Chapter 10 Section 2 Chinese-style rescue of the market (Part 2): Stimulating domestic demand is a game of life and death

After the State Council announced the 4 trillion investment plan, I immediately wrote an article entitled "Which stocks have short-term investment value?" "The blog post pointed out: Investment-related stocks already have short-term investment value. I listed cement first, and pointed out that "oversold resource stocks are also worthy of attention (for example, if the demand for cement and steel increases large, which may increase the corresponding demand for coal)".As a result, in just two or three months, many cement stocks more than tripled, and coal stocks became one of the strongest sectors subsequently.

Because, all of this is in the government's plan. In fact, for China's stock market, not only the trend is determined by policy, but also which sector will be stronger and which sector will be weaker is also derived from policy.Those who do not understand policy interpretation cannot become a good investor in China. These are off topic. The government wants to play a dead game, and to activate consumption, it must let the people have money first, and to activate consumption through the money-making effect of a rapid increase in the stock market, although it is an auxiliary means, it is the option with the fastest results and the lowest cost.As the most typical policy market in the world today, if you grasp the policy trend, you will also grasp the direction of China's trend.

As I mentioned earlier, what China is facing is how to revitalize the dilemma of the "troika" of investment, export and consumption.When exports are declining, investment is short of money, and domestic demand is sluggish, the government’s favorite thing to do is investment, and investment requires money, and if there is money, it must activate domestic demand, but the activation of domestic demand faces the constraints of poor people. This may sound a bit tongue-tied, but it is a cruel reality. The extent of the financial distress is not difficult to see through a subsequent notice. On November 12, 2009, the Ministry of Finance issued the "Notice on Strengthening the Financial Management of Employee Welfare Expenses in Enterprises", which stipulates that the transportation, housing, and communication benefits provided by enterprises for employees, which have been monetized, will be paid on a monthly basis or Housing subsidies, transportation subsidies or car reform subsidies, and communication subsidies paid shall be included in the total wages of employees and shall no longer be included in the management of employee welfare expenses; if the monetization reform has not been implemented, the relevant expenditures incurred by the enterprise shall be managed as employee welfare expenses, but according to the State According to the unified regulations on the reform policy of the enterprise housing system, the purchase and construction of housing for employees is no longer allowed.Holiday allowances and monthly lunch allowances paid by enterprises to employees should be included in the management of total wages.

Incorporating benefits such as transportation, housing, and monetized housing subsidies for enterprise employees into the total wages of employees will cause some employees to pay more personal income tax. Even taking this small amount of money into account, it can be seen how strong the government's desire for funds is! In the context of the great need for money, to activate domestic demand, the government must allow those who need money to spend more money, and let those who do not need to spend money passively spend money out of fear of currency depreciation.This is "intimidation" consumption.

Everyone should pay attention to a detail: China really strongly stimulated domestic demand after the subprime mortgage crisis worsened in 2008. Why didn't it do so before? We need to interpret this question from two levels: First of all, the term "stimulating domestic demand" is widely used in countries with unsound social security. In countries with sound social security, ordinary people even don't hesitate to borrow money and consume excessively. Where is "pull" needed?This is the conclusion I reached after comparing relevant data from dozens of countries.In fact, it is also a conclusion that can be drawn based on common sense: Who would not want to spend money if they have money?I really dare not spend, I really have concerns!If you walk into the lives of ordinary people, you will know how much pressure they bear.

Secondly, before the deterioration of the subprime mortgage crisis in 2008, although China mentioned stimulating consumption many times, what China relied on was not domestic consumption, but foreign consumption!This is a chronic disease and a fatal flaw of the Chinese economy.When the per capita GDP of all countries exceeds 1,000 US dollars, their national income distribution mechanism is inclined to individuals and enterprises.Only after China's per capita GDP exceeded 1,000 US dollars in 2003, the wealth distribution mechanism still leans heavily towards the government, which leads to poverty among the people.Compared with the status quo of poor people, the products produced in China are surplus. However, the surplus products in China have formed a connection with the excessive consumption of Western countries represented by the United States, thus delaying the economic crisis in China. However, this may cause The hidden danger of economic crisis has always existed.This is also the reason why China's real economy has been hit harder than Europe and the United States after the subprime mortgage crisis.Once foreign consumption demand declines, China's overcapacity situation will be highlighted, and this vulnerability is difficult to correct in the short term.

China cannot really introduce substantive policies to encourage consumption before 2008. Another concern is inflation. We know that China's currency excess phenomenon is relatively serious, which generally leads to severe inflation, but China often maintains a state of coexistence of a large amount of excess money supply and low price levels. This peculiar phenomenon is called American economist McKinnon called it the "China Mystery" in 1993. In fact, the mystery of China is not difficult to understand at all. Part of the huge over-issued currency has been absorbed by real estate and the stock market, and part has been saved. This purchasing power has not been released in reality.

