Chapter 6 Lecture 5: China's Economy in the Global Financial Crisis

According to the field survey results of the Economic Observer, the operating rate of the clothing industry in Jiangsu and Zhejiang is less than one-third, 50% of the plastic industry, 60% of the rubber industry, and less than 30% of the soybean pressing and filtering industry.According to my own research report, the report made by our own team shows that 60% of the leather processing factories in Haining Leather City are currently shut down. Also, the power generation, how many areas do we have power shortages, do you know?Do you think that our economy is getting better and the electricity is insufficient?No, it’s because the power plants are unwilling to generate electricity. Our field research found that China’s total installed capacity is 916 million kilowatts. Now, guess what percentage of electricity is generated?Only 40%.

Why?There is no need for electricity at all, and the economy has been depressed for several times. Do you understand?Why is there still a power shortage?Because the power plant doesn't want to generate electricity, the more electricity it generates, the more money it loses, so it doesn't generate electricity at all.As a result, power shortages have occurred in many areas, including Guizhou, Yunnan, Shanxi and other places.What's more, iron ore, as of June 20, the backlog of iron ore in various ports in China was as high as 98.9 million tons, which has exceeded the 70.98 million tons during the financial tsunami.

These figures are all manufacturing data.I have told my friends that our economy is already in recession.This is why Wen Jiabao has been visiting Zhejiang continuously recently, and he finally understood it this week.Believe it or not, he only understood it this week.What are you doing?what!this level.Well, the data I just read is the result of a terminal illness.Then you have to ask me, Mr. Lang, what disease happened to us in China, which led to the phenomenon of ice and fire?So that's the topic of this morning's lecture.China's disease is called a manufacturing crisis.We are sick due to the manufacturing industry, which leads to fever and chills, which leads to less than 40% power generation, which leads to this series of negative figures.Since today is a class, not a simple public speech, I am particularly in the mood to train you today.Let me ask you why we have come to this point.

Let me tell you a conspiracy theory that you have never heard of before, and I will read you another set of data. This is definitely the feeling. In 1991, Margaret Thatcher of the United Kingdom visited the United States and gave a public speech in Houston titled "How We Destroyed the Former Soviet Union". She made a conclusion that caused an uproar all over the world. She said that we (the United Kingdom and the United States) deliberately Spread false news to induce the former Soviet Union to invest a large amount of social resources in the military industry and engage in an arms race with the United States and other countries.Before the disintegration of the Soviet Union, 70% of the GDP of the entire Soviet country was military industry. Great, so why did the Soviet Union disintegrate?

None of our Chinese scholars know. Let me tell you the answer now. Do you know that the military industry is not profitable?For example, after the military factories in the Soviet Union produced aircraft and cannons, they were directly assigned to the troops for use. Can you make money?No, you have no real benefit.So, how do I buy spare parts?Let's guess how the workers' wages are paid.Have you thought about the seriousness of the matter?70% of a country's GDP is military industry, which is a sector without benefits, so how do you do it? Don't make it too complicated. The simplest concept is how you pay wages.Can't post, why, he doesn't work.You are all state-owned enterprises, you know very well, okay.Internal transfers are enough, there is no benefit at all, everything is a number on paper.

Then how do you pay wages, how do you import raw materials from abroad, tell me?No wages can be paid, so on the eve of the disintegration of the entire Soviet Union, everyone in the entire country is working in the military industry, because the population of the Soviet Union is very small, unlike ours.So let me ask you, how about eating?Imported from abroad, where do you get your toothpaste, toothbrush, and soap?Foreign imports, what about wages?issued by the government.May I ask where did you get the money from?think about it.This money only comes from the oil exports of the former Soviet Union.Create 30 billion US dollars of foreign exchange a year, and use this 30 billion US dollars of foreign exchange to import various spare parts, toothpaste, toothbrush, soap and agricultural products to feed the entire population of the Soviet Union and the military industry.

So, if the United States, Britain and other countries want to defeat the former Soviet Union, which one must be defeated first?Yes, oil exports.As long as the oil export is defeated, the Soviet Union will disintegrate immediately. Okay, let me read another set of data to you. This is our official figure. 70% of the GDP of the People’s Republic of China in 2010 is reinforced concrete, which is what you see. highway. 70% is these things. Please think about another question, take the expressway as an example, is it beneficial in itself?No.Why?Can he create wealth after the expressway is built?no.It is the same as the military industry of the former Soviet Union, that thing is useless.You must look at its carrier, and it will be beneficial to use it. Do you understand what I mean?

