From the local "two sessions" in 2015 to the "two sessions" in the country, "Belt and Road" has been repeatedly mentioned as a hot word. The “One Belt, One Road†strategy proposed by Xi will cover 4.4 billion people in 26 countries and regions, accounting for 63% of the world; it will generate 21 trillion US dollars of economic benefits, accounting for 29% of the world. The world's longest economic corridor, the largest market, will generate huge investment opportunities, and the “Belt and Road†will change China.
This change is not only long-term, but also short-term. “One Belt and One Road†is likely to become the biggest uncertain factor affecting China's economic growth and market performance in 2015. China's passive austerity is likely to be reversed in the second half of the year and become the continuation of the first half of the year. Important support.
According to our statistics, the scale of the proposed “One Belt, One Road†infrastructure under construction has reached 1.04 trillion yuan, and the scale of cross-border investment is about 52.4 billion US dollars. It is expected to affect the newly added investment of 400 billion yuan in 2015, pulling GDP 0.25. Percentage points. (Note: In 2015, the local government work report covered 114 items of “One Belt, One Road†infrastructure investment projects, and public information has disclosed nearly 20 major projects.)
(1) The local enthusiasm is overwhelming, the domestic “investment scale†has exceeded more than one trillion. According to the statistics compiled by the public news, the total scale of the “One Belt, One Road†infrastructure investment project in the “two sessions†government work report of the provinces in 2015 has reached 10,400. Billion, mainly including Chongqing, Sichuan, Ningxia, Jiangsu, Hainan, Yunnan, Shaanxi, Guangxi, Zhejiang, Inner Mongolia, Xinjiang, Gansu, Qinghai, Guangdong, Fujian and other provinces and cities.
From the perspective of project distribution, it is mainly based on “iron public aircraftâ€, accounting for 68.8% of all investment. Among them, the railway investment is nearly 500 billion yuan, the highway investment is 123.5 billion, and the airport construction investment is 116.7 billion. In addition, the port water investment amount is relatively large, exceeding 170 billion yuan.
From the perspective of investment entities, mainly government investment, social capital participation rate is still low. Among the identifiable items, the proportion of government and government platform companies as investment entities reached 27.9%, and the cooperation between government and enterprises reached 16.3%, but most of them were joint investment projects between local governments and China Railway Corporation. Enterprise investment accounted for 15.9%, but large state-owned enterprises such as railway headquarters, power grid and coal accounted for the vast majority.
(II) The overseas investment has been accelerated, and the “One Belt, One Road†overseas investment project promoted by the central level with a short-term investment of over US$50 billion is also rapidly advancing. According to the statistics of more than 20 overseas projects collected, the total planned and under construction investment reached 52.47 billion US dollars, mainly concentrated in Central Asia, South Asia and other regions. The investment direction is more energy, railway, highway and other infrastructure. Mainly. Among them, railway investment including Zhonglao and Zhongtai reached US$19.4 billion, followed by investment in power grids and pipelines exceeding US$10 billion. According to the investment cycle estimates of each project, only the information collected in 2015, the “One Belt, One Road†overseas investment scale is close to 17 billion US dollars.
(3) The "money bag" is uncertain, and the "One Belt, One Road" still has risks. Given the current tight government finances, the investment enthusiasm of the "One Belt, One Road" construction of the central and local governments can be determined, depending on whether the money bag can be effectively expanded. ". Under the premise of not engaging in strong stimulus and large water release, we believe that the source of funds for the “Belt and Road†investment may depend on three channels: debt swap, PPP and AIIB.
1. “Debt replacement†revitalizes the stock, but it is difficult to squeeze out the incremental contribution “One Belt and One Roadâ€
Under the pressure of debt repayment and financial pressure, docking government debt and opening the money bag boldly is the method of revitalizing the stock. Recently, the Ministry of Finance disclosed the basic situation of local stock debt swaps. The Ministry of Finance has issued 1 trillion yuan of local government bond quotas to replace the stock debts, instead of the 3 trillion scale of market rumors.
We predict that in a short period of time, local debt replacement will be the main channel for the diversion of fiscal stock funds, but in 2015, only 1 trillion debt swaps are still insufficient to support the incremental demand of “One Belt, One Road†exceeding one trillion.
This is because, according to the results of the National Auditing Audit of the National Audit Office of the Audit Commission in June 2013, the government’s debts with repayment obligations, the government’s debts with guarantee obligations, and the government’s debts that may be responsible for certain relief obligations in 2015 are about 1.8. The trillion, that is, the replacement scale only covers more than half of the debts due this year. Moreover, this does not consider: 1) Platform debt not included in the Audit Commission. According to the data of the Trust Industry Association, at the end of June 2013, the trust financing balance of the basic industry was about 2.4 trillion, but the Audit Commission’s caliber was only 1.4 trillion; at the end of June 2013, the balance of the city’s investment deposit was about 6.9 trillion. However, the Audit Commission’s caliber is only 2.3 trillion. 2) The short-term local debts added to the second half of 2013 have not been considered. 3) Failure to consider local government debt due after 2015. It can be seen that 1 trillion yuan has been used to replace debt maturity, which is already difficult. Let alone talk about the incremental demand of “One Belt, One Road†exceeding one trillion.
