Weakness In The US Economy Is Weighing On China.

Finally, the United States

For Bernanke's outlook on the US economy in June 7th, I believe that his analysis is reasonable in terms of short-term inflation and the main driving force of commodity prices.

But for the current weak economic data, Bernanke's explanation is questionable.

In his speech, Bernanke attributed the recent weakness in the US economy to short-term factors such as the Japanese earthquake, the US hurricane and gasoline prices.

He described the labor market and real estate in detail.

But Bernanke's analysis may have overlooked some economic logic.

The US economy grew by 3.1% in the fourth quarter of last year. Most economists and the Federal Reserve are optimistic that the US economy will grow by 3.2% this year and 3.6% in the first quarter.

But the actual situation is that the first quarter's annual growth rate is only 1.8%.

Worse still, the situation worsened after entering the second quarter.

From the number of first unemployment declarations, new non-agricultural jobs and new products

Is such a weak performance really as temporary as the White House says? It should not be.

The main reason for the weak economic growth in the United States is the lack of endogenous motivation.

Since the second half of 2009, the US economy has rebounded to a certain extent, driven by loose and extreme fiscal and monetary policies.

However, this rally is not convincing.

From the industrial level, the deleveraging process highlights the serious surplus capacity, and the lack of exciting technology and industrial innovation makes it difficult for the industry to find "animal spirit".

From the financial aspect, one of the sequelae of the financial crisis is that the business community is exceptionally cautious. Even if the profit is quite good, the profits obtained will also be used to repair and improve the balance sheet rather than search for new investment projects or expand production capacity.

Even if the Federal Reserve maintains a zero interest rate policy and purchases large amounts of debt held by banks and businesses, it plays a role in preventing the liquidity crisis rather than starting the wave of credit creation.

Banks and businesses have been fully handheld by the Fed, but on the one hand, it is difficult to find opportunities for investment development. On the other hand, they do not have enough incentive to take risks.

This situation has led to low credit requests from the economies themselves.

One proof is that the risk spills in the United States remain at a very high level.

Risk spilled is the difference between the yield of corporate bonds with different risk levels, which measures investors' compensation for higher risk requirements.

Historically, the risk spilled water averaged 2%, rising to 3% in the recession and falling to 1% at the time of economic prosperity.

In the 2008 financial crisis, the index surged to 6%.

Now, after two years of real economy's recovery, risk spills are still at 3%, which is the average level of economic recession in history.

This shows that economies do not see prosperity prospects nor are they willing to accept the risk of low pricing.

Without the commitment to risk, it is difficult for us industry to create more expansion and employment opportunities. Two indicators can show this.

First, because the credit request is lower than the historical average level, the money supply created by the financial system is only 4.9% now, though it is much higher than 1.4% in early 2010, but still below the historical average of 6%.

With the expansion of its balance sheet to 2 trillion and 600 billion US dollars, the Fed should be frustrated by the inability to rely solely on its own efforts to create enough credit requests and money.

Secondly, it is precisely because the industry is unwilling, or unable to expand production capacity, that the job market performs badly: during the crisis, the United States lost 8 million jobs, and so far it has only recovered 900 thousand, and the unemployment rate is still hovering at 9.1%.

Those companies that are shy of recruiting and cutting costs have achieved very good profits, supporting inventory growth and good performance of the stock market, but are not conducive to the improvement of the job market and the real growth of the economy.

From the current situation, the US economy may continue to lose momentum in the foreseeable future.

The White House's fiscal deficit policy is unsustainable, and the growth rate of treasury bonds may be reduced from 14.7% last year to 6.2% this year.

The Federal Reserve will also end quantitative easing in June.

Without the support of policy, the fatal flaw of the US economy lacking intrinsic growth power will be revealed.

According to our forecast, the US economic growth rate is likely to be below 1.5% this year, about half of economists' expected value.

If economic growth continues to decline, where will Bernanke go?

The trend of the US economy is of great significance to China's economy.

China's economic growth has been falling down since last year. The growth rate of industrial added value dropped from 18.1% in March 2010 to 13.3% in May this year, and the stock began to rise. I think this shows that China's economy has entered a typical stage of deliverability.

In the past four economic cycles, the release stage often corresponds to export growth, which means that a lot of capacity is absorbed by external demand.

If the peripheral economy represented by the United States continues to be weak and the renminbi will appreciate at an expected rate, the proportion of China's excess capacity absorbed by exports will be lower than the historical average.

In fact, China's export growth this year is predicted to be only 15%-20%, far below 31% in 2010.

Without the international market as a drain, the surplus capacity will pour into the domestic market with greater force. The competition will be more intense in the industry, and the efficiency of the enterprises will be greatly affected, especially the export oriented industries and supporting industries along the coast.

From the recent grassroots data, the private enterprises in the coastal areas are in a state of concern.