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Pan Xiangdong: How to achieve true prosperity
Pan Xiangdong
Chief Economist, New Era Securities
Investment - insights

financial:There have been several economic differences in the A-share market, and the stock market has risen; the economy is good, and the stock market has fallen. The logic is that when the economy is poor, the stock price is usually low and cheaper, so the buying will increase. What do you think of the stock market's gains in the first quarter, is it a short-term rebound or a real bull market?

Pan Xiangdong:In the first quarter, the phenomenon of “cold economy, stock market fever” has actually appeared in history. The stock market is a complex system, not only affected by economic fundamentals, but also affected by various factors such as liquidity, government policies and investor sentiment. influences. Therefore, any round of stock market growth can not be simply attributed, currently affecting the stock market several major factors:

First, liquidity is relatively abundant. As the downward pressure on the economy increases, we expect the easing of monetary policy will continue, so liquidity will be more plentiful. In fact, in January, the RRR cut and the interest rate cut have been opened. Both the RMB credit and the social scale have reached record highs. It is the introduction of CBS to supplement the commercial bank capital, and the private lending rate has also dropped significantly. The monetary policy has entered a substantial easing. As far as the whole society is concerned, sufficient liquidity will help push up asset prices.

Second, the status of the capital market has been unprecedentedly improved. The first is to promote the establishment of a science and technology board on the Shanghai Stock Exchange and the pilot registration system will be launched as soon as possible. It is expected to bring unprecedented investment opportunities to the market. The second is to guide more medium and long-term funds to enter, medium and long-term funds, major institutional investors, including insurance funds, overseas funds and pensions. The third is to improve the trading system, and the stock index futures, options and other systems will be further improved. In particular, the "Guiding Opinions on Promoting the Healthy Development of Small and Medium-sized Enterprises" issued by the Central Office and the State Council require that the progress of the initial public offering of small and medium-sized enterprises be accelerated, and the listing of small and medium-sized enterprises with prominent and standardized operations for the main industry should be facilitated. This increase capital market construction and direct financing will help guide more funds into the capital market and resolve the financing problems of SMEs. The issue of equity pledge of private enterprises will also be alleviated. Supporting additional issuance and debt financing will also accelerate, and the stock market will rise. The wealth effect of residents and the stabilization of consumer expectations.

The third is the marginal relaxation of financial supervision. In fact, in the first half of last year, China's financial system was still de-leveraging, and liquidity showed relatively tightness. In the second half of the year, marginal improvement occurred, and corresponding financial regulatory policies also showed substantial changes. Through development to solve some of the problems facing financial development, it is expected that there will be a gradual consensus in the future.

Fourth, the economy is basically facing the weakening of investor sentiment. In the fourth quarter of last year, when the stock market fell, investors had already had the expectation of further economic decline. As long as there is no further deterioration, the impact on the stock market will be weakened, that is, the expected difference is not bad. With the relatively loose monetary policy, the easing of Sino-US trade frictions, and the state's emphasis on small and medium-sized enterprises and private enterprises, all this has aroused the enthusiasm of investors to be extremely suppressed.

As for whether there will be a big bull market in the future, there is really no answer. It depends on whether our macroeconomic policies and reforms lead the economy to a new round of growth cycle. If the future economy can reverse and the new cycle starts, then this round of bull market will be the big bull we are looking forward to and will last for a long time. However, if the economic growth rate cannot form a new round of growth in the future, the driving force for the future market will be exhausted due to lack of performance support. Any irrational prosperity will provide you with only trading opportunities.

financial:Some scholars believe that Sino-US trade negotiations are the biggest dividend for opening up reforms. They are challenges and opportunities. Can we learn from the trade negotiations between Japan and the United States in the last century? Which industries are likely to resist the invasion of American products? In addition, which industries are likely to grow a small number of small businesses?

Pan Xiangdong:Drawing on the trade negotiations between Japan and the United States in the last century, we will find that this round of Sino-US trade negotiations has similarities with it: First, China and Japan have huge trade surpluses with the United States; second, China and Japan have high dependence on trade with the United States. Trade friction is more passive; third, both China and Japan pose challenges to the US economy. China can learn from Japan-US trade negotiations in the last century.

At present, China and the United States have made substantial progress on specific issues concerning technology transfer, intellectual property protection, non-tariff barriers, services, agriculture, and exchange rates. Sino-US trade negotiations will further expand China’s opening up to the outside world. Promote reform.

I believe that emerging industries with independent intellectual property rights will resist the invasion of American products and grow rapidly. In particular, some industries have a small share of exports to the United States and are not affected by this round of shocks. In the future, in the fields of biomedicine, new energy and new materials, industrial robots, next-generation information technology, new energy vehicles and high-speed rail equipment, there will be strong resistance to the invasion of American products.