I ask you again.70% of our country's GDP is made of cement, and governments at all levels are frantically engaged in construction, like lunatics.May I ask you, where does the money for the construction come from?Where does the government get the money to pay your wages for construction?How do you import these raw materials?Let me tell you the answer, it all comes from the taxation of the manufacturing industry and the dollar foreign exchange created by the manufacturing industry.Do you all understand?Therefore, 70% of the GDP of the former Soviet Union is military industry, which has no benefit.It has to rely on oil exports of 30 billion US dollars in foreign exchange every year.70% of China's GDP is reinforced concrete, which is equally useless. It depends on China's manufacturing industry to provide tax revenue and provide US dollar foreign exchange.So today, I would like to remind everyone that if the former Soviet Union is to be defeated, oil must be defeated, right, as I said just now.If the United States wants to defeat China, which part must be defeated?Manufacturing, understand?Everyone, let's cry together.

Today, when I am speaking, why does the mysterious phenomenon of ice and fire appear?Because of the manufacturing crisis, everyone cry.In fact, I told the government about this a few years ago, but it didn't listen.I don't want to talk too much nonsense, just this opening statement is enough to shock all the students.what to do? Raising the price of manufacturing products will aggravate inflation. It is impossible to raise the retail price. If the retail price cannot be raised, the price of raw materials will continue to rise. The inevitable result is cutting corners. On September 15, 2008, Lehman Brothers, the fourth largest investment bank in the United States, finally filed for bankruptcy protection due to the subprime mortgage problem, thus becoming the source of the first round of financial turmoil.Wall Street, known as the heart of the United States, has thus fallen into earth-shaking turmoil. In just a few days, Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, American International Group and other former Wall Street all-powerful characters have been in succession. Falling, everything seems to be verifying the words of Greenspan, the former chairman of the Federal Reserve - the United States is falling into a once-in-a-century financial crisis.

The financial crisis in the United States spread rapidly across the world, but the impact on China has not yet begun in a real sense.As far as the specific situation of our country is concerned, there is only one place where our economy is linked to European and American countries. The most critical one is 35% of excess production capacity. Unnecessary things are then sold to Americans, and we are linked to the United States through this part.Because after the subprime mortgage crisis in the United States, the consumer confidence of ordinary people lost, and they began to reduce consumption. In addition, their property prices plummeted, and the speed of building construction also slowed down. Therefore, for various departments related to construction, including building materials and furniture The need to wait has also dropped.This is an indirect impact, but what is more terrifying is that if the confidence of the American people collapses, it will not be a problem of furniture, but an impact on all walks of life.

