Chapter 2 Chapter 01 The real crisis of the Chinese economy is not the financial crisis
Highlights of this chapter: The crisis in China is not the financial tsunami, but the deterioration of the investment and business environment since 2006. A large amount of manufacturing funds entered the property market and stock market, resulting in bubbles.From 2006 to the middle of 2009, due to six major factors including exchange rate, cost, "Labor Contract Law", export tax rebate, macro-control and tax increase, our entrepreneurs faced the first dilemma, that is, investment and operation The drastic deterioration of the environment.The second dilemma faced by entrepreneurs is serious overcapacity. In the past, we digested this part of overcapacity through exports, and the purpose of our exports was to satisfy the bubble consumption in Europe and the United States. However, the financial tsunami caused the bubble consumption to burst and overcapacity The problem immediately appeared.
The simple method becomes the key to deciphering the truth? This is why many studies use the growth rate of power generation to judge a country's GDP growth rate. From the trend chart of power generation and GDP, what kind of problems did Professor Lang see? By the fourth quarter of 2008, electricity generation had plummeted by 22%, yet our GDP growth rate was still positive. Throughout the first half of 2009, our stock market picked up. On July 1, the Shanghai Composite Index broke through 3,000 points in one fell swoop, and broke through 3,500 points at the end of the month.The property market has also picked up.Now it seems that the recovery of the property market is no longer a matter of real estate developers finding a few "children" to pull it up.Taking Shanghai as an example, our researchers went to the notary office in Shanghai to do research and found that the notary office has become very busy in recent months.Judging from the car sales in the first half of 2009, the car market is also picking up.This cannot be simply attributed to "cars going to the countryside". In fact, the demand for cars in cities has also increased significantly.Does the combination of these data give readers the impression that our economy has begun to pick up? On July 16, 2009, the National Bureau of Statistics released relevant data on GDP in the first half of the year. According to preliminary calculations, the GDP in the first half of the year was 1,398.62 billion yuan, a year-on-year increase of 7.1% at comparable prices; The quarterly increase was 7.9%, and the added value of industrial enterprises above designated size increased by 7% year-on-year.Corresponding to the data from the Bureau of Statistics, since the State Council issued a 4 trillion economic stimulus plan on November 6, 2008, the Chinese stock market has gradually come out of the reversal market. In July 2009, the Shanghai Composite Index broke through 3,500 points.On the other hand, the national automobile, real estate and other industries have shown Xiaoyangchun market.So, does this Xiaoyangchun market mean that the Chinese economy has bottomed out and rebounded, and has fully recovered?What are the reasons behind the phenomenon of warming up in these industries?
So, has the Chinese economy recovered?If not, how should we understand it?As shown in Figure 1-1, if we compare the curves of my country's power generation growth rate and GDP growth rate from 1979 to 2009, we will find that before the third quarter of 2008, the trends of the two are similar.This is very reasonable, because the growth of GDP needs electricity. For example, we need electricity to watch TV, and factories also need electricity to produce products.Because of this, many of our studies use the growth rate of power generation to judge a country's GDP growth rate.Because the calculation of the GDP growth rate is very complicated, this does not mean that the calculation by the Bureau of Statistics is correct, but because this country is too large, our statistical methods cannot be popularized in every village and every town, and the data are obtained from the following For reporting, errors are inevitable. This is not a problem unique to China. It is the same in other countries. GDP statistics are very troublesome because they are too complicated.For example, does the salary of a nanny count as GDP?How to count?For another example, the pigs eaten by the farmer are different from the pigs sold. The pigs eaten by themselves are not counted as GDP, but the pigs sold are counted as GDP. But the farmer raises 10 pigs, and it is not clear whether they should keep them. If you eat it yourself or sell it, then you don’t know whether it should be counted as GDP, and going to the toilet, stool is not counted as GDP, right?But what if it is used as fertilizer?It's GDP again, it's hard to say clearly. GDP is very difficult to calculate. For example, is the United States good enough?Is the statistical technology of the United States advanced enough?Last year, that is, in the fourth quarter of 2008, I estimated that the GDP of the United States fell by 6%. Many economists in the United States had the same estimate as mine, and it fell by 6%. This is not a matter of level, but because of our The method for estimating US GDP is the same, so our calculations are similar.I mentioned this data in October 2008. By the end of January 2009, the data released by the US government was that GDP fell by 3.8%.Almost double the difference.When I saw the data released by the US government, I thought it was impossible. I thought the US government must be wrong.At the end of February 2009, the data was released again. The US government said sorry, it made a mistake, and the GDP should have fallen by 6.2%.At the end of March and early April, it was revised again and fell 6.3%, which was similar to the result I estimated in October 2008.From 3.8% to 6.3%, even the statistical data in the United States has nearly double the error. The reason is the problem I just mentioned-the problem of pork, the problem of stool, and so on.
Figure 1-1 Comparison of my country's power generation growth rate and GDP growth rate from 1979 to 2009
Please refer to Figure 1-1. From 1979 to the third quarter of 2008, our power generation growth rate and GDP growth rate were similar.Here comes the problem, as shown by the circle in Figure 1-1, in the fourth quarter of 2008, power generation plummeted by 22%, and the growth rate of power generation in the first half of 2009 was -2.02%, so why is our GDP growth rate still positive? of.That is to say, from 1979 to the fourth quarter of 2008, the growth rate of GDP and the growth rate of power generation were relatively matched, but they became mismatched from the fourth quarter of 2008, and the gap was very large.Well, the calculation of this GDP makes me suspicious.