According to the data released by the central bank, the ratio of the balance of Chinese residents' savings to GDP was close to 80% at the end of 2005, and the personal savings rate also reached a historical high.In major developed countries, the ratio of household savings balance to GDP is mostly between 15% and 20%, and the personal savings rate is below 5%.In Asian countries, the proportion of household savings balance to GDP is basically between 30% and 50%, and the personal savings rate is between 10% and 15%. With a high savings rate second to none in the world, China did not cause serious inflation in the end, and savings "locked" purchasing power.

However, in 2008, when the government was facing a huge crisis and when external consumption was declining rapidly, consumption must be activated to make up for this big gap.At this time to stimulate domestic demand, the government will not be too worried about inflation, because the decline in external consumption makes the dual consumption driving force of external demand + domestic demand activation cannot be concentrated and exploded! Only by activating domestic demand can excess production capacity be absorbed and huge investment plans be funded. Therefore, stimulating domestic demand has become China's top priority.In addition to the real estate stimulus mentioned above, daily consumption and automobile consumption are also important to stimulate domestic demand.Subsequently, people saw a long-lost scene: China's domestic demand erupted like a volcano.

Under the pressure of anticipation of currency depreciation, people's consumption potential is instantly released.This is a brand-new consumption-stimulating mode that the international economics circle rarely paid attention to in the past. After real estate consumption is driven, it is followed by automobile consumption: On January 14, 2009, the State Council reviewed and approved in principle the "Plan for the Adjustment and Revitalization of the Automobile Industry and the Iron and Steel Industry", which regards the automobile and iron and steel industries as "important pillar industries of the national economy". On the 1st, the vehicle purchase tax will be levied at a reduced rate of 5% for passenger cars with a displacement of 1.6 liters and below.

