Goldman Sachs Group pointed out in a newly released report that if the global economy slumps again, although the Fed will do its best, because the hegemony of the dollar is in jeopardy, the task of saving the world will once again depend on China, as it did in 2008 / 2009.

Meanwhile,Goldman Sachs Group explained that in view of the heavy position of Chinese stocks,Sino-US trade frictions will not have much impact on the Chinese stock market, and will continue to maintain the view of "overweight Chinese stocks".

It is worth noting that singing more and more A shares has become the latest trend of most foreign investors, and foreign capital has also become an important index affecting the trend of A shares. The data show that from January to July, the net inflow of northward capital was close to 130 billion yuan, of which April and June became the peak of foreign capital inflow, with net purchases of 53.258 billion yuan and 52.679 billion yuan respectively.

Gao Sheng pointed out that there is much room for China's policy implementation.

Due to the poor control of the epidemic and the implementation of the "anti-globalization" isolation policy, the United States is being seen by more and more institutions as a stumbling block to the world economy. At the same time, foreign investors are turning their attention to China again. Goldman Sachs Group pointed out in a newly released report that if the global economy slumps again, although the Fed will do its best, because the hegemony of the dollar is in jeopardy, the task of saving the world will once again depend on China, as it did in 2008 / 2009.

According to media reports, Goldman Sachs Group pointed out in the report that there are three characteristics of the type of monetary policy easing implemented by the people's Bank of China in the first half of 2020. First, some policy instruments are very short-term liquidity reserves. Second, some of the figures refer to total loans, not net loans. Third, many easing measures are targeted in nature. These funds are earmarked for sectors hard hit by the epidemic, small businesses and self-employed enterprises that face the greatest challenges in obtaining credit, and at a time when the epidemic has had the greatest impact on the economy.

In view of this, the combined impact of these easing measures on the PBoC's balance sheet is not significant and may not last long.

Goldman Sachs Group argued in the report that in order to promote lending and combat the worst recession since the Great Depression, the Fed must significantly increase the monetary base, while the people's Bank of China can resort to more direct tools, such as targeted easing and window guidance, to increase bank lending. This means that China does not need to expand M2 as much as the United States does to support its economy.

But America's economic recovery is still weak. Non-farm data released by the Labor Department show that the US labor market continued to recover in July, but growth slowed. Non-farm payrolls rose by 1.76 million in July, higher than the expected increase of 1.48 million. The unemployment rate fell to 10.2 per cent, slightly higher than the peak during the 2008 financial crisis, and although the decline was larger than expected, it may not reflect the real labour market situation. It may be more appropriate to measure the broader U6 unemployment rate, which includes people who have given up looking for work because of loss of confidence and part-time workers who cannot find a full-time job, which is still high at 16.5%. Coupled with a slight decline in the labor force participation rate, this shows that market confidence is low.

According to media reports, compared with the United States, Goldman Sachs Group believes that China's economy has performed best in the context of the epidemic, and there is still a lot of room for China's fiscal policy to be implemented. Goldman Sachs Group pointed out in the report that the balance sheet of the PBoC as a share of GDP peaked at 65 per cent in 2009. At the current level of 37 per cent of GDP, the PBoC's balance sheet seems to have room to expand if capped at the previous peak of 65 per cent.

On the other hand, with the exception of a few emerging market countries that take exchange rate into account, China's reserve requirement ratio is still high relative to many other economies, which means there is room for downward adjustment if necessary. It is important to note, however, that the role of the required reserve ratio in China's monetary policy has been declining in recent years. The tool played a central role in absorbing excess liquidity before 2014, when the trade surplus led to a sharp rise in foreign exchange reserves, but this year, open market operations (OMO) and various lending instruments are becoming increasingly important in the PBOC toolkit.

Strong recovery of made in China activates raw material market

How good is the rapid recovery of China's economy in the epidemic? Trade data have also supported China's economy to gradually recover from the epidemic and get back to normal. let's take a look at an Australian export data.

Australian exports rose 3 per cent in June, thanks in part to sharp increases in iron ore and gold prices, according to figures released in early august. Of this total, exports to China reached a record high of 14.6 billion Australian dollars (72.8 billion yuan), with Australian exports to China totaling 151 billion Australian dollars in the past 12 months as of the first half of this year. In addition, Australia had a trade surplus of A $8.2 billion in June and A $23.4 billion in the second quarter.

Specifically, Australian iron ore occupies the first place in Australia's exports to China. In June, Australian iron ore exports to China reached 9.92 billion Australian dollars (50 billion yuan), up 8% from a year earlier and the highest monthly purchase in history. And this year, BHP Group Ltd and Rio Tinto PLC, two giants of Australian iron ore, have adopted RMB settlement in order to retain Chinese customers.

Market participants pointed out that the increase in Chinese industrial activity supported demand for Australian iron ore, an important steelmaking raw material, with imports reaching a record high in June. Imports of commodities from India, Ukraine and Russia also hit record highs, according to Platts.

As of Aug. 7, 2020, iron ore prices had soared to $120 a tonne due to strong demand, and iron ore imports hit a new high again, according to the General Administration of Customs: iron ore imports in June were 101.68 million tons, up 16.8 per cent from the previous month and 35.3 per cent year-on-year. From January to June, iron ore imports totaled 546.91 million tons, an increase of 9.6 percent over the same period last year. This is largely due to the role of the Chinese market as the locomotive of the world economy, especially as China's manufacturing sector is recovering strongly, which has boosted the export market of raw materials.