According to statistics from the dispatching center of the State Grid Corporation of China, the country's power generation in the first quarter fell by 2% year-on-year. The monthly power generation in April fell by 3.55% year-on-year, and the monthly power generation in May fell by 3.54% year-on-year. The monthly power generation in June and July increased by 3.59% and 4.21% respectively year-on-year, and the growth rate of power generation in the first half of 2009 was -2.02%.Prior to this, the national power generation had a slight rebound in February. The growth rate reached 1% in the first ten days of March. This recovery data was once gratifying.However, the analysis believes that the increase in power generation in February and early March is mainly related to factors such as weather and holidays.It is also related to the small base affected by snow disasters in the same period last year. After mid-March, the country's power generation once again showed a downward trend. Many experts believe that this at least shows that the trend of China's economy is still uncertain.However, the power generation in June was relatively encouraging, showing a rare positive growth of 3.59%. Whether this growth can be sustained is of great concern to all parties. It is generally believed that this increase in power generation is related to the more use of air conditioners in June.In July, power generation continued to grow by 4.21%, so whether the growth in these two months came from the increase in industrial electricity consumption has attracted special attention.
From January to July 2009, my country's GDP continued to grow at a rate of more than 7%, while the national industrial electricity consumption fell by 4.4%, which means that from the perspective of electricity consumption, the economy has not recovered.What does this mean?This means that the factory is not working, which means that we don't need so much electricity.If industrial electricity consumption continues to decline, how can the economy recover? The more encouraging news is that the growth rate of power generation in June 2009 turned into a positive growth rate of 3.59% for the first time. We should pay close attention to whether this recovery can continue. However, the power generation continued to grow by 4.21% in July.In order to understand the essential reason for the positive growth of power generation in June and July, we try to find the growth rate of industrial electricity consumption. In the first quarter of 2009, industrial electricity consumption fell by 8.38%, while industrial electricity consumption in the first half of the year still fell by 5.9%, but it was 1.7 percentage points smaller than that from January to May.In addition, industrial electricity consumption increased by 2.67% in July, of which, light industry electricity consumption decreased by 0.34%, while heavy industry electricity consumption increased by 3.28%.These data show that the increase in power generation is not only due to the increase in air-conditioning electricity consumption, but also from the increase in industrial electricity consumption.But what confuses me is that electricity consumption in light industry fell in July, while electricity consumption in heavy industry rose.Obviously, this gap is the result of the government's 4 trillion yuan in infrastructure spending to promote the development of heavy industry, but the light industry dominated by private enterprises has not grown significantly.This also confirms the statement made by the government in August that infrastructure construction has not stimulated investment by private enterprises. However, the recovery of China's stock market, property market, and auto market began before the first quarter of 2009, and even started in 2008. During this period, the growth rate of power generation was basically negative, so we must discuss these markets from other angles The reason for warming up. So, how should we interpret the pick-up in the stock market and property market?To answer this question, I have to take readers back to 2006 to see how the stock market and property bubbles were different from today. In 2006, when I proposed the real reason for the bubbles in the stock market and property market, many people could not accept it, but now the facts have proved that what I said at the time was correct.That is, there was only one reason why there was a bubble in the stock market and property market in 2006, and that was the sharp deterioration in the investment and business environment faced by our manufacturing industry in those years.Therefore, many private enterprises, especially the private manufacturing industry, use the funds that should be invested in the manufacturing industry to speculate in stocks and real estate, thus causing stock market bubbles and property market bubbles.In other words, the reason for the bubble phenomenon at that time was not because many scholars said that China's economic development was too successful and the people became richer, so they had more money to speculate in stocks and real estate. The real reason is that the investment and business environment faced by China's manufacturing industry is too bad, so private entrepreneurs stopped doing manufacturing, and private enterprises took the lead to use money to speculate in stocks and real estate, thus causing bubbles in the stock market and property market.According to my analysis at the time, the essence of the stock market bubble and property market bubble in 2006 was the reflection of the manufacturing industry.When I proposed this theory in 2007 (refer to "Eight Major Crisis of China's Economy" I wrote in 2007), most experts and scholars held the opposite view. Only then can there be more money to speculate in stocks and real estate. They call this phenomenon "excess liquidity".In my opinion, the bubbles in the stock market and the property market are the reflection of the manufacturing industry, because the investment and business environment faced by the manufacturing industry has deteriorated.Finally, the mid-year data of 2008 speaks for itself. 30% of the manufacturing industry in Guangdong Province closed down or shut down, and 20% of the manufacturing industries in Jiangsu and Zhejiang provinces closed down or shut down. At that time, the financial tsunami had not yet come. Unfortunately, the view of excess liquidity misled the government's macro-control. The government began to withdraw liquidity through tightening policies. They believed that as long as the liquidity was recovered, they would not have much money to speculate in stocks and real estate. Therefore, the stock market bubble and the property market Bubbles can be resolved.Unfortunately, the premise of excess liquidity is wrong, which made the government's macro-control wrong for several years.I give a simple example to illustrate my point.Let's take a look at the impact of each interest rate adjustment on the stock market since March 2007.From March 18, 2007 to December 21, 2007, my country raised interest rates 6 times.According to economic theory, the result of raising interest rates should be to suppress the stock market, causing stock prices to fall.However, we found that the results of these 6 interest rate hikes were all rises in stock prices, without exception, please refer to Table 1-1.What does this phenomenon indicate?This phenomenon tells us that the macro-control measures are wrong, because the results they lead to are completely opposite.As