Chapter 27 5. New ideas of supply creating demand

●How to help our company earn more money. ●We should have an understanding in terms of industrial policy, don't continue to work hard on manufacturing, but shift from manufacturing to the link of large logistics, and this transfer is promoted by the power of the government, I think it is the most efficient. ● How should the bailout money be used wisely? What is supply creates demand?That is to help our companies make more money, rather than asking companies to simply increase supply.How to help companies make more money?I would like to give our government a suggestion.How to help our business make more money.

Let me take Dongguan, which is relatively difficult for us, as an example.Our Dongguan toy factory manufactures a Barbie doll. Its ex-factory price is about 1 US dollar. What is the profit in 2008?Should be 0 if not negative.Therefore, if we use RMB 4 trillion to directly help these manufacturing companies to manufacture Barbie dolls, no matter how much they manufacture, the profit will be close to zero, so I am not suggesting that the government directly help manufacturing companies.What should I do, please think about it?What is the retail price of this $1 Barbie doll sold at the point of sale in the United States - Wal-Mart? 10 USD. $10 minus $1 is generated through the entire logistics link, that is, it is created by six logistics links including product design, raw material procurement, warehousing and transportation, order processing, wholesale operation and terminal retail.

If we can help enterprises move from pure manufacturing to six more profitable logistics links, I often call it "six plus one", "one" is manufacturing, and "six" is big logistics links, then by The resulting benefits are immeasurable.Here I don't want to talk about how to help companies make money in "One", because it is difficult for you to make money here because the profit is too low.The government should assist our enterprises to move from "one" to "six", and make money from "six", and its profits will be high.That's why I think we should have an understanding in terms of industrial policy, not to continue to work on manufacturing, but to shift from manufacturing to the link of large logistics, and this transfer is promoted by the power of the government. I think it is the most effective efficient.

I want to give you a few examples.In November and December 2008, I went to Quanzhou and Jinjiang to give speeches, and I also went to Shantou to give speeches.I have done a lot of communication with local leaders.I don't want to mention the names of these companies here today, so as not to be suspected of propaganda. Take Jinjiang as an example. The leaders of Jinjiang told me that the output value of their export enterprises accounted for 58% of the local economy. At the end of 2008, they were facing serious difficulties.But they have quite a lot of brand companies, and their brand companies are big and well-known. They are currently operating well, and the overall growth rate is not bad.The leader of Jinjiang pointed out.This is due to the effect of their brand strategic advantages.Taking Jinjiang as an example, there are as many as 230,000 retail outlets.Shantou is the same situation, although many toy factories in Dongguan have closed down.But there is a toy company in Shantou that is doing very well, and it also has many terminal retail outlets.Of course, local leaders told me that this may be because of the brand.I said, it’s not like this, it’s not a simple brand effect, but besides the manufacturing of “one”, these companies also have a product design department, and there are many terminal retail outlets, this is “six plus one”. one part of it.Of course, there are several other logistics links from product design to terminal retail.

That is to say, on the surface, these companies seem to be well-known companies. In fact, the reason why these companies have a good growth rate is because they have mastered the entire industrial chain of "six plus one".Although the manufacturing profit of "one" is very low, close to 0, but through the "six" big link of the whole big logistics, this enterprise is very profitable.So on average, the benefit of the whole company is still good.And this is why it can create a brand, that is to say, when you successfully integrate the "six plus one" industrial chain, you can create a brand.So let's not misunderstand, it is not that it has a brand, so it creates its benefits, but it will have a brand after it controls the entire industrial chain.

Today, I will provide the government with a new way of thinking to consider how to use the bailout money on the knife edge.Our manufacturing industry seems to be very difficult at present, but what is the reason for the difficulty? For example, many enterprises in Zhejiang, Jiangsu and Guangdong have closed down, and low productivity is certainly one of the reasons.But let me tell you that because they only focus on manufacturing, the problem of low productivity is very serious. When the final profit is negative, they can't carry it on and must go bankrupt.But for a manufacturing company, if it controls the six major logistics links, its productivity will naturally increase, it's as simple as that.

