Chapter 10 Lecture 09 Does the Inflection Point Really Exist?

●For macro-control to be effective, the country must have a unitary economy. ●To solve the problems of China's economy today, we must jump out of the economic circle. ●The stability of housing prices is the inevitable result of the current lack of a large number of real estate transactions. At the end of 2007, real estate prices in Shenzhen and Guangzhou took the lead in reducing prices. Wang Shi even threw out "the turning point of the property market" on his personal blog, and the term "turning point" became very popular for a while.The inflection point of real estate, the inflection point of the stock market, and the inflection point of prices are almost full of voices of "turned, turned".The topic of the inflection point of housing prices is even more controversial.Some people say that the inflection point of real estate prices has finally arrived, while others say that the inflection point is actually just a marketing strategy of developers.Then, how does Professor Lang analyze the inflection point of real estate?

Hello, everyone.Recently, there have been several hot issues that deserve our attention.One of them is the real estate inflection point question raised by Wang Shi a month or two ago.On the basis of this inflection point question, I would like to talk to all the guests about the real economic philosophy. The entire concept of macroeconomics probably involves two parameters, one is the interest rate, and the other is the bank deposit reserve ratio.These two parameters are very important, and I have mentioned them many times before.The central bank's interest rate has been adjusted six or seven times, and the deposit reserve ratio has been adjusted no less than 10 times.my country's current deposit reserve ratio is as high as 15% (Editor's Note: According to the latest data, as of June 25, 2008, the central bank has adjusted the deposit reserve ratio to 17.5%, which is the highest in the history of my country's deposit reserve ratio position), ranking first in the world.This means that our macro-control policy has been adjusted from moderate tightening before 2007 to absolute tightening today.

The increase in the bank deposit reserve ratio has led to a large amount of credit loans and currency being withdrawn. Coupled with the increase in interest rates, the cost of people borrowing money has also increased. At the end of January 2008, a set of data released by the state showed that the growth rate of bank credit loans was as high as 18%, which can be said to be the highest point since last year.After years of continuous macro-control, by the end of January 2008, the money supply still rose sharply, and the scale of bank credit could not be reduced. I would like to ask the guests on site, especially those engaged in the manufacturing industry, are you well-off?Can you borrow money from a bank loan?I gave a speech in Henan a while ago and met several big entrepreneurs in Henan.They told me that at the end of M07, 2/3 of their working capital was withdrawn, and many private enterprises were short of money.And do ordinary people have enough money to buy a house?Can I get a mortgage loan from a bank?The answer is no.Not only is it very difficult for ordinary people to borrow mortgage loans from banks to buy houses, but it is also very difficult for companies to borrow money from banks for working capital.We can't borrow money, so where did the money go?Borrowed by whom?

The growth rate of bank credit loans increased from 16% to 18%, which shows that our credit scale is still growing.But private entrepreneurs can't borrow money, and neither can ordinary people. Where did the money go?This is the problem in China today.Where is the money?Basically, it flows into the hands of local governments and large state-owned enterprises.So what does the government do with the money?Engage in public construction, such as building bridges and paving roads.This is not a question of whether it is right or not, nor is it a question of whether it should be done. This is the status quo in China today.Through this macro-control, we have tightened the scale of capital growth of private enterprises and ordinary people, but relaxed the scale of local governments and large state-owned enterprises.Therefore, the economic development of the departments related to local construction is overheated, while the general private enterprises are overcooled.Why is our economy very hot, but the life of entrepreneurs is getting more and more difficult every day?The reason is that in the dual economic environment, we have a phenomenon of reverse flow of funds.The reverse flow of funds is led by banks. They implement a policy of shrinking credit for the overcooled private enterprise sector, recovering the money lent or not lending at all, and who is the money used for?to the local government.

Why do I mention this theory?What does this have to do with inflection points?There are relationships.Today's Chinese economy is the only dual economy in the world, which means that the sectors related to local governments and state-owned enterprises, that is, sectors related to construction, have overheated economic development, such as real estate, steel manufacturing, and cement production. , image project, performance project, bank and stock market.But the economic development of most private enterprises is too cold. If all the guests agree with my original dual economic theory, do you know what happened to Wang Shi's turning point theory and the macroeconomics you learned in school?In the macroeconomics textbooks commonly used around the world, the reason why interest rates or bank deposit reserve ratios can regulate the economy has a premise, that is, the country must be a unitary economy.