the macro-control further impacted the investment and business environment, more entrepreneurs stopped investing in the manufacturing industry and invested their funds in the stock market, resulting in a strange phenomenon that the more macro-control the stock price rose.The relationship between the property market and macro-control is also similar. But please note that at that time, apart from the stock market bubble and property market bubble, entrepreneurs in the manufacturing industry also spent a lot of money to speculate in calligraphy, paintings, antiques, and mahogany furniture, so calligraphy, paintings, antiques, and mahogany furniture also rose sharply at that time.In other words, the stock market bubble, the property market bubble, and the speculation in calligraphy and painting have the same source of funds. After the investment and business environment deteriorated, manufacturing funds entered these markets.When the crash happened, the stock market crash, the property market crash, and calligraphy and painting, antiques, and mahogany furniture crashed at about the same time. Why?Because it is the same source of funds, if it is going to collapse together, it must be good together. By 2009, compared with before 2006, due to the following six shocks, the investment and business environment faced by manufacturing entrepreneurs has worsened. In the past, we always simply believed that due to my country's trade surplus, it is normal for the RMB exchange rate to rise. This is the theory in textbooks.It can also be said that our exchange rate policy is basically still at the textbook level.However, I want to tell readers that the exchange rate is not just to balance the balance of payments, but a means for governments to achieve political goals.Manipulating exchange rates is the strength of European and American countries.For example, in the first quarter of 2009, in the case of the US trade deficit, why should the US dollar soar instead of falling?In the case of the EU trade surplus dominated by Germany and France, why should the euro plummet instead of rising?Only our renminbi rises when it should, because we don't know how to manipulate our own exchange rate.The United States constantly criticized us for manipulating the RMB exchange rate in the first half of 2009. I am afraid that we are flattering our central bank. Our central bank does not have the level to manipulate the exchange rate. They should be the ones who are really manipulating the exchange rate.This issue will be discussed in detail in Chapter 5. For example, in June 2009, when the international economy was so depressed, why did the price of oil soar to 72 dollars a barrel, then fell to 60 dollars at the end of the month, and then rushed to 70 dollars a barrel in late August above?This is manipulation, not dictated by supply and demand.Because the demand in June, July, and August was sluggish, there was no reason for the increase.And the boom in energy and agricultural prices starting in 2004 was the result of Wall Street manipulation (see ).The sharp rise and fall in the price of imported bulk materials (raw materials) has brought great difficulties to our manufacturing industry. The original intention of the "Labor Contract Law" was good, that is, to protect vulnerable groups through the government.However, there are several problems with the introduction of this regulation. The first problem is the lack of demonstration, and the second problem is the lack of pilots.The hasty introduction of such an important regulation caused more than one-third of my country's manufacturing companies to immediately fall into trouble, followed by layoffs, and workers faced unemployment; in the end, the government had to pay the bill in order to maintain social stability.As a result, the "three losers" situation of enterprise distress, worker unemployment and government footing the bill has been created.If our government does not accept opposing opinions on economic policy, it will eventually pay a huge price. The three-lose situation caused by the "Labor Contract Law" is the best example. Many scholars continue to praise China's economy, misleading the government's decision-making, and causing the government to seriously misjudge the economic situation. Therefore, they wrongly lowered the export tax rebate ratio and impacted my country's export manufacturing industry. As mentioned earlier, during the stock market and property market bubble era in 2006, the government adopted the so-called "excess liquidity" theory of some scholars, and shrunk the bank by raising interest rates and deposit reserve ratios for several consecutive years, resulting in corporate investment The further deterioration of the environment led to the continued rise of the stock market and property market. Beginning in 2009, due to excessive government spending, the financial situation deteriorated rapidly.In order to meet the targets set by their superiors, the taxation departments in many places have begun to kill chickens and collect taxes and fees under such a depressed economy, which has caused a great impact on private enterprises. It is because of these six major shocks (of course there are many small shocks not to mention), the investment and business environment that our enterprises are facing now is not as good as it was in 2006.If the environment continues to deteriorate, do you think entrepreneurs will invest?The deterioration of the investment and business environment is the first dilemma faced by entrepreneurs, and it is also the first cause of the Chinese economy. In addition, according to our data, the private economy in some places seems to be picking up in May, June, and July, which is related to the alleviation of five of the six major shocks. conducive to the increase in consumption.For example, the RMB exchange rate did not continue to rise in 2008/2009; the price of international bulk materials fell sharply at the end of 2008 and the first half of 2009, which caused a sharp drop in my country's import costs; some regions relaxed the implementation of the "Labor Contract Law"; Among them, the government adjusted the export tax rebate ratio back to 17%; in September 2008, the macro-control policy changed from tightening to loose, and international inflation was on the rise again, which would delay the recovery momentum.This also explains that although the electricity consumption of light industry dominated by private enterprises fell by 4.68% from January to July 2009, the electricity consumption of service industries also dominated by private enterprises increased by 10.37%. We need to carefully observe this Whether the recovery can be sustained. On April 13, 2009, "First Financial Daily" released a survey report involving 1,500 entrepreneurs.The results of the survey showed that 41% of the respondents considered the macroeconomic situation in the first quarter to be "poor" or "very poor", an increase of 16.9% over 2008. 32.9% of the respondents said that their business is not in good condition, and 25.6% of the companies are in a state of "semi-shutdown".Under the tremendous pressure of the global economic recession, 40.3% of enterprises indicated that they would reduce investment in the future.Entrepreneurs generally believe that insufficient demand is the cause of direct impact on the production and operation of enterprises.That being the case, where does the money in consumer markets such as the stock market, property market, and auto market come from?