Therefore, by controlling the entire so-called "six plus one" industrial chain, enterprises are particularly able to withstand pressure.And our so-called industrial upgrading thinking needs to be changed, don't continue to work on "one", because your profit margin is close to 0, you have to go from "one" to "six".This is the specific concept of industrial upgrading.Therefore, our governments at all levels hope to promote industrial transformation during this recession.Here, I also hope to draw a more concrete outline of the government's so-called industrial transformation.The so-called industrial transformation is not about continuing to work hard on manufacturing, nor is it asking you to buy more advanced manufacturing equipment.I think that in times of depression, our government should assist enterprises in a special transformation, that is, from the past "one" to "six plus one" efficient integration, which is what we should do.

Only through the integration of "six plus one" can it create considerable profits for the company, and after the company makes more profits, it will give employees more salaries, and after the employees get their salaries, they will spend and buy a lot Things, then the company can make more money, and after the company makes more money, he will make reinvestment, and then there will be a multiplier effect.This is the new thinking that supply creates demand, rather than simply asking companies to increase production capacity. The audience raised many meaningful questions about this chapter. I list the questions and answers below for your reference.

Audience: Do you think there are any measures that are feasible, such as driving a certain industry to stimulate national consumption? Lang Xianping: As Premier Wen Jiabao put forward, I hope that everyone will quickly replace old durable consumer goods with new ones, replace old TV sets quickly, buy new TV sets, and then improve sales channels.But what we really need is to increase the consumption of consumer goods as a whole. It does not need to be limited to any industry. It is best that everyone has a sum of money to spend. Buy what you like, anyway, just don’t buy necessities for people’s livelihood.You don't want to buy vegetables or pork, this is not acceptable.What are you going to buy?If you want to buy more luxurious things, such as diamonds, stereos, motorcycles, and cars, it’s okay to buy these things.

Audience: Okay, thank you Professor Lang. Audience: I have two questions. The first question is about infrastructure investment, because now there is a new news in China that China will invest in high-speed railways in the central and southern regions, from Hefei, Anhui, to Wuhan, Hubei.Now my question is, the country is investing in infrastructure, is it because our infrastructure is still not perfect?Because the infrastructure in the United States is already quite complete.Therefore, it is impossible for the United States to invest in infrastructure to survive the crisis.Like Roosevelt's New Deal, he also promoted domestic consumption through infrastructure investment.So to what extent and from what range, the government has already done a good job in terms of infrastructure. For example, when it is saturated, this part of the funds can be used for domestic consumption.

