A Definitive Guide to Chinas Economic Cycle

　　摘要- 中国短周期的回暖已逐步见顶，而长期的经济处于下行趋势– 这是我们发现的中国三年库存投资周期模型的结论。数据和图表都清晰地印证了我们三年的投资库存周期理论，并与许多经济文献中论述的其他国家的Kitchin基钦库存周期基本一致。最近，较高频率的数据，如汽车销售等令人失望，零售增长和消费者价格指数疲弱。这些数据侧面证实了我们的模型结果。

　　我们的模型结论和去年五月份“权威人士”的观点一致，并与市场共识认为中国经济周期“已经见底”，“新的经济周期正在开始”的观点大相径庭。在高库存，高杠杆，和几乎所有资产高估值的大环境里，政策运行的空间日益缩小。随着贫富分化变得越来越根深蒂固，资产泡沫反而已经成为底层群众改变人生的最后一根救命稻草。随着利率被压抑，对更美好生活的渴望正在推动劳动人民群众在一个又一个泡沫里历险折腾。现在，房地产泡沫的风险不容小觑。

　　此外，上游商品再库存周期和中国周期板块相对表现的势能已经在去年五月份见顶。这些周期变量长期以来持续领先中国股票，中美长债收益率，商品和房地产价格，以及美国周期板块的相对表现。

　　中国的三年库存投资周期，上游商品再库存周期和中国周期板块的相对表现的势能见顶的情况表明：1）再通胀交易正在逐渐落幕，全球周期性板块将开始跑输大市; 2）大宗商品、债券收益率的上行势能将衰减; 3）中国的房价周期已经见顶，虽然房地产泡沫似乎暂时坚不可摧。我们3月7日发表了题为《》的报告。最近几个星期以来，上述的这些趋势已经初露端倪。随着防御性轮动在未来几周内逐渐展开，久违了的市场波动性将回归。

　　这是今天的报告《中国经济周期权威指南》的英文版。中文翻译版随后发。

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　　Summary: China’s cyclical upswing is peaking, and its longer-term trend is declining, as our model of 3-year inventory investment cycle suggests. Our 3-year cycle is evident by data and on charts, and is consistent with the Kitchin Inventory Cycle that has been identified in other countries in numerous economic literatures. Recently, higher frequency data, such as disappointing car sales, retail sales growth and a weak CPI, have confirmed our model results anecdotally.

　　Our findings confirm the writings of the “Authoritative Figure” last May, and contradict the popular belief that China’s economic cycle has “bottomed”, and “a new economic cycle is beginning”. With high inventory, high leverage and high valuation in almost all asset classes, the room for policy maneuvers is limited. As the divide between the rich and poor becomes ever more entrenched, asset bubbles have become one last way to change one’s life. With suppressed interest rates, the desire for a better life is driving the hoi polloi to z-turn from one bubble to another. Now, the property bubble is the elephant in the room.

　　Further, the strength in upstream commodity restocking cycle and Chinese cyclical’s relative performance have peaked last May. These cycles have demonstrated a consistent long lead over Chinese stocks, long bond yields in China and the US, commodity and property prices, as well as the US cyclical’s relative performance.

　　The peaking of the 3-year inventory cycle, upstream restocking cycle and Chinese cyclical’s relative performance suggest: 1) the reflation trade is fading soon, and global cyclical will start to underperform; 2) bond yield’s surge will lose momentum; 3) China’s property price cycle has peaked, although the bubble has been proved to be resilient.Indeed, some of these trends have emerged in recent weeks since our last note “” on March 7. As the defensive rotation unfolds in the coming weeks, volatility will return.

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　　China’s 3-Year Inventory Investment Cycle

　　A consistent 3-year inventory investment cycle and a long-term down trend. The current cycle has peaked. Consensus believes that China’s economic cycle has bottomed, yet with scant data support. We believe that consensus has mistaken a small cyclical upswing within China’s 3-year inventory investment cycle for the start of a new cycle. And we demonstrate this cycle comprehensively in Focus Chart 1. We can see that China’s current cyclical upswing indeed started from early 2016, coinciding with the inception of the dramatic surge in commodity prices. The start of the upswing predates Trump's winning of the US election. By now, the strength of the upswing appears to have peaked, and will soon decline, if the cycle we have discovered holds. And the strength in commodity price and bond yields should wane.

　　Further, we note that in the past two decades of which period we have data, the trend of investment growth is down, with lower highs and lower lows in each of the cycle sequentially. This is not difficult to fathom: China’s massive investment scale and increasing leverage are suppressing marginal investment return, and thus limiting the room for further productive investment (Focus Chart 1).