So what is the impact of the financial tsunami?The financial tsunami has hit my country's overcapacity, which is the second dilemma faced by entrepreneurs. To understand how overcapacity is caused, we must first observe the two major policies that local governments have implemented over the years.The first policy is to focus on infrastructure construction and boost GDP; the second policy is to attract investment.Let's take a look at the impact of these two policies on excess capacity. Let’s talk about the first policy first. The so-called focus on infrastructure construction is to boost GDP growth by building bridges and paving roads and other reinforced concrete projects. Most of our GDP growth in recent years has come from this, not because of any remarkable increase in the productivity of enterprises. .The result of this is that the proportion of reinforced concrete to GDP is as high as 57%, thus reducing consumption to about 35% of GDP.If we compare the data of other countries with the composition of our GDP, we will find that the composition of our GDP is distorted.Consumption usually accounts for 70% to 80% of the GDP of other countries, but ours is less than half of that.Their reinforced concrete accounts for less than 20% of GDP, while ours is several times that of others.The new concept I want to tell readers is that the reason why our consumption is small is because there is too much steel and concrete, which compresses consumption. It is by no means a simple problem of increasing consumption just by building a social security system.Moreover, our bank savings are about 25 trillion yuan, divided by 1.3 billion people, the per capita savings is less than 20,000 yuan.If 1% of the wealthy population is deducted, the per capita savings is only 10,000 yuan, which means that China is actually a country with low consumption and low savings rate, not a country with low consumption and high savings rate as claimed by the media.Readers, please think about it, what should you do if there is an urgent need at home, such as paying tuition or getting sick?Even if a social security system is established, it is unlikely that this savings, which is only more than 10,000 yuan per capita, will be used for consumption. Let's talk about the second policy. In order to attract business and investment, our local governments are more tolerant of the three major problems of environmental pollution, resource destruction and labor exploitation.In addition, local governments have launched three preferential policies for land, taxation and financing in order to attract investment.Driven by these three major tolerances and the six major benefits of the three major preferential policies, our country's production capacity has expanded to about 70% of GDP. Readers, please think about it, the first policy causes consumption to be only 35% of GDP, and the second policy causes production capacity to become 70% of GDP.That is to say, we have 70% of production capacity, but only 35% of consumption, so the remaining 35% of production capacity that cannot be consumed is serious overcapacity. Readers may be curious, why didn't this part of excess capacity cause a crisis before?That's because it was absorbed by the frothy consumption of countries dominated by the United States.The impact of the financial tsunami on us is to burst the consumption bubble.The background of the formation of bubble consumption is very complicated, and we will introduce it in detail in the next chapter.The bursting of the consumption bubble immediately revealed the problem of our overcapacity. This is the second dilemma faced by entrepreneurs and the second cause of China's economy. Our economic system is indeed sick, and the disease is not serious. The cause is the deterioration of the investment and business environment and overcapacity.But what I am most worried about is that I will inevitably have a fever after being sick, but this fever is interpreted by us as "warming up".I will describe this in more detail later.How would you react if your child had a fever?You will definitely go to the doctor for a detailed examination to find out the cause, and you will never say that the child's body temperature has "warmed up".So I don't understand why our economic system is sick. Instead of investigating the cause, we say it is "recovery".The absurdity of the policy lies in making decisions based on superficial phenomena. This is the reason for the vicious circle of "when it is released, it will be messed up, when it is messed up, it will be closed, once it is closed, it will die, and once it dies, it will be released". Without finding the right cause, we hastily prescribe six major prescriptions to rescue the market from October 2008, including the 4 trillion rescue project, agricultural reform, ten major industrial revitalization plans, automobile and home appliances going to the countryside, medical reform, The last one is bank credit.I would like to briefly talk about the effect of these six prescriptions. The so-called agricultural reform means that farmers release their rights to manage farmland to obtain capital, and then they can work in cities or stay in rural areas to work for agricultural companies that purchase farmland.The essence of this policy is good, but the phenomenon I have observed so far is that the world's four major grain merchants have begun to take advantage of the good opportunity of agricultural reform to acquire Chinese agricultural companies with "agricultural product purchase licenses", and then give them money from behind to let them Large-scale acquisition of agricultural land in China.If this trend continues, China's agricultural security will inevitably be greatly challenged. I call on the government to pay attention to this crisis.The reform did not have the desired effect. Until August 2009, the implementation rules were not promulgated, and this reform was impossible to implement. The essence of this policy is to drive today's overcapacity through future overcapacity.For example, 4 trillion yuan is invested in infrastructure in the Midwest, such as expressways. After the expressways in the Midwest are built, there are basically no cars running. This is the so-called expressway with overcapacity.In the construction process, steel, cement, etc. need to be used, so the steel and cement industries with overcapacity can be stimulated by increasing demand (for example, the current supply of the steel industry is more than 600 million tons, while the demand is only 400 million tons , there is serious overcapacity).What about after the highway construction is completed?Not only are the highways themselves overcapacity, but the steel industry has returned to overcapacity because steel is no longer needed.Unless new growth points are found, there will be two crises of overcapacity in the future.Therefore, this kind of infrastructure construction is a so-called "one-shot deal" short-term behavior, and it will not be able to stimulate China's economy for a long time after it is completed. The essential meaning of this policy is the same as the 4 trillion plan, which is to drive today's overcapacity through future overcapacity.For example, the shipbuilding industry is overcapacity. The inevitable result of revitalizing the shipbuilding industry is to stimulate the steel industry with overcapacity through the rising demand for steel products.As long as the construction is completed, the shipbuilding and steel industries will become industries with excess capacity. Unless new growth points are found, it will be a short-term "one-shot deal" and will not be able to stimulate the Chinese economy in the long run. The essence of this policy is to solve the overcapacity crisis in these industries by going to the countryside. The problem is that this short-term behavior of squeezing rural purchasing power cannot solve the overcapacity crisis in these two industries in the long term.The problem is still the same, unless a new growth point is found, it will be a "one-off deal" and will not be able to stimulate the Chinese economy for a long time. Bank credit is the fastest and most effective of the six major policies.Why?Because it is monetary policy.The 4 trillion yuan bailout project, agricultural reform, revitalization plan for the top ten industries, the sending of automobiles and home appliances to the countryside, and medical reform are all fiscal policies.Fiscal policy is to be implemented and effective, but it is very slow.For example, for the 4 trillion bailout project, funds must be raised before it can be implemented, and it is still unknown how much money can be invested.Fiscal policy is slow, there is no way.The problem is that most of the 7.37 trillion bank loans in the first half of 2009 were used for infrastructure construction, which is also driving today's overcapacity through tomorrow's overcapacity.The remaining 30% to 40% of credit is mainly used for short-term credit and bill financing mainly for state-owned enterprises. This bank credit has caused a major impact on China's stock market and property market. We will discuss it in detail in Chapter 3 . The first and second prescriptions have no real effect, and most of the funds for the third, fourth, fifth, and sixth prescriptions make the second cause more serious, creating more serious overcapacity in the future.What is even more frightening is that part of the credit funds of the sixth prescription was used for short-term credit and bill financing mainly by state-owned enterprises. This fund not only did not alleviate the cause of the disease, but caused a more serious fever phenomenon. We will detail it in Chapter 3 Explore this question.