What is a unitary economy?That is, when the economy is depressed, the country is depressed, and when the economy is overheated, the country is overheated.This phenomenon only occurs in a unitary economic environment, such as the United States, Europe, Japan and other countries.We are different in China. We have a dual economic environment, where overheating and overcooling exist at the same time. With the increasing voice of the inflection point theory, among the real estate bigwigs, the inflection point dispute is also going on vigorously.Adversaries represented by Wang Shi insist that the inflection point of housing prices has already taken shape, suggesting that people buy a house after three or four years, while real estate developers represented by Pan Shiyi insist that the inflection point has not occurred at all, and there is still room for housing prices to rise.The big names are fighting with each other, each sticking to their own words.Someone stood up and said that the concepts of the inflection point considered by the two sides of the debate are different, but what is the inflection point?

What is an inflection point?Let's take a look at the trend of US real estate from the second half of 2007 to the first quarter of 2008.When the U.S. central bank lowered interest rates, the U.S. real estate market immediately heated up, and housing prices rose sharply.Because interest rates are low, everyone can borrow money to buy a house.But after housing prices rose, the U.S. government believed that the economy might be overheated, so what should we do?Just follow the method in the macroeconomics textbooks of American universities to increase interest rates.As interest rates rise, the burden on borrowers also increases accordingly, so they stop borrowing money and buy houses, and housing prices immediately fall.This, folks, is called an inflection point.

Therefore, the power of macro-control can be said to be very powerful.Since there are not too many obstacles to the unitary economy, as long as the central bank gives an order, its policies can be implemented from the central government to the local governments.In this economic environment, macro-control can have a timely impact on housing prices, which forms an inflection point.Therefore, with regard to the trend of house prices in 2008, we should stop making predictions. We are not in a unitary economic environment at all, but in a dual economic environment where overheating and overcooling exist at the same time.How do you predict the future trend and inflection point of real estate?We continue to raise interest rates and bank deposit reserve ratio, what impact will it have?As I said earlier, because the central bank's macro-control will cause the reverse flow of funds, it will make overheated departments hotter and overcooled departments colder.Therefore, the more the central bank regulates, the more it will accelerate the violent turmoil in the dual economic environment.

Think about it again, if interest rates and bank deposit reserve ratios are raised again and again, what will happen to the overcooled sectors?You will find that these private entrepreneurs don't want to do it anymore.Let me take Shenzhen as an example. A private entrepreneur in Shenzhen invests 1 billion yuan in the manufacturing industry. The profit he makes in a year is definitely not as good as the profit he made last year when he bought a house with 10 million yuan. doubled or tripled.According to this situation, if they have been engaged in manufacturing honestly, they must have suffered a lot.So what should they do?First of all, the increase in interest rates makes the cost of borrowing money correspondingly higher. They do not want to borrow money, and even if they want to borrow, they may not be able to borrow.In addition, even if they can borrow money, once the bank withdraws the credit loan, its liquidity will be cut off.What should our private entrepreneurs do?What do they do with the money that should be invested but not invested?Engaged in real estate buying and selling, which is why housing prices in Shenzhen doubled or tripled last year.And ordinary people simply do not have such a strong financial strength.

By February and March 2008, there were overwhelming figures showing the arrival of various inflection points. The prices of some real estate properties in Shenzhen had been reduced by 10%, the real estate properties in Shanghai were secretly discounted, and the real estate properties in Beijing directly offered a discount of "20% off the full payment in one lump sum" .In the first-tier cities where housing prices have risen too fast, the transaction volume has shrunk sharply; real estate companies headed by Vanke have also heard news of discounts.For a time, the property market seemed to be toppled like dominoes, and there was a breath of price cuts everywhere.Someone asked, do these phenomena not mean that the "turning point" of housing prices has really come?