China's financial crisis has not really started yet, and it will start only after the property market collapses to a certain extent.The financial crisis in the United States has affected China through the loss of confidence and the decline of American real estate.The real impact, on China's 35% excess capacity, has only just begun.In other words, a Chinese-style financial crisis may also occur in the future.Therefore, our economy cannot be optimistic, and once the export is hit, the problem is not limited to the export. Once a large number of factories close down, a large number of workers will be unemployed, and a large number of unemployment will reduce consumption. If you buy so many cosmetics, don’t buy so many clothes, and don’t buy so many non-necessities of life, the domestic sales industry will also decline, and China’s financial crisis will officially break out. Facing the crisis in the manufacturing industry, we are not optimistic now, and none of us know what the international financial crisis will look like next week. We used to imagine that the crisis would be resolved, but it turned out that not only was it not resolved, but it became worse , more and more serious.More and more banks are failing.There are hundreds of banks in the United States that have been affected by the subprime mortgage crisis. This tsunami will not stop there, and will continue to impact.If our Chinese economy continues to deteriorate due to the pressure of exchange rate, cost, "Labor Contract Law" and macro-control, the investment and business environment will continue to deteriorate, and everyone will stop doing business and use money to speculate in stocks and real estate, causing bubbles in the property market and the stock market. In this case, the next step will be a continuous decline in property prices and stock prices.The reason for the continuous decline of property prices and stock prices is that the manufacturing industry, which is the main body of China's economy, continues to decline. Therefore, property prices and stock prices will continue to fall in the future.If property prices and stock prices continue to fall, the vision rate of the future manufacturing industry will continue to rise. For example, if you bought a house for 100 yuan and took a loan of 70 yuan, the current market value is only 50 yuan. You just sold the house , If you still have 20 yuan and can’t pay it back, then the payment may be cut off, even if you don’t want to cut off the payment, but you have to continue to pay even if you are unemployed, which will lead to a more serious financial crisis. In this case, the thing to pay attention to when investing is not to be overwhelmed.I have seen many people, in order to maintain and increase the value, use limited money to buy properties, but the worst thing has not happened yet.Judging from the current situation in Shanghai, everyone is waiting and watching.We must do what we can, the financial crisis in China has not really started yet.What we see now is only the recession of the manufacturing industry, and the recession is caused by four domestic factors - exchange rate, cost, "Labor Contract Law" and macro-control.Moreover, the manufacturing industry, which is the main body of China's economy, is constantly declining. Therefore, stock prices and property prices can only continue to fall, and the possibility of continuing to rise is almost zero. It is only a matter of time and speed. Now, we can see that many local governments have begun to rescue the market, and do not want house prices to continue to fall.Everyone needs to understand one thing, the rescue of the market itself is right, but the rescue method may not be effective, this is not an era of headaches and cures.The reason why our real estate market has fallen like this is that there was a big bubble some time ago, and if it is pushed forward, it will be the recession of the manufacturing industry. Therefore, if the root problem is not solved, the real estate market will not be saved. Rescue the market is only a short-term effect. The long-term trend depends on the health of economic entities. Everyone knows that the Chinese government has been bailing out the market since March 2008. In the end, our stock market has become 1900 or 1800 points. Why did this happen?Because of the foundation of the whole country, our manufacturing industry is constantly declining. This force is too powerful, and it drags down the stock price and property price. Therefore, the local government will continue to pull it up. Because the stock price and property price are the same, long-term Stock price movements also depend on the health of economic agents. Now that house prices have been falling, the next step is to cut off the supply, the financial crisis, and the terrible thing is that once an abnormal phenomenon occurs in the international financial crisis, what will happen to China?Or, the consumption pattern of Americans has changed, from the past pattern of debt consumption to non-consumption, which is simply a disaster for China's manufacturing industry.Therefore, not only the property market and the stock market will be hit, but our manufacturing industry will also be further hit.When our manufacturing industry is hit, our economic foundation will be shaken, which will make our stock market and property market continue to fall. In this case, what we really need is the profit growth of our business, more than anything else.Because only when profits increase can the Chinese people live a better life, and only after profits increase can we solve the problem of falling property prices and stock prices that we are worried about.Only after this problem is solved will there be no financial crisis.Only after our profits grow can the impact of foreign countries be minimized. As us ordinary people, we must be careful now.What we can do is limited. The international financial crisis does not depend on us. It depends on how European and American governments deal with it. Moreover, the growth rate guaranteed by the government cannot be changed by us. In the current situation, it can be said that cash is king, and having cash in hand is the most important thing. Our economic development for so many years, with an annual growth rate of 10%, is basically based on government projects, called local government GDP projects, which are driven by bridges and roads, and reinforced concrete. Therefore, these related departments, including real estate, reinforced concrete Large-scale state-owned