The simple method becomes the key to deciphering the truth? This is why many studies use the growth rate of power generation to judge a country's GDP growth rate. From the trend chart of power generation and GDP, what kind of problems did Professor Lang see? By the fourth quarter of 2008, electricity generation had plummeted by 22%, yet our GDP growth rate was still positive. Throughout the first half of 2009, our stock market picked up. On July 1, the Shanghai Composite Index broke through 3,000 points in one fell swoop, and broke through 3,500 points at the end of the month.The property market has also picked up.Now it seems that the recovery of the property market is no longer a matter of real estate developers finding a few "children" to pull it up.Taking Shanghai as an example, our researchers went to the notary office in Shanghai to do research and found that the notary office has become very busy in recent months.Judging from the car sales in the first half of 2009, the car market is also picking up.This cannot be simply attributed to "cars going to the countryside". In fact, the demand for cars in cities has also increased significantly.Does the combination of these data give readers the impression that our economy has begun to pick up? On July 16, 2009, the National Bureau of Statistics released relevant data on GDP in the first half of the year. According to preliminary calculations, the GDP in the first half of the year was 1,398.62 billion yuan, a year-on-year increase of 7.1% at comparable prices; The quarterly increase was 7.9%, and the added value of industrial enterprises above designated size increased by 7% year-on-year.Corresponding to the data from the Bureau of Statistics, since the State Council issued a 4 trillion economic stimulus plan on November 6, 2008, the Chinese stock market has gradually come out of the reversal market. In July 2009, the Shanghai Composite Index broke through 3,500 points.On the other hand, the national automobile, real estate and other industries have shown Xiaoyangchun market.So, does this Xiaoyangchun market mean that the Chinese economy has bottomed out and rebounded, and has fully recovered?What are the reasons behind the phenomenon of warming up in these industries?
So, has the Chinese economy recovered?If not, how should we understand it?As shown in Figure 1-1, if we compare the curves of my country's power generation growth rate and GDP growth rate from 1979 to 2009, we will find that before the third quarter of 2008, the trends of the two are similar.This is very reasonable, because the growth of GDP needs electricity. For example, we need electricity to watch TV, and factories also need electricity to produce products.Because of this, many of our studies use the growth rate of power generation to judge a country's GDP growth rate.Because the calculation of the GDP growth rate is very complicated, this does not mean that the calculation by the Bureau of Statistics is correct, but because this country is too large, our statistical methods cannot be popularized in every village and every town, and the data are obtained from the following For reporting, errors are inevitable. This is not a problem unique to China. It is the same in other countries. GDP statistics are very troublesome because they are too complicated.For example, does the salary of a nanny count as GDP?How to count?For another example, the pigs eaten by the farmer are different from the pigs sold. The pigs eaten by themselves are not counted as GDP, but the pigs sold are counted as GDP. But the farmer raises 10 pigs, and it is not clear whether they should keep them. If you eat it yourself or sell it, then you don’t know whether it should be counted as GDP, and going to the toilet, stool is not counted as GDP, right?But what if it is used as fertilizer?It's GDP again, it's hard to say clearly. GDP is very difficult to calculate. For example, is the United States good enough?Is the statistical technology of the United States advanced enough?Last year, that is, in the fourth quarter of 2008, I estimated that the GDP of the United States fell by 6%. Many economists in the United States had the same estimate as mine, and it fell by 6%. This is not a matter of level, but because of our The method for estimating US GDP is the same, so our calculations are similar.I mentioned this data in October 2008. By the end of January 2009, the data released by the US government was that GDP fell by 3.8%.Almost double the difference.When I saw the data released by the US government, I thought it was impossible. I thought the US government must be wrong.At the end of February 2009, the data was released again. The US government said sorry, it made a mistake, and the GDP should have fallen by 6.2%.At the end of March and early April, it was revised again and fell 6.3%, which was similar to the result I estimated in October 2008.From 3.8% to 6.3%, even the statistical data in the United States has nearly double the error. The reason is the problem I just mentioned-the problem of pork, the problem of stool, and so on.
