中国 “反内卷” 风险向房地产领域蔓延-China‘s anti-involution risks heading the housing way

Summary of J.P. Morgan's Research on China's Economic Situation Industry Overview - The report focuses on the Chinese economy, particularly the housing market and the implications of anti-involution policies on various sectors, including automobiles, solar cells, batteries, chemicals, and electric vehicles (EVs) [2][16][30]. Key Points and Arguments 1. Economic Structure: China's economy is characterized by a decentralized resource allocation system, contrasting with the Soviet command economy. The Communist Party of China (CPC) sets broad economic priorities, while local agencies implement policies [3][4]. 2. Overcapacity Issues: Current overcapacity is more systemic than in previous years, affecting traditional sectors like coal, steel, and cement, as well as new sectors like EVs and e-commerce. Approximately 26% of total industrial production is impacted by anti-involution policies [8][11]. 3. Excess Capacity and Price Competition: Intense price competition, termed "involution," is prevalent across various sectors, leading to significant profit margin pressures. The auto industry has seen payment delays to suppliers extend to 182 days [12][18]. 4. Impact of Tax System: The Value Added Tax (VAT) system incentivizes local governments to prioritize production over consumption, contributing to excess capacity. Shifting VAT collection from production to sales could help address this issue [7][40]. 5. Real Estate Market Challenges: The housing market continues to struggle with high inventories and declining transactions. Major cities have seen new home prices drop by only 11%, while new home starts have contracted by 77% since 2021 [37][38]. 6. Government Response: The government has introduced measures to control production levels and stabilize prices, particularly in the auto sector. However, the effectiveness of these measures is questioned due to the slow pace of structural reforms [32][35]. 7. Future Economic Growth: The transition from a real estate-driven economy to a new economy focused on high-value manufacturing faces significant challenges. The new economy's contribution to GDP growth remains limited, and excess capacity could hinder overall economic expansion [29][31]. Additional Important Insights - Structural Reforms: The ongoing structural transformation initiated in 2015 has not progressed as expected, with the new economy not expanding quickly enough to offset declines in the real estate sector [22][30]. - Consumer Demand Support: While there have been efforts to support consumer demand, the scale of these initiatives (0.4% of GDP) is insufficient to significantly impact deflation [36]. - Long-term Risks: If the anti-involution policies overly focus on preventing price cuts without addressing structural issues, it may lead to prolonged adjustments in inventories and deeper deflation [38][39]. This summary encapsulates the critical insights from the J.P. Morgan report on China's economic landscape, highlighting the complexities and challenges faced by various sectors amid ongoing policy shifts.