On October 24, the Standing Committee of the National People's Congress approved the resolution of the State Council on the issuance of additional treasury bonds and the adjustment plan of the central budget for 2023. The central finance will issue 1 trillion yuan of additional treasury bonds for 2023 in the fourth quarter of this year as a special treasury bond management. The national fiscal deficit will increase from 3880 billion yuan to 4880 billion yuan, and the deficit rate is expected to increase from 3% to about 3.8%. As soon as the news came out, the market sentiment improved significantly, and the stock market, commodity market and other financial markets responded to the rise. What impact will this heavy good news have on the cement market?
According to the Ministry of Finance, all the additional treasury bonds will be allocated to local governments in the form of transfer payments. 500 billion yuan will be allocated for this year and 500 billion yuan will be carried over to next year. The funds will be mainly used for flood control projects and disaster prevention, mitigation and relief. Since the 1990s, China has issued special treasury bonds five times, all of which are extraordinary actions in extraordinary times, but this issue has a strong positive signal transmission significance. Firstly , as an incremental fund for infrastructure construction, it is quite different from the previous four times for supplementing capital, balancing local government revenue and expenditure, debt replacement and extension, which is conducive to consolidating the security foundation of economic development; Second , it is not difficult to achieve the annual economic growth target in the fourth quarter. The issuance of treasury bonds is included in the fiscal deficit. The central government increases leverage, reduces the financial pressure of local governments, greatly boosts confidence, improves market expectations, and is expected to further consolidate the good momentum of economic recovery.
Table 1: Issuance
of all previous special treasury bonds Source: Cement Big Data Research Institute
II. Positive impact
on cement market (I) Boosting confidence & nbsp; Since the beginning of
this year, China's economy has continued to recover and positive factors have increased, but the endogenous power is still not strong and the recovery foundation is not solid. Although the third quarter economic data exceeded expectations, the market's policy expectations for the fourth quarter have cooled significantly. In June 2023, the confidence index of economists recorded 92.3%, less than 100%. It reflects that the prospects for economic growth are not optimistic. According to the author's research, many cement enterprises are not optimistic about the future market, and the financial measures offered in the fourth quarter far exceed expectations, which injects a cardiotonic agent into the depressed market sentiment, which is conducive to boosting the overall confidence of the cement industry and enhancing the development belief.
Figure 1: Confidence index of economists since 2023 is mostly below
100% Data source: Cement big data (https://data.ccement.com/)
(II) Cement demand in infrastructure sector is expected to increase 0 HTML0UNK Since the second half of this year, affected by the high base of the same period and insufficient project funds, the cumulative growth rate of water conservancy management industry has gradually slowed down, and in September it was lower than overall infrastructure. Accord to that arrangement of the Ministry of finance, Trillions of national debt funds are mainly used for post-disaster recovery and reconstruction, key flood control projects, natural disaster emergency response capacity enhancement projects, other key flood control projects, irrigation area construction and transformation and key soil erosion control projects, urban drainage and waterlogging prevention capacity enhancement actions, key natural disaster comprehensive prevention and control system construction projects, Northeast China and Beijing-Tianjin-Hebei. They all belong to the field of capital construction, especially closely related to water conservancy management. It is expected that the growth rate of water conservancy management industry will accelerate in the fourth quarter of this year and next year, which may support the demand for cement in the field of infrastructure. 0 HTML0 https://data.ccement.com/ 6 Figure 2: Water conservancy management industry growth continued to slow down since the second half of 2023 0 HTML0 https://data.ccement.com/ 7 Data source: Cement Big Data (https://data.ccement.com/) 0 HTML0 https://data.ccement.com/ 8 (III) Limited sentiment boost It is difficult to change the downward trend 0HTML0 UNK1 9. Overall, although the additional issuance of trillions of treasury bonds is good for the cement industry, the author believes that this positive impact is mainly reflected in the mood, and the real demand impact is relatively limited. 0 HTML0 UNK2 0 First 0 HTML0 UNK2 1, real estate accounts for a high proportion of cement demand, the current real estate investment side is still not stable, which will cause a greater drag on cement demand, the downward trend of cement demand is difficult to reverse; 0 HTML0 UNK2 2 Second 0 HTML0 UNK2 3, the favorable policy is mainly reflected in the infrastructure water conservancy management industry, while the water conservancy management industry has a weak driving force for cement demand, and the cement demand in the whole infrastructure field is less than 7%, which is a drop in the bucket; 0 HTML0 UNK2 4 Third 0 HTML0 UNK2 5. It takes procedures and time for special treasury bonds to raise funds from issuance to appropriation and then to the formation of physical workload, which may lead to the phenomenon of "project waiting for money", resulting in poor investment results, and then affecting terminal cement consumption. 0 HTML0 UNK2 6 Figure 3: Real estate investment is still not stable 0 HTML0 UNK2 7 Data source: Cement Big Data (https://data.ccement.com/) 0 HTML0 UNK2 8
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