Figure 1-1 Comparison of my country's power generation growth rate and GDP growth rate from 1979 to 2009
From January to July 2009, my country's GDP continued to grow at a rate of more than 7%, while the national industrial electricity consumption fell by 4.4%, which means that from the perspective of electricity consumption, the economy has not recovered.What does this mean?This means that the factory is not working, which means that we don't need so much electricity.If industrial electricity consumption continues to decline, how can the economy recover? The more encouraging news is that the growth rate of power generation in June 2009 turned into a positive growth rate of 3.59% for the first time. We should pay close attention to whether this recovery can continue. However, the power generation continued to grow by 4.21% in July.In order to understand the essential reason for the positive growth of power generation in June and July, we try to find the growth rate of industrial electricity consumption. In the first quarter of 2009, industrial electricity consumption fell by 8.38%, while industrial electricity consumption in the first half of the year still fell by 5.9%, but it was 1.7 percentage points smaller than that from January to May.In addition, industrial electricity consumption increased by 2.67% in July, of which, light industry electricity consumption decreased by 0.34%, while heavy industry electricity consumption increased by 3.28%.These data show that the increase in power generation is not only due to the increase in air-conditioning electricity consumption, but also from the increase in industrial electricity consumption.But what confuses me is that electricity consumption in light industry fell in July, while electricity consumption in heavy industry rose.Obviously, this gap is the result of the government's 4 trillion yuan in infrastructure spending to promote the development of heavy industry, but the light industry dominated by private enterprises has not grown significantly.This also confirms the statement made by the government in August that infrastructure construction has not stimulated investment by private enterprises. However, the recovery of China's stock market, property market, and auto market began before the first quarter of 2009, and even started in 2008. During this period, the growth rate of power generation was basically negative, so we must discuss these markets from other angles The reason for warming up. So, how should we interpret the pick-up in the stock market and property market?To answer this question, I have to take readers back to 2006 to see how the stock market and property bubbles were different from today. In 2006, when I proposed the real reason for the bubbles in the stock market and property market, many people could not accept it, but now the facts have proved that what I said at the time was correct.That is, there was only one reason why there was a bubble in the stock market and property market in 2006, and that was the sharp deterioration in the investment and business environment faced by our manufacturing industry in those years.Therefore, many private enterprises, especially the private manufacturing industry, use the funds that should be invested in the manufacturing industry to speculate in stocks and real estate, thus causing stock market bubbles and property market bubbles.In other words, the reason for the bubble phenomenon at that time was not because many scholars said that China's economic development was too successful and the people became richer, so they had more money to speculate in stocks and real estate. The real reason is that the investment and business environment faced by China's manufacturing industry is too bad, so private entrepreneurs stopped doing manufacturing, and private enterprises took the lead to use money to speculate in stocks and real estate, thus causing bubbles in the stock market and property market.According to my analysis at the time, the essence of the stock market bubble and property market bubble in 2006 was the reflection of the manufacturing industry.When I proposed this theory in 2007 (refer to "Eight Major Crisis of China's Economy" I wrote in 2007), most experts and scholars held the opposite view. Only then can there be more money to speculate in stocks and real estate. They call this phenomenon "excess liquidity".In my opinion, the bubbles in the stock market and the property market are the reflection of the manufacturing industry, because the investment and business environment faced by the manufacturing industry has deteriorated.Finally, the mid-year data of 2008 speaks for itself. 30% of the manufacturing industry in Guangdong Province closed down or shut down, and 20% of the manufacturing industries in Jiangsu and Zhejiang provinces closed down or shut down. At that time, the financial tsunami had not yet come. Unfortunately, the view of excess liquidity misled the government's macro-control. The government began to withdraw liquidity through tightening policies. They believed that as long as the liquidity was recovered, they would not have much money to speculate in stocks and real estate. Therefore, the stock market bubble and the property market Bubbles can be resolved.Unfortunately, the premise of excess liquidity is wrong, which made the government's macro-control wrong for several years.I give a simple example to illustrate my point.Let's take a look at the impact of each interest rate adjustment on the stock market since March 2007.From March 18, 2007 to December 21, 2007, my country raised interest rates 6 times.According to economic theory, the result of raising interest rates should be to suppress the stock market, causing stock prices to fall.However, we found that the results of these 6 interest rate hikes were all rises in stock prices, without exception, please refer to Table 1-1.What does this phenomenon indicate?This phenomenon tells us that the macro-control measures are wrong, because the results they lead to are completely opposite.As the macro-control further impacted the investment and business environment, more entrepreneurs stopped investing in the manufacturing industry and invested their funds in the stock market, resulting in a strange phenomenon that the more macro-control the stock price rose.The relationship between the property market and macro-control is also similar. But please note that at that time, apart from the stock market bubble and property market bubble, entrepreneurs in the manufacturing industry also spent a lot of money to speculate in calligraphy, paintings, antiques, and mahogany furniture, so calligraphy, paintings, antiques, and mahogany furniture also rose sharply at that time.In other words, the stock market bubble, the property