On March 20, 2009, the government issued the "Detailed Rules for the Adjustment and Revitalization of the Automobile Industry" to clear up and cancel the unreasonable regulations that restrict the purchase of automobiles, revise and improve the automobile consumer credit system, and carry out "automobiles to the countryside", with the goal of ensuring automobile production and sales achieve steady growth. In 2009, the production and sales of automobiles will strive to exceed 10 million, and the average growth rate in three years will reach 10%. The problem is, China's auto industry itself has a surplus problem.As early as March 2006, the State Council issued the "Notice on Accelerating the Structural Adjustment of Industries with Overcapacity", which made it clear for the first time that there is a serious overcapacity in my country's auto industry.After the announcement of the notice, the state began to raise the threshold for investment in new vehicle companies and cross-product categories. On December 26, 2006, the National Development and Reform Commission issued the "Notice on Opinions on Structural Adjustment of the Automobile Industry", which defined the automobile industry as an industry with structural excess, and clearly listed 6 implementation opinions to deal with excess capacity and accelerate structural adjustment. Turning the time to 2008, compared with the measures introduced in 2006 for structural excess, it has taken a 180-degree turn. The policy of encouraging the development of automobiles has produced fruitful results that have left the world dumbfounded. On January 11, 2010, the China Association of Automobile Manufacturers officially released the automobile production and sales data: In 2009, China produced 13.791 million automobiles and sold 13.6448 million automobiles, a year-on-year increase of 48.30% and 46.15% respectively.For the first time, China officially surpassed the United States to become the world's largest new car market. On January 10, 2011, the China Association of Automobile Manufacturers released the latest data on automobile production and sales: In 2010, 18.2647 million automobiles were produced and 18.0619 million were sold, a year-on-year increase of 32.44% and 32.37% respectively.The production and sales of automobiles both exceeded 18 million, ranking first in the world in production and sales. The policy of vigorously encouraging automobile consumption was adjusted due to road congestion just one year after its implementation: from January 1, 2010 to December 31, 2010, the policy for passenger cars with a displacement of 1.6 liters and below was reduced by 7.5 % (formerly 5%) for vehicle purchase tax. On December 28, 2010, the Ministry of Finance adjusted the tax rate again, stipulating that starting from January 1, 2011, a vehicle purchase tax of 10% will be levied on passenger cars with a displacement of 1.6 liters or less. That's the end of the preferential policy, because the situation of overcapacity in the auto industry has further deteriorated. On September 4, 2010, Chen Bin, director of the Industrial Coordination Department of the National Development and Reform Commission, pointed out that, driven by local governments, the rapid expansion of domestic auto companies has exacerbated the risk of overcapacity, so measures must be taken to resolutely curb it.He said that many companies have formulated large-scale production capacity expansion plans, and a new round of production expansion has begun.According to the survey, my country's main 30 auto companies (groups) formed a vehicle production capacity of 13.59 million vehicles at the end of 2009, and a planned production capacity of 31.24 million vehicles at the end of 2015. The planned production capacity at the end of the "Twelfth Five-Year Plan" has been far greater than market demand.Chen Bin pointed out that overcapacity is the normal state of the market economy.The emergence of overcapacity is a failure of market signals, leading to a certain degree of blindness in investment behavior.However, serious overcapacity will lead to a series of problems such as vicious competition in the market, declining economic benefits of enterprises, and underutilization of factories, which will not only hinder the sustainable and healthy development of the automobile industry, but will also have a great impact on macroeconomic development. ① If housing and automobiles are the main force for stimulating domestic demand in cities, then sending automobiles to the countryside and home appliances to the countryside are the main measures to stimulate the rural consumer market. The huge rural market has always been regarded as an area with great potential that has not yet been fully tapped in China. Many experts believe that China's largest consumer market is in rural areas.For the 250 million households with a rural population of nearly 700 million, if the penetration rate of any commodity increases by 1 percentage point, the demand for more than 2 million units will increase.According to estimates, every 100 billion yuan of final consumption of rural residents in my country will generate a consumption demand of 235.6 billion yuan for the entire national economy, thereby expanding the intermediate investment of 125.3 billion yuan in the industrial sector, 62 billion yuan in the agricultural sector, and 47.8 billion yuan in the tertiary industry .According to the calculations of relevant experts, every 1 yuan increase in consumption expenditure of the rural population will bring 2 yuan of consumption demand to the entire national economy. This rural market is indeed very attractive. However, the rural market is not easy to pull.The per capita income in rural areas is less than 1/3 of that of urban residents, but according to the CPI data released by the National Bureau of Statistics in recent years, the price increase in rural areas exceeds that in urban areas. Moreover, public investment in rural areas is far less than in urban areas. During the two sessions in 2011, Ma Li, a deputy to the National People's Congress, a counselor of the State Council, and a member of the National People's Congress's Special Committee on Education, Science, Culture and Health, said that according to calculations, there is an average difference of 330,000 yuan in welfare benefits between rural and urban China.Generally speaking, it is more than 500,000 in large cities, and more than 100,000 in small and medium-sized cities. The three factors of per capita income, public investment and welfare treatment restrict the consumption ability of farmers. Statistics show that in 2009, the per capita disposable income of urban residents nationwide was 17,175 yuan, an actual increase of 9.8% after deducting price factors; the per capita net income of rural residents was 5,153 yuan, an actual increase of 8.5% after deducting price factors.Rural per capita disposable income is only 30% of urban per capita income. In 2010, the per capita disposable income of Chinese urban residents was 19,109 yuan, an actual increase of 7.8% after deducting price factors; the per capita net income of rural residents was 5,919 yuan, an actual increase of 10.9% after deducting price factors.The rural per capita disposable income is only equivalent to 30.9% of the urban per capita income. Let's take a look at it. A farmer's annual disposable income is only 5,919 yuan, an average of 493.25 yuan per month. Excluding daily basic expenses, the disposable funds are actually very limited.If there are serious patients at home, or children who go to school, their spending power will be swallowed up.If they have money, do we need to encourage them to spend?Still need "pull"? Behind the domestic demand is a sad reality, and it is an issue of people's livelihood that China must face up to. After the reform and opening up, rural residents only enjoyed