2, PPP activation increment, but the trillion project signing rate only accounts for 1/8
Our statistics show that before and after the publication of Circular No. 43, local governments in 34 provinces and municipalities launched a total of about 1.6 trillion PPP projects. But so far, the actual contract is about 210 billion, accounting for only 1/8 of the total. This is related to the long time lag of investment in PPP projects, and also to the fact that the current financing costs are high and infrastructure-based PPP investment income is not attractive. In the short run, the above problems are difficult to solve. Therefore, relying on PPP to achieve local “One Belt, One Road†basic project financing still has great uncertainty.
First, there is a time lag in the PPP project. Since the project has been introduced for less than half a year, there has been a time lag in PPP promotion, and it is difficult for social capital to effectively continue government investment in the short term. Our observations show that many of the projects that have been sold have been investigated and demonstrated a few years ago. For example, the first phase of the Shanghai Jiading Nanxiang Wastewater Treatment Plant began to be tendered in 2012, and it was not until September 2014 that it signed a PPP agreement with CITIC Water. . These contracted projects have recently ushered in the government's push for PPP, and they have been vigorously promoted as PPP projects. For newly launched projects, local governments and social capital need time to argue and negotiate, and it will take time to get started.
Second, investment income is not attractive compared to high financing costs. Due to the public service nature of PPP, social capital can only obtain reasonable but not excessive income from investment. For example, the internal rate of return of 13 sewage treatment PPP projects in Tonglu County, Guizhou is 8%. However, the current corporate financing costs are relatively high. The 7-day repo rate in the interbank market is 4.6%, and the one-year base loan interest rate (LPR) representing the market loan interest rate center is 5.3%. Under the triple constraint of high cost of financing, low-yield projects and policies, PPP projects are not attractive enough for social capital.
3. The AIIB and the Silk Road Fund have attracted much attention, but only one leg walks before the end of 2015. For overseas investment projects, there will be a large amount of funds coming from the China-led Asian Infrastructure Investment Bank (“AIIBâ€). Silk Road Fund. The investment capital of the AIIB is 100 billion U.S. dollars, and the initial investment amount of the Silk Road Fund is also 40 billion U.S. dollars. Once the two institutions are established, the amount of funds to be mobilized through capital market instruments such as bond issuance must be calculated in trillions of dollars.
However, as the two most important financial measures for China's high-level push for the “Belt and Road†strategy, at least until the end of 2015, it can only walk one leg. The Silk Road Fund is the leg that has already walked. On November 8, 2014, President Xi Jinping announced the establishment of the Silk Road Fund. On December 29th, Silk Road Fund was officially registered in Beijing and operated on January 6, 2015. The Silk Road Fund took only two months from its announcement to its establishment, demonstrating the determination of the central decision-making body to push the “One Belt, One Road†national strategy. However, the most influential AIIB, the fastest timetable for official establishment, is also at the end of 2015. According to a speech by Chinese Finance Minister Lou Jiwei on March 20th, the AIIB will be formally established at the end of 2015.
(4) Ready for the next "capital feast"
1. “One Belt, One Road†incited investment of 400 billion yuan in 2015, pulling GDP by 0.25 percentage points. Considering that the construction period of general infrastructure is generally 2~4 years. In 2015, the investment amount of “One Belt and One Road†in China may be 3000~ About 400 billion yuan; while overseas projects (a total of 52.4 billion, about 17 billion US dollars per year), the investment in infrastructure is assumed to be 1/3 in China. In 2015, the scale of investment by the “Belt and Road†will be around 400 billion yuan. Considering the impact of the capital multiplier and the GDP deflator, we expect to boost GDP growth by 0.25 percentage points.
2, "Passive austerity" is expected to reverse, "stocks and double cattle" will continue to be viewed from the capital market, the "double cattle" situation of stocks and bonds, at least in the first half of this year will continue. With the implementation of the “Belt and Road†policy, China’s passive austerity is likely to reverse in the second half of the year, thus changing the expectation of slowing economic growth. From this perspective, the “Belt and Road†is likely to reverse the fundamentals of the entire economic operation and the trend of the market. The superposition of moderately loose monetary policy (reduction of RRR, interest rate cuts are not expected), the effect of capital re-allocation continues to play a role, and the pattern of “double debts of stocks and bonds†is expected to continue.
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