market bubble, and the speculation in calligraphy and painting have the same source of funds. After the investment and business environment deteriorated, manufacturing funds entered these markets.When the crash happened, the stock market crash, the property market crash, and calligraphy and painting, antiques, and mahogany furniture crashed at about the same time. Why?Because it is the same source of funds, if it is going to collapse together, it must be good together. By 2009, compared with before 2006, due to the following six shocks, the investment and business environment faced by manufacturing entrepreneurs has worsened. In the past, we always simply believed that due to my country's trade surplus, it is normal for the RMB exchange rate to rise. This is the theory in textbooks.It can also be said that our exchange rate policy is basically still at the textbook level.However, I want to tell readers that the exchange rate is not just to balance the balance of payments, but a means for governments to achieve political goals.Manipulating exchange rates is the strength of European and American countries.For example, in the first quarter of 2009, in the case of the US trade deficit, why should the US dollar soar instead of falling?In the case of the EU trade surplus dominated by Germany and France, why should the euro plummet instead of rising?Only our renminbi rises when it should, because we don't know how to manipulate our own exchange rate.The United States constantly criticized us for manipulating the RMB exchange rate in the first half of 2009. I am afraid that we are flattering our central bank. Our central bank does not have the level to manipulate the exchange rate. They should be the ones who are really manipulating the exchange rate.This issue will be discussed in detail in Chapter 5. For example, in June 2009, when the international economy was so depressed, why did the price of oil soar to 72 dollars a barrel, then fell to 60 dollars at the end of the month, and then rushed to 70 dollars a barrel in late August above?This is manipulation, not dictated by supply and demand.Because the demand in June, July, and August was sluggish, there was no reason for the increase.And the boom in energy and agricultural prices starting in 2004 was the result of Wall Street manipulation (see ).The sharp rise and fall in the price of imported bulk materials (raw materials) has brought great difficulties to our manufacturing industry. The original intention of the "Labor Contract Law" was good, that is, to protect vulnerable groups through the government.However, there are several problems with the introduction of this regulation. The first problem is the lack of demonstration, and the second problem is the lack of pilots.The hasty introduction of such an important regulation caused more than one-third of my country's manufacturing companies to immediately fall into trouble, followed by layoffs, and workers faced unemployment; in the end, the government had to pay the bill in order to maintain social stability.As a result, the "three losers" situation of enterprise distress, worker unemployment and government footing the bill has been created.If our government does not accept opposing opinions on economic policy, it will eventually pay a huge price. The three-lose situation caused by the "Labor Contract Law" is the best example. Many scholars continue to praise China's economy, misleading the government's decision-making, and causing the government to seriously misjudge the economic situation. Therefore, they wrongly lowered the export tax rebate ratio and impacted my country's export manufacturing industry. As mentioned earlier, during the stock market and property market bubble era in 2006, the government adopted the so-called "excess liquidity" theory of some scholars, and shrunk the bank by raising interest rates and deposit reserve ratios for several consecutive years, resulting in corporate investment The further deterioration of the environment led to the continued rise of the stock market and property market. Beginning in 2009, due to excessive government spending, the financial situation deteriorated rapidly.In order to meet the targets set by their superiors, the taxation departments in many places have begun to kill chickens and collect taxes and fees under such a depressed economy, which has caused a great impact on private enterprises. It is because of these six major shocks (of course there are many small shocks not to mention), the investment and business environment that our enterprises are facing now is not as good as it was in 2006.If the environment continues to deteriorate, do you think entrepreneurs will invest?The deterioration of the investment and business environment is the first dilemma faced by entrepreneurs, and it is also the first cause of the Chinese economy. In addition, according to our data, the private economy in some places seems to be picking up in May, June, and July, which is related to the alleviation of five of the six major shocks. conducive to the increase in consumption.For example, the RMB exchange rate did not continue to rise in 2008/2009; the price of international bulk materials fell sharply at the end of 2008 and the first half of 2009, which caused a sharp drop in my country's import costs; some regions relaxed the implementation of the "Labor Contract Law"; Among them, the government adjusted the export tax rebate ratio back to 17%; in September 2008, the macro-control policy changed from tightening to loose, and international inflation was on the rise again, which would delay the recovery momentum.This also explains that although the electricity consumption of light industry dominated by private enterprises fell by 4.68% from January to July 2009, the electricity consumption of service industries also dominated by private enterprises increased by 10.37%. We need to carefully observe this Whether the recovery can be sustained. On April 13, 2009, "First Financial Daily" released a survey report involving 1,500 entrepreneurs.The results of the survey showed that 41% of the respondents considered the macroeconomic situation in the first quarter to be "poor" or "very poor", an increase of 16.9% over 2008. 32.9% of the respondents said that their business is not in good condition, and 25.6% of the companies are in a state of "semi-shutdown".Under the tremendous pressure of the global economic recession, 40.3% of enterprises indicated that they would reduce investment in the future.Entrepreneurs generally believe that insufficient demand is the cause of direct impact on the production and operation of enterprises.That being the case, where does the money in consumer markets such as the stock market, property market, and auto market come from?