Lang Xianping: Our infrastructure is already very complete.The infrastructure is like this at the beginning. You build railways and roads. In a place where there are no railways and roads, the economic benefits of doing so will increase.After building more, its efficiency of generating economic benefits will drop.We are not at this high point, but at a low point where benefits have fallen sharply.What are you doing with this money?To hide wealth among the people.It is hoped that consumption can stimulate production and create a virtuous circle.Because after stimulating production, you can hire more workers, pay him, and then stimulate consumption, hoping to form this virtuous circle.Since we are currently investing in infrastructure so inefficiently, I don't think we should invest in infrastructure anymore. Audience: Just now you mentioned that 2009 should be much more difficult than 2008. I wonder if you can give us a macro analysis of all aspects of economic life except the property market.For example, this year 2009 is more difficult than 2008. In what aspects of economic life is it specifically reflected? Lang Xianping: Let me ask you a question, do you know how many unemployed people will be created by the current situation of a large number of Chinese manufacturing enterprises going bankrupt?This is why President Hu Jintao said that the employment situation in 2009 was very severe.After the Chinese New Year, especially after the fifteenth day of the first lunar month, when workers come back to look for jobs and cannot find a job, that is the real crisis moment.And our manufacturing companies that have closed down in large numbers are the number one killer of this unemployment crisis.China's biggest crisis is its own manufacturing industry. Before the financial crisis, there were already problems. Coupled with the impact of the financial crisis, my country's manufacturing industry declined rapidly. In addition to the workers directly employed by China's manufacturing industry, there are also his family members.There are probably more than 200 million workers, and if his family is added, there may be 700 to 800 million people.This cannot be taken lightly, which is why I hope that the government’s 4 trillion yuan bailout funds can be used on the knife’s edge, that is, those who really need assistance are not those infrastructure road workers and construction workers.It is this large private economy that cannot collapse, otherwise the consequences will be unimaginable. It involves 90% of China's employed population. Audience: According to my understanding, if there is some crisis in the manufacturing industry, it should be about half a year after the order reduction before the manufacturing industry will experience a depression.If orders have been greatly reduced since the fourth quarter of 2009, then the real depression in our manufacturing industry was in the first half of 2009.In the fourth quarter of 2008, there was already a recession.This means that orders began to decrease in the first half of this year? Lang Xianping: When the stock price and housing price bubbles appeared in 2006, the investment and operating environment of the manufacturing industry had already begun to deteriorate. Misjudgment.The investment and business environment of the manufacturing industry has been deteriorating for a period of time, and it was only in the middle of 2008 that it began to appear in the form of a large number of manufacturing enterprises closing down. Audience: I understand. At present, our economy is facing two threats. One is the crisis in the manufacturing industry that has emerged, and the other is the financial crisis. Lang Xianping: You asked this question very well. We are a nation with a very good sense of ourselves. We only see other people's problems, never our own.So we see that European and American countries are busy coping with the financial crisis, and we talk about what they are going to do every day.But there is only one crisis called the financial crisis.We have more problems than anyone else. We have two crises. Not only do we have a financial crisis, but we also have a crisis in manufacturing itself.If we hadn't had a financial crisis, our manufacturing crisis alone would have been enough to send us into a recession.So our problem is bigger than others. Audience: Many media are now promoting the depression brought about by the financial crisis.Before the financial crisis came out, what kind of measures should our country take for the various crises that existed in us, and how should we solve our original problems while dealing with the financial crisis? Lang Xianping: In other words, our country should have used today's policies to help the manufacturing industry at that time when the stock market and the property market bubbled two or three years ago, such as financing, taxation, industrial transformation or service etc.If we had helped them solve their difficulties at that time, maybe neither the property market bubble nor the stock market bubble would have happened.It is because the operating environment of the manufacturing industry is so bad that their funds are transferred to the real estate market and the stock market.If you help them improve their investment and business environment, they will not speculate in real estate and stocks.If there was no property market bubble and stock market bubble in 2007, these funds would not be locked up. These are all misjudgments.In fact, the point I put forward two years ago is that the essence of the property market bubble and the stock market bubble is the reflection of the manufacturing industry. Audience: What effect do you think the investment of RMB 4 trillion will have in solving the crisis in our manufacturing industry in terms of the impact of the financial crisis? Lang Xianping: I am worried that the allocation of part of the bank for infrastructure investment will have a negative effect, making the manufacturing