Not the new $4 trillion but the new infrastructure that's bigger

& have spent Can China expect a strong rebound in the summer of 2020? We have noticed that the provinces and regions in the resumption of production in the process of the release of signals, large investment and large projects are expected, so that the new. Four trillion dollar investment plan; It is also starting to be talked about more by the market. One guess is that investment will act like it did in 2008 and 2009. Mr. Key ” Will China's economy force its way back to normal growth in 2020?

Yes, investment matters. Steady investment remains the key to steady growth. But we don't believe there will be another stimulus like 2008. Throughout four trillion &; . Remember that in 2008, China's economy was worth only 30 trillion yuan. Now it is approaching 100 trillion yuan. If China relies on strong investment to drive its economy, how much ammunition will it need and how much credit will it need? We expect that even if China has to increase leverage appropriately for the sake of economic stability, it will be prudent and restrained, mindful of local debt that is still expanding in various ways.

Moreover, in terms of economic structure, 2020 and 2008 can not be compared simply. It is estimated that final consumption expenditure contributed 57.8% to economic growth in 2019, 26.6 percentage points higher than total capital formation and 46.8 percentage points higher than net exports of goods and services. Back in 2008, consumption accounted for only 30% of the economy. There is no doubt that consumption is the essence of today's Chinese economy. Mr. Key ” . That means we need to do more to drive consumption.

That doesn't mean we don't value investment. Indeed, investment is likely to play a bigger role in the epidemic than most expect. However, in the overall economic situation of 2020, the connotation of investment is by no means. Miser & throughout; And other traditional areas can be covered. Industry shutdown and corporate crisis response, let us see an unprecedented scale of the people “ Online & throughout; The test. Whether it's food delivery, online education, health care, new retail, or smart factories, it's hard not to say that if it hadn't been for years of continued investment in new infrastructure like the Internet, the Chinese economy would have had fewer options and Chinese companies would have had more to lose from today's epidemic.

For quite a few businesses, the outbreak will be a watershed. Whether they are in traditional industries or are already part of the Internet economy, they will reshape business processes, business models and organizations. This is a visible reality. Like it or not, adapt or not, the outbreak has driven the entire Chinese economy in extreme ways. Online & throughout; Process. This means huge demand for new infrastructure such as 5G, artificial intelligence, big data, industrial Internet and Internet of things, as well as potential investment in intercity transport, logistics and new municipal infrastructure based on intelligence, connectivity and new energy. From the pure investment volume, they are more new than the market expected. Throughout four trillion &; Much larger.

Given the history of China's Internet boom, it is important to understand that, unlike the state-led model of infrastructure investment in the past, a significant proportion of new infrastructure projects are market-driven, or a combination of the market and the government. Private investment plays an important role in the government's open mind, which allows markets to experiment and make mistakes. Without so much capital chasing after them, China probably would not have a massive and still rapidly expanding Internet economy that maximizes the scale of the Chinese market.

Perhaps it can be understood as the whole of China's economy. Online & throughout; Is to build a new economic ecology based on new infrastructure. In this process, the market and the enterprise will face more unknown, which is not familiar formula and taste, requires bold innovation and constant trial and error. We believe that the market will bear more in such investment, and only the market can do such investment well. What the government needs to do is to step back and create the conditions for the market to do so.

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