The one-week heave smog has filled the air over more than 1.4 million kilometers in China, and significantly shocked nearly 500 million people, societies and governments. As an expertise of studying smog, ANBOUND"s chief researcher Chen Gong first of all has decoded the cause of smog. Generally, it is the combined effects of climate, weather, urbanization, environment, intensive activities by human beings and regional factors. In practice, it is no doubt that China will devote greater effort on responding the issue. But Rome couldn"t be built in one day, the "environmental battle" would last for decades, more important, it might highlight the conflict between economic growth and curbing the environmental problem.

In the context of supply-side structural imbalance and its effects have gradually emerged, the economic environment both at home and aboard is going worse, Chinese banks and over-expanded companies now is worrying about their declining profits and gloomy outlooks. The potential risk generated by bad loans will be inevitable, it has put greater pressure of debt-to-equity swap on banks. ANBOUND thus suggests the banks to actively vitalize the bad loan asset with flexibility, especially to ensure the debt-to-equity swap plan could help the involved companies to establish real modern enterprise institutions and business operational mechanism, increase the investment return ratio. Given the "moderate and steadiness "economic keynote in next year, Chinese banks have to pay more attention to their credit expanding strategies and do their best to reduce the new created bad loan size.

Recent years, Japan is pursuing to normalize their country, which has been forcefully opposed by Beijing. But from ANBOUND"s perspective, the problem should be viewed dialectically. For America, the post-war order serves their interest best, so they will be the "Great Wall" to block Japan’s movement toward state normalization. While for Japan, they long for shake off the yoke of World War II history problem made by China and South Korea, and American’s limitation as well, they are looking for opportunities to rise again. So, Japan’s attempt on state normalization will inevitably change its alliance with the US, which can directly affect the geopolitical situation in East Asia.

Alone with the end of 2016 is coming, now the market highly concerns the question over the tendency of China"s economy throughout 2017, it will go worse or better than that in 2016? According to ANBOUND’s study, the growth rate in 2017 is expected to be around 6.8%, almost keeping the same pace as it did in 2016. Generally, our forecast depends on two keys, namely, platform period and greater market, the former determines the basic momentum of China’s economic future, while the later reflects the driver of China’s consumption sector. Given the two forces, it is easy to build confidence over China’s economy.

Recently, there are more signs to suggest "hard Brexiting" since Britain voted to leave the EU, regarding its effects on China, ANBOUND believes that both risks and opportunities will come after it. Basically, it is likely to boost a closer economic and trade relationship between China with both Britain and Europe, attract much more hot money flowing into Chinese capital market from Europe. However, when facing these opportunities, China needs to do its own things, maintain the stable development in house, and continuously strengthen investors" confidence on Chinese market.

Mr. Cao Dewang, President of FuYao Glass Group, days ago has talked about the issue of building manufacturing in the US, and the cost gap between Chinese and American companies, which drawn a heated discussion on domestic media, in order to clarify this issue, ANBOUND chief researcher Chen Gong points out three problems if the manufacturing moved to American market. First of all, the labour cost is extremely high there, addition to aging problem, particular the blue-collar workers, they will raise the overall cost; second, the global market factors must be preserved, American market is not the only concern. America"s reindustrialization can hardly resolve unemployment; third, the manufacturing should keep in mind that China is likely to take trade countermeasures, once China did so, those "Made in US" products will be blocked at the door of China.

Given the idea of SOEs reform, the 18th National Congress has proposed the model of "asset management", and targeted on promoting the ownership diversification. ANBOUND"s chief researcher Chen Gong repeatedly stresses that the model is similar to ANBOUND’s “common fund”. But in practice, he found that the focus of diversification is on mutual holding among SOEs and increasing employees’ holding, which constrain the reform in a structural framework. Besides, the SOEs have integrated to be some mixtures by mutually holding each other’s shares. They can easily control the assets with leverages. If the structural limitation cannot be broken, the so-called SOEs reform is nothing but structural adjustment, far way from real reform.

Over the past years, industrial integration and capital monopoly have become the industrial economic trend across the world, large-sized multinational corporate gradually upgraded their control and integrating capacity over production, sales, R&D and service. ANBOUND has also noticed the trend ranging from manufacturing to financial sector, in which merger and restructure are considered to be the key way of economic changes globally. In this context, China"s domestic sectors have to set a plan in advance on building consortium economy with concentrated industries and industry-finance combination, so that to improve China’s competitiveness in global industrial chain.