Does Goldman Sachs Group become the spokesman of China's A-share bull market?

Goldman Sachs Group's report has been reliable since the beginning of this year. During the most tense period of the epidemic in China, that is, at the end of February this year, Goldman Sachs Group released a report saying that it had lowered its economic growth forecast for the first quarter of this year. But the highlight of this report is that Goldman Sachs Group stressed that it is very optimistic about China. It is predicted that China's economy will rebound rapidly in the second and third quarters of 2020 with "resolute policy support". At the same time, Goldman Sachs Group did not adjust mainland China's full-year GDP growth forecast at that time, but other countries were sharply lowered.

In line with Goldman Sachs Group's emphasis on a rapid rebound in the second quarter, China's gross domestic product (GDP) grew 3.2 per cent year-on-year in the second quarter, according to figures released by the National Bureau of Statistics on July 16, 2020. After squatting in the first quarter, the "revival" of growth in the second quarter shows the strong resilience and great potential of the Chinese economy. A number of foreign media are concerned that China has become the first major economy to achieve growth since the COVID-19 epidemic. China's economy has taken the lead in turning from negative to positive, which is seen by the outside world as good news for the global recovery.

While Goldman Sachs Group continues to be bullish on China's economy, the Wall Street firm has been bullish on China's A-share market since the outbreak this year, while using Chinese stocks as a safe haven for assets. Wang Yajun, co-head and managing director of Goldman Sachs Group Asia (excluding Japan) equity capital markets, said in an interview with a media at the beginning of this year that with the continuous progress of "deep reform" in China's capital market and the recent A-share "safe haven" effect, A-share IPO attractiveness will be significantly enhanced, and the refinancing and stock block trading market space is expected.

In July this year, Goldman Sachs Group also continued to support the hot market of China's A-share market. Goldman Sachs Group released a report in early July this year that a number of factors, including China's strong economic recovery, the risk of a resurgence of the epidemic is controlled, and favorable macro policies support the recent A-share rally.Liquidity-driven upside space is expected to reach 15% in the next one to three months.

Goldman Sachs Group believes that the factors of the A-share bull market include the full recovery of the mainland economy and the control of the risk of another outbreak so that the economy can be restarted more smoothly. On the policy front, the easing of financial conditions through monetary instruments and credit policies over the past few months, an improvement in corporate earnings, low stock valuations and increased retail participation have all contributed to the stock market rally.

What is worth pushing is that Goldman Sachs Group is not only a variety of whistles, in fact, it is also putting real gold and silver into China's A-shares.

Goldman Sachs Group's emerging market equity fund managed by Basak Yavuz and Hiren Dasani bought heavily into Chinese mainland and Taiwan, according to a filing at the end of June 2020. According to data compiled by Bloomberg, the fund returned 12% last year, surpassing 82% of its peers, and its five-year annualized return was 7%.Stocks with the largest positions include Tencent, BABA and Taiwan Semiconductor Manufacturing Co LtdAccounting for about 22% of the portfolio Goldman Sachs Group explained that the trade friction between China and the United States will not have much impact on the Chinese stock market and will continue to maintain his view of "overweight Chinese stocks".

According to a previous report by the brokerage China, the US Wall Street institution wants to invest in Chinese A-shares even when some Chinese A-share companies are listed on the US entity list. this is called by many market participants as the charm of A-shares that "money can make ghosts go around".

According to Haikangwei's semi-annual report, Goldman Sachs Group, a well-known QFII, bought 46.22 million shares in the second quarter of 2020, making it the ninth largest tradable shareholder. Based on Haikangwei's average price of 30 yuan in the second quarter of 2020, Goldman Sachs Group spent 1.4 billion yuan.

Taking Haikang Weiwei as an example, Goldman Sachs Group also picked up a bargain in its investment, because the second quarter of 2020 was almost a golden pit, when almost all the leading stocks and technology stocks of A shares were enjoying this year's big bull market. Haikang Weiwei's share price was knocked down in the first quarter and spent three months in the second quarter. As a result, when the A-share market continued to rise and began to catch up, Haekangwei's shares easily rose 34% from June 30, 2020 to July 31, 2020.

Foreign investors emphasize that Chinese science and technology stocks are the best opportunity

In fact, it is a general consensus that foreign institutions are optimistic about China's A-shares.

According to media reports, Kevin Russell, chief investment officer and fund manager of UBS's asset management company, recently said that Chinese technology stocks are the best investment opportunities in the world.

UBS O'Connor, a $2.2 billion multi-strategy hedge fund owned by UBS, made a significant investment in Asian markets in July. The fund has invested about $1.4 billion in the Chinese market, including A-shares. The UBS fund manager said Chinese technology stocks with small and medium-sized market capitalization were among the best investment opportunities in the world because China was actively developing its own supply chains in industries such as semiconductors.

Ben Powell, chief investment strategist for Asia Pacific at Blackrock Investment Research Institute, also said recently that the stock and bond markets of China and its Asian trading partners, such as South Korea and Japan, will outperform global emerging markets in the next 6-12 months.