industry more short of funds and more depressed. Audience: Professor Lang, you also mentioned just now that the social security system in China's rural areas is relatively weak, so in your opinion, how to revitalize the consumption capacity in rural areas under such circumstances?And it seems that the central government does not seem to have much of the 4 trillion yuan of funds used to revitalize agriculture or the economy of rural areas. So what do you think the Chinese government should do?For example, to help revitalize China's agriculture, I think it is agriculture in a broad sense.Including, for example, planting, breeding, and forestry.If China's agriculture can be revitalized, it may attract some workers who went to work in the Yangtze River Delta or the Pearl River Delta to return to their hometowns to engage in their original industries, which may reduce the unemployment situation in China's manufacturing industry. Lang Xianping: All countries in the world support agriculture through industry. I have never heard of creating domestic demand for agriculture to support industry. That is impossible.why?Because relatively speaking, the added value of agriculture is very low, so it is impossible to rely on domestic demand in agriculture to stimulate the economy, but must subsidize agriculture through industries with high added value.Doing the opposite is almost never done by other countries.Because the agricultural population is too poor, the added value is too low.Not enough of a shock to hit the entire economy. Audience: I have another question. For example, the European Union and the United States have a lot of subsidies for agriculture. Lang Xianping: Yes, this is what I mean, to subsidize agriculture with the value created by industry.For example, if you invest 1,000 RMB in the Midwest, your income will be 100 RMB.Similarly, if you invest 1,000 RMB in Shanghai, you may be able to earn 10,000 RMB, and you can take 1,000 RMB out of the 10,000 RMB to give to the countryside, which is better than investing directly in agriculture.Why does the United States invest in the east coast, including California and New York State, and the Midwest of the United States is also an agricultural area or desert, where there is not much development at all, why?Because the benefits are too low.So how does America or Europe treat agriculture?Basically, agriculture is subsidized after making a lot of money from industry, because the added value is different. For an investment of 1,000 RMB, the money earned from investing in industry may be 10,000 RMB, and the money earned from investing in agriculture may be 500 RMB.Then after earning 10,000 RMB, it is better to spend 500 RMB to subsidize agriculture. There is no need to waste money investing in low-efficiency agriculture. This is a problem of effective allocation of resources. After more than 20 years of rapid development.Today's China enjoys the reputation of "the world's factory".According to research.in manufactured goods.The output of more than 130 kinds of products in China ranks first in the world.All kinds of evidence show that China seems to be a veritable manufacturing powerhouse. However, let me tell you that China is not a big manufacturing country at all. On the contrary, China's manufacturing industry is facing an unprecedented crisis.Because we have entered an era of unprecedented industrial chain competition, Chinese manufacturing that only focuses on labor costs has come to an end.The so-called manufacturing powerhouse.It is just the thinnest link in the division of labor in the international industrial chain.In fact, in the international industrial chain, if a Chinese company earns one yuan (10%) from the actual manufacturing part, then for foreign businessmen, it will not be able to do this kind of product design and development, procurement, warehousing, order processing, wholesale, and retail. Some earn nine bucks (90%).In other words, we use less than 10% of the value.The accumulation of foreign exchange reserves of 1.8 trillion US dollars means that we have contributed trillions of US dollars to foreign countries at the same time, which is almost the total salary of the whole country for 80 years! So what is the division of labor in the international industrial chain?Let’s take the toy industry as an example. The preliminary product design and market research of a Barbie doll are all completed in the United States. Wholesale and retail are also done by foreign businessmen.In other words, it is one dollar that is actually manufactured in the international industrial chain.We call it "hard one yuan", and the industry chain that does this kind of design, procurement, warehousing, order processing, wholesale, and retail is called "soft nine yuan".What is going on behind the division of labor in the international industrial chain?The essence is to outsource the labor-intensive industry and also the least profitable part to Chinese factories through "soft nine yuan". Foreign businessmen rely on their leading industrial chain and their advantages in orders to actually pay the price to Chinese factories Can be far cheaper than the cost of its own manufacture. In the past, we made many mistakes, such as exchanging the market for technology. As a result, the market was lost and the technology was not exchanged.In the past two years, many local governments have called on enterprises to engage in industrial upgrading and brand strategy. I think this is another misunderstanding.The so-called industrial upgrading should not still be upgraded on the "1" of "6+1", but should be upgraded from 1 to 6.In addition, taking ZARA as an example, the establishment of the brand is the inevitable result of the efficient integration of the industrial chain rather than the reason for the success of the enterprise, so we cannot turn the result into the cause. "This article is excerpted from "Industrial Chain Conspiracy: A War Without Smoke I~II" by Lang Xianping)