Considering the exchange rate of yuan is on a sensitive point, ANBOUND chief researcher Chen Gong pointed out that current concerns over yuan on market actually is a problem of how to raise market"s psychological expectation on yuan. Generally, the government can take various measures, for example, publicly demonstrating China’s gold reserve when the top leaders visited the central bank’s treasure; inviting authorities to forecast China’s growth rate of 2016; highlighting the positive development of China-European and China-British relation; further stressing the "self-centered RMB internationalization route", which means on the base of long-term economic stable, the central bank would be allowed to properly adjust the currency basket to reveal yuan’s real value via free float.

According to the recent central economic working conference, the diversified ownership reform will be the vital breakthrough of SOEs reform, and next year"s key task of this will target on the combination of labour and capital. For ANBOUND, instead of stumbling upon the issue of insider holding, the diversified ownership reform should try other models such as introducing social capital, the "common fund" management model provided by ANBOUND will be a good example. From this point of view, there will be two major directions for the ownership reform, it is important to study that on a micro level, how to revive the SOEs by diversifying ownership; while on a macro level, how to break the monopoly within some industries.

Regarding the core of the recent central economic working conference: the monetary policy will remain steady and moderate throughout 2017; and give priority to prevent financial risks and assets bubble, ANBOUND believes that the central bank wouldn"t overly relax due to several potential risks, including the fast rebound in commodity price, and risks in real estate, capital market and other sectors. Therefore there is less chance of cutting both interest and reserve ratio, addition to the reduction of basic currency supply, the credit growth will further slow down. Nevertheless, the central bank would conduct short-term adjustment aiming at calming market if necessary.

Alone with the end of central economic working conference, various translations about the content have resounded in the market. Given the importance of the opening of the 19th National Congress next year, ANBOUND considers that the meaning of this conference largely differs from those previous. The top priority is "steadiness". As a famous advocate of “steadiness” in China, ANBOUND"s suggestion matched the current economic and politic circle. We forecast that the story line in next year is still deepening supply-side reform. The government would focus reducing useless supply, expanding effective supply, improving the overall quality of supply, and finally boost the adaptation of supply to need.

The United States has recommenced its focus on the semiconductor industry; led by the Government, a series of actions are taken by the industry. Anbound Think Tank’s industry consultant Mo Dakang pointed out that the birthplace of the global semiconductor industry in the United States, and reached the peak in the last century. However, this absolute advantage may have ceased to exist, coupled with the United States Government’s wariness on the rise of China’s semiconductor industry, it worries that oversupply would destroy the market and innovation. Now, the US semiconductor industry has been in the intensive preparation of coming out with proposals, including the establishment of national laboratories, national foundries, large-scale production and research consortium; this will pose direct competition or even inhibition to the rise of China’s semiconductor industry.

This year, the Renminbi"s exchange rate against the US dollar continues to depreciate, and accompanied by large-scale capital outflows, the controversies on China’s exchange rate formation mechanism and the exchange rate policy have re-emerged. Anbound Think Tank’s special economist Zhong Wei believes that first of all, Renminbi exchange rate’s L-shaped growth is expected. Second, the inherent conflict of multi-goals highlights the dual paradox. Third, the rational allocation of assets outflow has become the mainstream. How should we look at the future options of the Renminbi exchange rate? Zhong Wei suggests that the Renminbi exchange rate’s trend would be largely affected by dollar. In the future, the Renminbi exchange rate formation mechanism will gradually shift to the exchange rate corridor system, and gradually move toward clean floating.

As Donald Trump takes a tougher stand in the trade position with China, some American companies are worried for China’s retaliation. A report listed out General Motors, Caterpillar, Walmart, Starbucks, Boeing, Macy’s as six companies closely related with China that could be the first targets of China’s retaliation. However, Anbound Think Tank researchers believe that the credibility of this rumor is doubtful. During the presidential election period, Trump could say whatever he wants and used Twitter to publish his policies, yet this would be entirely different when he assumes the action position of the President. If China is preparing for retaliation now, it is not only too early for that but also and very irrational. The rumor is just hearsays reported by the media without basis in facts.

China"s economic downturn, the contradictions of the survival of the government and the business have been exacerbated. With the businesses gone bad, the government"s finance is also in decline. Anbound Think Tank’s researchers understand that many local public financial data look decent on the surface yet the that would be far cry from the truth. In our survey of some cities, the real financial income shows negative growth. Under such circumstances, the local tax collection in the past two years, excessive tax and early taxation are becoming more serious. However, the Government cannot live without businesses. Good businesses will be good for the government.