Next is the topic that everyone is most concerned about. Will there be an inflection point in our real estate? Should everyone go to buy a house?Here, we do not make predictions, but logical reasoning.As long as you understand the dual economic concept I mentioned earlier, you will understand.Take Comrade Wang Shi as an example, everyone think about it, is his so-called inflection point really his wishful thinking?Or is it something he's actually doing?After Wang Shi put forward the "property market inflection point theory", in order to match this inflection point theory, Vanke's site first started to cut prices. What's the point? To give an example, the average house price per square meter in Fuzhou is 6,000 yuan.When Vanke came in, the house he built had a land price of 7,000 yuan per square meter, plus construction costs and profits, and the house price was at least 15,000 yuan.So what are the characteristics of this real estate?When this real estate was supposed to sell for 6,000 yuan in the past, and now it sells for 15,000 yuan, the nearby real estate, although nothing has been done, but the house prices have also risen.Under such circumstances, Vanke’s house price is only 5% cheaper than the 15,000 yuan. Do you think it makes sense? Simply put, the cost of purchasing land increases the total cost of the house, and the later the house is built, the more expensive the house price will be. Houses in the second half of 2008 will definitely be more expensive than before, and this batch of houses in 2009 will be even more expensive.There is no economic indicator in the world that will rise as fast as our house prices in China. The price increases of gold, oil and heavy metals are far less rapid than our land prices.Moreover, our land price rise has another feature, that is, it only rises but not falls. We have not heard of any land price that will be cheaper than last year. The real estate developers’ price cuts are only a temporary illusion. Coupled with the nature of China’s current dual economy, if we only rely on the market-oriented operation of the real estate market itself, there will be no basis for the existence of the “turning point”. What about the sequence? Today, if China wants to solve economic problems, it must jump out of the economic circle, that is, to "encircle Wei and save Zhao", what does that mean?I use the terms of traditional Chinese medicine to say that today our real estate bubble is like having hepatitis. The word "yan" is very interesting, it is two "fire".What is hepatitis?Too much anger.According to the theory of Chinese medicine how to treat it?How to put out the fire?It needs a great coolness, and the great coolness can only be neutralized when it encounters a big fire.But if the Great Cool is really used, the patient may be put to death, because the patient's constitution is not good, so how should he be rescued?Do the opposite, use warming tonifying, first slowly mend his body, and then use great cooling.Our real estate market seems to have hepatitis, but what is the current macro-control policy based on the unitary economy transplanted from the United States?It is Great Liang.But we should use warming tonic, how to warm tonic?There are two problems to be solved: one is the problem on the demand side, and the other is the problem on the supply side.What is the demand side problem?First of all, the government should improve the harsh investment and business environment faced by private entrepreneurs, let the funds return, and encourage them to engage in the manufacturing and production industries they should be engaged in.This is difficult, but it can cure the root cause.Where else would the money go?After the government cracked down on the real estate and stock markets, these funds had nowhere to go, so they went to speculate in gold, diamonds, famous paintings, antiques, and Puer tea. Regarding the supply side, we will re-examine.The open auction is fair and hard to replace.But how should the land sales proceeds after the public auction be used?Should it be regarded as the fiscal surplus of the local government, or should the money be returned to the people to build more low-rent housing or affordable housing?The more important question is how to solve the problem of fairness in the distribution process. This series of problems must be considered and solved simultaneously in combination with the supply-side and demand-side factors.This is called warming. We have good intentions, but the actual economic phenomenon, just like the dual economic environment we are facing, is extremely severe.To solve the problems of real estate and housing prices, we must first see whether we can solve the problems of supply and demand.I have introduced all these theories to everyone here, but I have not drawn a conclusion on whether there will be an inflection point, but I leave it to everyone to think for themselves.As for the trend of housing prices from 2008 to 2009, it must be the result of relying on government policies. Finally, I want to tell you an economic theory.Everyone has traded in stocks, if there is no trading in the stock market that day, what will happen to the stock market?The stock price does not move.The reason why the stock price moves is because there is a transaction.So why was the housing price relatively stable from the end of 2007 to January 2008?This is an inevitable consequence of the current lack of significant transactions in the real estate market.But let's not get excited, and we must not get excited, because this is not an actual phenomenon.How should the house price go next?According to the theory I just mentioned, you will come to your own conclusion after careful consideration. Audience: Professor Lang, hello.Just now you mentioned that after the increase in our money supply, investment has mainly flowed into popular industries such as real estate, while investment in unpopular industries such as manufacturing has decreased.So what caused this phenomenon? Is it the regulating effect of the market or the regulating effect of the government? Lang Xianping: Very good, this question is very profound.Over the past 30 years of reform and opening up, we have always hoped to allocate resources based on the market, but now we have not achieved marketization in the true sense.Taking real estate as an example, the supply side of real estate is related to the government's control, which is the manifestation of insufficient marketization of real estate.What about the demand side of real estate?Corporate funds are running around, which is a manifestation of excessive marketization.Therefore, our marketization is basically like this: either insufficient or excessive, it is difficult to achieve marketization in the true sense, and marketization in the true sense is what we need.So why do we insist on reform and opening up?Because it's the right policy. But at present we lack a market for effectively allocating resources because of the distortion of power I just mentioned.For example, the allocation of resources should be allocated by the bank, which should use the resources to the highest value, which is called marketization.But it doesn't, what is it used for? Used its parent department.The secretary of the local construction department opened his mouth to borrow money from the bank. Can the bank not borrow money?This is not marketization. It is not the allocation of resources according to benefits, but the allocation of resources according to power. This is the problem.But the behavior of entrepreneurs is more market-oriented.When times are hard, he can quit.What are you going to do if you quit?To speculate in stocks and real estate.Although we do not agree with him to do so, and are saddened by his actions, his behavior is reasonable, which is the result of the so-called distortion of marketization and non-marketization.