in the flat yield curve of treasury bonds.

According to the data of the central debt register, the Ministry of Finance held the tender of the Treasury interest bearing (seventeen phase) treasury bonds in August 3rd, the actual circulation amount was 35 billion 810 million yuan, and the tender coupon rate was 2.74%.

Data show that 2.74% of the successful rate has reached a new low in the past 14 years - in 2002, it issued four phase 10 years, the coupon interest rate was between 2.54% and 2.7%.

This round of interest rate downgrades began in 2014, and the 10 year treasury bond tendering interest rate dropped from about 4% to about 2.9%.

The 10 year treasury bonds issued in August 3rd were 3 BP lower than those of the same period in the same period.

The yield curve shows that the yield curve has been flat this year, that is, the yield spreads between long term and short period bonds are narrowing.

The August 3rd data show that the yield of treasury bonds in 3 months is 2.1%, and the yields of 1 years, 3 years, 5 years, 7 years and 10 years are 2.22%, 2.43%, 2.58%, 2.77%, and 2.77%, respectively.

Judging from the current market liquidity, there is no shortage of liquidity in the domestic market.

As of June 2016, China's M1 grew by 24.6% year-on-year, 0.9 percentage points higher than last month, and M2 grew 11.8% year-on-year, unchanged from last month.

The gap between the growth rate of M1 and M2 has gradually expanded, and there has been an obvious "scissors gap" between the two.

Under the current downward pressure on the economy and low inflation, the trend of monetary policy has attracted the attention of all parties.

On 2016, when the forum of the branch of the people's Bank of China held a focus on its work in the second half of the year, while stressing the continued implementation of a prudent monetary policy, it pointed out that we should maintain flexibility and moderation, timely adjust the fine tune, and enhance the pertinence and effectiveness of the policy.

Last Friday, the central bank issued the two quarter monetary policy implementation report, and repeatedly stressed the need to stabilize market expectations with stable macroeconomic policies.

The report points out that we will comprehensively use monetary policy tools, optimize policy mix, maintain moderate liquidity, and achieve a reasonable growth of monetary credit and social financing scale. At the same time, we should flexibly apply various monetary policy tools according to the changes of internal and external economic and financial situation, and maintain the moderate and moderate monetary and financial environment from two aspects of volume and price.

We should pay attention to risks in the real economy, especially in the industries with excess capacity, real estate and local government debt.

Some analysts say that the improvement of consumption in the future will offset the negative impact of the decline of China's traditional economic growth, which will be the focus of the market.

In this regard, China's economic policy still needs to be worked out in the second half of this year.

But do not expect the central bank to "drain water".

In terms of monetary policy, the central bank has made clear that it is necessary to curb bubbles and not frequently drop standards.

The market thinks that the central bank's moderately moderate monetary policy will be tight and tight in the future.

When the downward pressure on the economy continues, it does not support the factors of economic recovery by cutting interest rates and lowering the quota. First, under the background of global capital surplus and liquidity easing, the effectiveness of loose monetary policy is decreasing.

In the domestic market, under the global negative interest rate environment, the policy of lowering interest rates and lowering the quota can not effectively reverse the downward pressure on China's economy, but will further stimulate China's capital bubble.

Second, China's interest rate cuts and drop in rates may have a chain effect in the international capital market, triggering more international investors to worry about China's economic prospects and the stability of the renminbi.

This may exacerbate capital outflow and further pressure on the RMB exchange rate.

In June of this year,

The balance is 44 trillion and 400 billion yuan, of which only about 6 trillion and 300 billion yuan is M0.

This means that China's enterprises have increased their demand capital holdings substantially.

Chinese enterprises have been trying to hoard money for an unprecedented time, showing that the "liquidity trap" phenomenon has emerged.

Under such circumstances, the Central Bank of China has no need to reduce interest rates in the near future.

China's macro policy will adhere to the "three down, one subsidy and one subsidy", and increase the structural reform of supply side. As long as the risk of significant stall does not appear in economic growth, the policy will remain stable, and more active fiscal policy should be used instead of monetary policy.

As experts say, in pition, we must maintain a certain rate of growth and expand.

To maintain certain investment growth is indispensable.

However, it is necessary to note that in the pition period, it is easy to fall into the old track when implementing the realistic pressure of maintaining short-term growth.

Of course, this is not to deny that the expansion of aggregate demand requires more investment, but that if we rely on government investment guidance alone, we will easily return to the old mode.

If we focus solely on investment and growth, this will affect the pformation and adjustment under the new normal.

Therefore, maintaining a tight balance is the goal that macro policy should achieve.

Emphasizing that investment should pay attention to two balances at present: first, the balance between investment in government and state-owned enterprises and private investment.

The two is the balance between investment and consumption.

At present,

The biggest risk is the real estate bubble.

The financial attribute of China's real estate has greatly exceeded the commodity attribute. The longer the real estate price stays high, the lower the ability of economic activities to create effective credit and wealth, the more serious the real estate squeeze on the real economy, including manufacturing.

It is worth noting that despite the downward pressure on the domestic economy, the "land kings" in some big cities are constantly.

Under the current market environment and policy guidance, the result of frequent "land king" is boosting, adding leverage and increasing inventory, which undoubtedly gives the market a strong wrong signal.

The old bubble has not yet been squeezed out, and the new bubble will accumulate. Eventually, it will break up when the policy is tightened, which will lead to risks in the real estate market, the financial system and even the whole economy.

If we want to prevent further deterioration of the trap of corporate liquidity and private investment and curb the erosion of the financial sector and real estate industry to the real economy, we must prevent further capital entering the real estate market.

It is foreseeable that more policies will be introduced in the future to prevent the rapid rise of property prices in second tier cities and to prevent possible property market crash.

We will encourage all localities to strengthen the effectiveness of "deleveraging and inventory" work in accordance with the principle of "one ground, one policy" and comprehensively using land policies, fiscal policies and financial policies.