Benefit from the creation of a number of small businesses in the fields of computer, communication and other electronic equipment manufacturing, special equipment manufacturing, software and information technology services, pharmaceutical manufacturing, Internet and related services, and become China's future economy. The direction of transformation and high-quality economic development.

Since the reform and opening up more than 40 years ago, the opening of dividends has been one of the reasons for the rapid growth of China's economy in the past. The opening up has an important role in promoting the development of China and the world economy, and is conducive to the long-term development of China's economy and the improvement of residents' welfare. Increasing openness will inevitably bring challenges to local industries. However, due to the “squid effect”, it also drives domestic product upgrades to better match the needs of residents. Opening up and a fair and equitable market environment are more beneficial in the long run. China's economic and industrial development.

financial:What do you think of the US economic trend? Many people think that they have begun to enter the recession, especially before everyone has unanimously reminded the interest rate to hang up the risk of US stocks, but there are also voices that the leverage ratio of the entire US society is still very healthy, and the US stocks have hit a new high this year.

Pan Xiangdong:With the weakening of the positive fiscal policy effect and the deterioration of the world economic environment, the US economy will converge from overheating to equilibrium, and the real economy will grow or decline. First, with the deepening of the game between the major economies in the world, the road to re-industrialization in the United States is not flat. There is uncertainty in whether or not the long-term supply capacity can be formed. At the same time, the tax reduction effect is diminishing, and the fiscal deficit will be affected in the future. The challenge. After the subprime mortgage crisis, the government sector's leverage ratio continued to rise, from 58.8% at the beginning of 2008 to 97.6% at the end of September 2011, and has remained above 97% since then. In the next 10 years, the total deficit will reach 7.1 trillion US dollars, and the US national debt will increase to nearly 30 trillion US dollars. With the Democratic Party in control of the House of Representatives and the high fiscal deficit, after 2019, US government spending is limited or the economy may be weakened.

Secondly, from the perspective of the financial cycle, the US financial cycle is in a prosperous stage. The US stock market has experienced a 10-year upswing cycle. At present, the US monetary policy is still in an abnormal state, and the leverage ratios of the US government and enterprises are constantly creating. A new high in history. The highest value before the US non-financial corporate leverage ratio subprime mortgage crisis was 72.5% at the end of 2008. US companies began to leverage from the third quarter of 2012, reaching 73.9% at the end of the third quarter of 2018. Once the financial market has undergone a major adjustment, the Fed’s monetary policy operation space will be constrained, and there is a possibility of triggering a credit crisis. Once a credit crisis occurs, the economic recession, and even the depression, will follow.

Although the US economic growth rate may decline, the lack of a rigorous theoretical basis for judging the economic recession from the downside of US Treasury yields. Indeed, historical experience shows that US bond yields are highly correlated with the US economic recession, and the rate of inversion is often earlier than the economic recession. However, the mechanism of US debt yields upside down leading the economic recession is still unclear. Some people also believe that the inversion does not necessarily mean a recession. There is no causal relationship between the two. It may be that third-party factors lead to the same trend. . The lower term premium level in recent years is partly due to the purchase of US debt by the Federal Reserve and overseas funds in the early stage.

financial:The asset-liability ratio of industrial enterprises at the end of 2018 is one percentage point higher than that at the end of 2017, which means that the leverage ratio after de-leveraging in 2018 is higher. How do you think 2019 should reduce the debt ratio?

Pan Xiangdong:The asset-liability ratio of industrial enterprises at the end of 2018 is one percentage point higher than that at the end of 2017. This statement should be compared with the new caliber of 2018 and the old caliber of 2017. In fact, under comparable caliber, according to the National Bureau of Statistics announced on February 28 The "Statistical Bulletin on National Economic and Social Development in 2018", the asset-liability ratio of industrial enterprises above designated size at the end of 2018 was 56.5%, down 0.5 percentage points from the end of the previous year.

China's overall macro leverage ratio has gradually stabilized. The focus of reducing debt ratio in 2019 is to stabilize leverage and structural de-leverage: First, to prevent deflation. If industrial deflation in 2019 leads to a decline in corporate income and asset shrinkage, this will be the debt ratio. A major threat, so we must increase counter-cyclical adjustments, expand demand, and prevent deflation. Second, relying on the capital market, promoting the listing of small and medium-sized enterprises, promoting debt-to-equity swaps, revitalizing bank assets, reducing the asset-liability ratio and leverage ratio of non-financial enterprises, and enhancing the vitality of enterprises. Third, continue to reduce taxes and reduce fees to reduce the burden on enterprises, so that the company's balance sheet can be improved, which is conducive to enhancing the competitiveness of enterprises. The fourth is to strengthen the management of implicit debts of local governments. Promote local government debt to improve the transparency of debt risk, establish a sufficient information disclosure system, and form a system of risk warning and information disclosure in accordance with the relevant indicators of leverage ratio, debt service ratio, overdue debt ratio and other regional economic and financial development. Ensure that local governments avoid defaulting on debts and debts on time, and enhance the ability of local governments to prevent and resolve hidden debt risks.