enterprises, their annual growth rate is as high as 30%, or even more than 40%. It is they that drive the Chinese economy, so the Chinese economy has a growth rate of 10%.Because 30% of sectors are growing at a rate of 30%, the entire Chinese economy is growing at 10%. You may be surprised when you see this sentence, why is this so? You may think that the situation in China is much better than that of the United States and some other countries, but dear friends, have you seen why the oil price in other countries falls while China’s oil price does not fall? You can also see the annual GDP growth rate of China. Why are the cities not rich, and the countryside is not improving? Why are the manufacturing industries in the Pearl River Delta of China closing down one after another? Have you ever thought about this series of issues? Everyone thinks that the financial crisis is coming to an end. In fact, the real financial crisis is just now. A beginning, and once it starts, it will last for years or even decades without stopping. Of course, the Chinese economy cannot be separated from this environment, an environment of global economic integration. As we all know, this financial crisis originated from the "subprime mortgage crisis" in the United States. What is the "subprime mortgage crisis"? Everyone knows that ordinary people buy houses It takes a lot of procedures and layers of checks before you can borrow money. In the United States, subprime debt, to put it bluntly, is to create a market for those who are not eligible to apply for housing, so that those with insufficient credit or loan records Bad people can also come to borrow, and the price of this market is today's financial crisis. From the beginning, these subordinated debts have to be applied for through intermediary agencies. The intermediary agencies have to take care of the first hurdle, but the intermediary agencies have lost their fiduciary responsibilities from the very beginning, and began to violate regulations and make frauds, using fake income certificates to deceive banks. Seeing the fake certificate, the situation is okay, the past credit record is good, but I didn’t expect that these are all fake, so I lent them 1 million, the bank is originally a profit-making institution, it will convert the 1 million into Bonds are sold to maintain the balance of payments. Who will sell the 1 million to, that is, Fannie Mae or Freddie Mac, and then these two companies will divide the 1 million into 1,000 yuan notes and sell them to ordinary investor.It’s not over here yet. Now it’s subprime debt, and there’s even more terrifying subprime debt. This is for those who can’t even provide proof of income. These people usually run small shops, set up street vendors, and Let them buy a house. In this way, people who can’t even provide proof of income can also buy a house, and deceive the bank through the packaging of an intermediary. The bank then sells the bonds to Freddie Mac or Fannie Mae. Without knowing it, it was divided into 1,000 shares and sold to the whole world, including AIG and other companies. Finally, one day, these subprime debtors began to be unable to repay the interest. Li Mae or Freddie Mac came to cash in. Fannie Mae and Freddie Mac couldn't get the money and couldn't cash it out to the public, which triggered a series of economic collapses. The current debt of Fannie Mae and Freddie Mac is 5 trillion US dollars , of which two trillion dollars were wrongly given to foreign governments, three trillion dollars were sold to the American people, and this one trillion dollar subprime debt, I dare not even think about it now, because this one trillion dollar bond was sold before There is no interest for five years, and they start paying high interest rates after about the fifth year, but once they start paying high interest rates, they will not be able to pay, so this is the next shock. Everyone wants to know when China's financial crisis will start. So far, most people think that the US financial crisis is just an impact on China's stock market, but in fact the impact of the US subprime mortgage crisis is still only indirect. Losses, such as our Fannie Mae or Freddie Mac lost more than 370 billion, which is not necessarily a complete loss, but has already invested more than 370 billion, but the real impact of the financial crisis on China, including the Chinese stock market The onslaught has not yet begun.Because the stock market in our mainland is different from that of the United States, and also different from that of Hong Kong. The stock markets all over the world are linked to the U.S. stock market. Only the A stock market in China is different, because the A stock market is basically a relatively closed system. It is very difficult to speculate in A-shares, so the impact of the subprime mortgage crisis on us is limited. It has not started yet. When will it really start? After the firewall in the United States is broken, once the firewall in the United States is broken, it will impact the consumption of the United States. In the market, due to the reduction of US imports, our exports have been affected, which has hit the fundamentals of our economy. Now it has begun to appear. Many manufacturing companies in Suzhou have begun to switch to domestic sales. Domestic sales have begun, but the enthusiasm of Chinese people for consumption has not been raised.Contradictions emerged. China's current economic development is still a "dual economy". The real estate and stock market are overheated, while the manufacturing industry is too cold. As we all know, in Asia, Japan's manufacturing industry accounts for 70% of the national economy, and South Korea is mainly famous for electronic products. , while Taiwan is mainly in the IT industry. Although the service industry accounts for about 70% of the national economy in the United States, it is still the largest manufacturing country in the world. Japan is second and China is third, surpassing Germany. The current economic environment is extremely unfavorable to China's development. China not only has to face the international financial crisis, but also China's national conditions are even more worrying. If the United States can contain this crisis, it will not be very effective for China. Big, if it is successfully curbed, it will be a few years later, and the current Chinese economic structure is unreasonable, and the GDP accounted for by the manufacturing industry is declining every year. In 2008, it may have become a negative value.