So what is the impact of the financial tsunami?The financial tsunami has hit my country's overcapacity, which is the second dilemma faced by entrepreneurs. To understand how overcapacity is caused, we must first observe the two major policies that local governments have implemented over the years.The first policy is to focus on infrastructure construction and boost GDP; the second policy is to attract investment.Let's take a look at the impact of these two policies on excess capacity. Let’s talk about the first policy first. The so-called focus on infrastructure construction is to boost GDP growth by building bridges and paving roads and other reinforced concrete projects. Most of our GDP growth in recent years has come from this, not because of any remarkable increase in the productivity of enterprises. .The result of this is that the proportion of reinforced concrete to GDP is as high as 57%, thus reducing consumption to about 35% of GDP.If we compare the data of other countries with the composition of our GDP, we will find that the composition of our GDP is distorted.Consumption usually accounts for 70% to 80% of the GDP of other countries, but ours is less than half of that.Their reinforced concrete accounts for less than 20% of GDP, while ours is several times that of others.The new concept I want to tell readers is that the reason why our consumption is small is because there is too much steel and concrete, which compresses consumption. It is by no means a simple problem of increasing consumption just by building a social security system.Moreover, our bank savings are about 25 trillion yuan, divided by 1.3 billion people, the per capita savings is less than 20,000 yuan.If 1% of the wealthy population is deducted, the per capita savings is only 10,000 yuan, which means that China is actually a country with low consumption and low savings rate, not a country with low consumption and high savings rate as claimed by the media.Readers, please think about it, what should you do if there is an urgent need at home, such as paying tuition or getting sick?Even if a social security system is established, it is unlikely that this savings, which is only more than 10,000 yuan per capita, will be used for consumption. Let's talk about the second policy. In order to attract business and investment, our local governments are more tolerant of the three major problems of environmental pollution, resource destruction and labor exploitation.In addition, local governments have launched three preferential policies for land, taxation and financing in order to attract investment.Driven by these three major tolerances and the six major benefits of the three major preferential policies, our country's production capacity has expanded to about 70% of GDP. Readers, please think about it, the first policy causes consumption to be only 35% of GDP, and the second policy causes production capacity to become 70% of GDP.That is to say, we have 70% of production capacity, but only 35% of consumption, so the remaining 35% of production capacity that cannot be consumed is serious overcapacity. Readers may be curious, why didn't this part of excess capacity cause a crisis before?That's because it was absorbed by the frothy consumption of countries dominated by the United States.The impact of the financial tsunami on us is to burst the consumption bubble.The background of the formation of bubble consumption is very complicated, and we will introduce it in detail in the next chapter.The bursting of the consumption bubble immediately revealed the problem of our overcapacity. This is the second dilemma faced by entrepreneurs and the second cause of China's economy. Our economic system is indeed sick, and the disease is not serious. The cause is the deterioration of the investment and business environment and overcapacity.But what I am most worried about is that I will inevitably have a fever after being sick, but this fever is interpreted by us as "warming up".I will describe this in more detail later.How would you react if your child had a fever?You will definitely go to the doctor for a detailed examination to find out the cause, and you will never say that the child's body temperature has "warmed up".So I don't understand why our economic system is sick. Instead of investigating the cause, we say it is "recovery".The absurdity of the policy lies in making decisions based on superficial phenomena. This is the reason for the vicious circle of "when it is released, it will be messed up, when it is messed up, it will be closed, once it is closed, it will die, and once it dies, it will be released". Without finding the right cause, we hastily prescribe six major prescriptions to rescue the market from October 2008, including the 4 trillion rescue project, agricultural reform, ten major industrial revitalization plans, automobile and home appliances going to the countryside, medical reform, The last one is bank credit.I would like to briefly talk about the effect of these six prescriptions. The so-called agricultural reform means that farmers release their rights to manage farmland to obtain capital, and then they can work in cities or stay in rural areas to work for agricultural companies that purchase farmland.The essence of this policy is good, but the phenomenon I have observed so far is that the world's four major grain merchants have begun to take advantage of the good opportunity of agricultural reform to acquire Chinese agricultural companies with "agricultural product purchase licenses", and then give them money from behind to let them Large-scale acquisition of agricultural land in China.If this trend continues, China's agricultural security will inevitably be greatly challenged. I call on the government to pay attention to this crisis.The reform did not have the desired effect. Until August 2009, the implementation rules were not promulgated, and this reform was impossible to implement. The essence of this policy is to drive today's overcapacity through future overcapacity.For example, 4 trillion yuan is invested in infrastructure in the Midwest, such as expressways. After the expressways in the Midwest are built, there are basically no cars running. This is the so-called expressway with overcapacity.In the construction process, steel, cement, etc. need to be used, so the steel and cement industries with overcapacity can be stimulated by increasing demand (for example, the current supply of the steel industry is more than 600 million tons, while the demand is only 400 million tons , there is serious overcapacity).What about after the highway construction is completed?Not only are the highways themselves overcapacity, but the steel industry has returned to overcapacity because steel is no longer needed.Unless new growth points are found, there will be two crises of overcapacity in the future.Therefore, this kind of infrastructure construction is a so-called "one-shot deal" short-term behavior, and it will not be able to stimulate China's economy for a long time after it is completed. The essential meaning of this policy is the same as the 4 trillion plan, which is to drive today's overcapacity through future overcapacity.For example, the shipbuilding industry is overcapacity. The inevitable result of revitalizing the shipbuilding industry is to stimulate the steel industry with overcapacity through the rising demand for steel products.As long as the construction is completed, the shipbuilding and steel industries will become industries with excess capacity. Unless new growth points are found, it will be a short-term "one-shot deal" and will not be able to stimulate the Chinese economy in the long run. The essence of this policy is to solve the overcapacity crisis in these industries by going to the countryside. The problem is that this short-term behavior of squeezing rural purchasing power cannot solve the overcapacity crisis in these two industries in the long term.The problem is still the same, unless a new growth point is found, it will be a "one-off deal" and will not be able to stimulate the Chinese economy for a long time. Bank credit is the fastest and most effective of the six major policies.Why?Because it is monetary policy.The 4 trillion yuan bailout project, agricultural reform, revitalization plan for the top ten industries, the sending of automobiles and home appliances to the countryside, and medical reform are all fiscal policies.Fiscal policy is to be implemented and effective, but it is very slow.For example, for the 4 trillion bailout project, funds must be raised before it can be implemented, and it is still unknown how much money can be invested.Fiscal policy is slow, there is no way.The problem is that most of the 7.37 trillion bank loans in the first half of 2009 were used for infrastructure construction, which is also driving today's overcapacity through tomorrow's overcapacity.The remaining 30% to 40% of credit is mainly used for short-term credit and bill financing mainly for state-owned enterprises. This bank credit has caused a major impact on China's stock market and property market. We will discuss it in detail in Chapter 3 . The first and second prescriptions have no real effect, and most of the funds for the third, fourth, fifth, and sixth prescriptions make the second cause more serious, creating more serious overcapacity in the future.What is even more frightening is that part of the credit funds of the sixth prescription was used for short-term credit and bill financing mainly by state-owned enterprises. This fund not only did not alleviate the cause of the disease, but caused a more serious fever phenomenon. We will detail it in Chapter 3 Explore this question.