In short, deleveraging is a painful process, so the impact on the macro economy should be minimized at the operational level, that is, avoiding rush. It is necessary to see that the upward trend of total liabilities has been curbed, while avoiding the rapid decline of economic growth and the emergence of financial risks. This requires us to gradually control the growth of total debt growth, while maintaining the steady growth of macroeconomic growth. While winning time, we will implement a series of reforms that stimulate potential growth, and gradually develop a new round of economic growth cycle. By diluting the ratio of total liabilities by making large total assets, the overall debt level is reduced.


financial:How many years have you been doing macro research?

Pan Xiangdong:Since entering the capital market in January 2008, it has been engaged in macro research for more than 12 years, but has been studying economic growth since the graduate school.

financial:What is your definition of macro research?

Pan Xiangdong:Analyze macroeconomic phenomena, find the mechanism behind it, anticipate the economic situation, and provide investment advice to investors.

financial:Why did you choose to do macro research?

Pan Xiangdong:Studying economic growth is the ultimate goal pursued by economic researchers. If your research results can increase global economic growth by 0.1%, you can solve the problem of how many poor people live, eat, and live! Lucas said: "Once a person starts thinking about economic growth, he will not consider any other issues."

financial:What do you think is the most important thing to do in macro research?

Pan Xiangdong:interest.

financial:How do you expand your thinking by doing macro research?

Pan Xiangdong:Read historical, psychological, and physical writings and communicate with people across borders.

financial:What is your research maxim?

Pan Xiangdong:Enjoy happiness in research. More enjoyment of the research process and the verification of the results of the research, the deviation of the results appearing or the emergence of research flaws, generally laughed to "forgive" themselves. Since human cognition always has defects, our understanding of economic and social phenomena will always be insufficient, and our research results cannot be perfect. For this reason, I never criticize other people, even if my assistants' mistakes in research results, even the so-called "low-level mistakes", criticizing others is actually "fifty steps to laugh."

financial:What is the most fulfilling of your work experience?

Pan Xiangdong:Judging the trajectory of future economic operations, the actual results are consistent with their own judgments.

financial:What are the biggest difficulties you have encountered and how to solve them?

Pan Xiangdong:The original career choice. Is it a pragmatic "market research" or a "teaching study" that is purely theoretical. When I graduated, I exchanged ideas with the tutor about staying in school. The tutor was faint and smiled at me. I remembered that if I felt that my level was good, I should go to the battlefield of the investment bank and close the door to write the military book. It is not the same as reading the military books written on the battlefield." Inspired by this sentence, I embarked on the road of chief economist in market pragmatic research.

financial:What do you think your career will be ten years later?

Pan Xiangdong:Still an economic researcher, it is best to raise the pragmatic sentiment for many years to the theoretical level.

financial:How do you think the analyst industry will develop in the future?

Pan Xiangdong:The low-end analysis is expected to be replaced by artificial intelligence, but in the mid-to-high end analysis, with the deep development of China's capital market, demand will further expand.


financial:If you recommend a book, or a movie, which one would you recommend?

Pan Xiangdong:Jin Yong's martial arts novels, the whole set like to watch. But one of the most influential books on my growth was when I saw Balzac's "Disillusionment" in my junior high school. I still remember it now, and always remind myself not to be trapped by the bustling world and forget the original intention.

financial:What is your biggest hobby now?

Pan Xiangdong:Read history books, watch movies and run.

financial:What is your belief in life that you have always insisted on?

Pan Xiangdong:Contentment is always happy. Life is not good enough, so be contented.

financial:What impact does macro research have on your worldview?

Pan Xiangdong:I have found that macroeconomics is a nonlinear dynamic system. To explain a phenomenon, we need to understand it from more perspectives. Not only the macro economy, but all things are complex, so I will consider the perception, understanding and judgment of anything from multiple angles.

financial:What are you most proud of?

Pan Xiangdong:In addition to working in a busy investment bank, I wrote "Real Prosperity" and felt that my child would grow up after reading this book and should benefit.

financial:What are you most worried about right now?

Pan Xiangdong:When will the Chinese economy usher in a new round of growth cycle?

financial:What is your most grateful?

Pan Xiangdong:Thanks to Professor Liao Jinzhong's teachings. Professor Liao took me to do economic research, taught me to be honest, and let me know that I really enjoy economic research.

financial:What kind of person do you most want to be?

Pan Xiangdong:Free to do economic research, children from childhood to large can be as free as my friends.

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