the fruits of development in the first few years.Later, during the transfer of benefits from agricultural subsidies to industrial routes and demolition, farmers were clearly at a disadvantage in wealth distribution.Although China no longer imposes agricultural taxes on farmers, the increase in the price of agricultural means of production alone is enough to dilute the benefits of tax cuts. When studying China's economic issues, I believe that the data of real surveys are more convincing than the data released by any organization. Even so, when the subprime mortgage crisis worsened in 2008, farmers must spend their hard-earned hard-earned money in order to revitalize the whole chess game. It is under such a background that the sending of automobiles and home appliances to the countryside is in full swing. Cars going to the countryside: The State Council proposed in the "Auto Industry Adjustment and Revitalization Plan" announced on January 14, 2009 that from March 1, 2009 to December 31, the state will arrange 5 billion yuan to scrap three-wheeled vehicles for farmers One-time financial subsidies will be given for the purchase of light trucks and minibuses with a displacement of less than 1.3 liters. Home appliances going to the countryside: In 2007, the Ministry of Finance and the Ministry of Commerce put forward a policy idea of ​​financial subsidies to promote home appliances going to the countryside.Since December 2007, a pilot project of sending home appliances to the countryside has been carried out in Shandong, Henan, Sichuan, and one city in Qingdao. With the deterioration of the subprime mortgage crisis, in order to stimulate domestic demand as soon as possible, digest inventory, and revitalize the big game, the Ministry of Finance, the Ministry of Commerce, and the Ministry of Industry and Information Technology issued the "Notice on the National Promotion of Home Appliances to the Countryside", which stipulates that from February 2009 Starting from January 1, home appliances going to the countryside began to be promoted nationwide on the basis of the original 14 provinces and cities, and the number of products increased from the past 4 to 8. In addition to the previously launched "color TV, refrigerator, mobile phone, washing machine" , and added motorcycles, computers, water heaters and air conditioners.They enjoy the same 13% state subsidy as color TV and other products.Each province and city can choose two of these four products for promotion according to the different needs of each region. The purpose of sending home appliances to the countryside is not limited to the simplicity of enabling farmers to use electrical appliances!If they have money in their hands, the travel expenses to the county seat will not cost much, not to mention that they can be bought in shops in towns and villages.From an economic point of view, the purpose of sending home appliances to the countryside is to digest the backlog of inventory products and resolve the pressure of excess products. In November 2008, Vice Minister of Commerce Fu Ziying pointed out that my country is the world's largest producer and exporter of home appliances, and the output of color TVs, refrigerators, washing machines, and mobile phones ranks first in the world. In 2007, the accumulative export of these four types of products was 57.9 billion US dollars, with an export dependence of about 50%, and serious overcapacity.Especially since 2008, due to factors such as rising production costs, appreciation of the RMB exchange rate, and rising prices of energy and raw materials, the export of home appliances has been greatly restricted. It is urgent to digest excess production capacity by starting the rural market. The "Home Appliances Going to the Countryside" policy shifts the export control policy to start the rural market, which not only expands the space for enterprises to adjust product structure and improve brand influence, but also helps to digest excess capacity in the home appliance industry and reverse the general decline in corporate profits... Preliminary calculations show that for four consecutive years in the rural areas of the country, the implementation of the "Home Appliances Going to the Countryside" for color TVs, refrigerators, washing machines, and mobile phones, four types of products that are in great demand by farmers, can stimulate the sales of rural household appliances by more than 150 billion yuan per year on average, driving the total retail sales of rural social consumer goods An increase of about 2.5 percentage points, equivalent to about 20% of the export capacity, can basically absorb the excess capacity of these products. "The excess production capacity of these products can be basically digested" obviously achieved the effect expected by the relevant departments. However, this kind of pull is also expendable. In the case that the social security mechanism in the countryside is not perfect and the public facilities are seriously lagging behind the cities (for example, in my birthplace, due to the muddy roads, each family has to spend 3000 yuan. Multivariate money to repair roads—this is equivalent to more than half a year’s income of a family, our hometown is very poor. This situation is completely resolved by the government in cities), China’s pull policy can only succeed but not fail— There is no ability to withstand failure, because once it fails, the originally fragile rural security system will become more fragile due to the decline in self-protection ability caused by the consumption of farmers' only stock wealth, and farmers' ability to resist risks will be further reduced. The risk lies precisely here. Many people don't understand what kind of adventure is behind China's rescue of the economy and the achievement of "first recovery" in the economy.Only those who have a deep understanding of the suffering of farmers can appreciate this danger. The rural market is always forced to undertake some special missions.Sending cars to the countryside and home appliances to the countryside bears the heavy responsibility of digesting inventory and stimulating domestic demand. After the implementation of the new rural construction, many local governments prohibit farmers from building their own houses, and instead purchase houses that are uniformly built by the government.This actually allows farmers to undertake the mission of absorbing excess currency, or in other words, the monetization of housing has extended to rural areas. Now, back to the topic of home appliances going to the countryside. Home appliances going to the countryside consume not only the fragile purchasing power of farmers, but also the reputation of merchants and relevant departments.During the process of home appliances going to the countryside, some unscrupulous merchants took the opportunity to sell overstocked, obsolete, or even refurbished or "knockoff" products to farmers, and some merchants raised their prices, and the subsidized prices that farmers bought were much higher than those in cities. . You may wish to read a report published by "Guangzhou Daily": In early December 2009, a survey report released by the China Consumers Association showed that "the repair ratio of home appliances going to the countryside is as high as 12.6%, which is equivalent to every 8 home appliances going to the countryside. 1 out of 1 has been repaired." What does this mean?Huang Xiaoming, vice president of Midea Group, revealed to the media that the repair rate in the industry is about 0.75% for air conditioners, 1.08% for refrigerators, and 0.59% for washing machines. The quality of their products is questionable and very unreasonable."The newspaper also cited a specific example: Ms. Qin bought a refrigerator in August for home appliances to go to the countryside, "but after using it for less than two months, the freezer appeared to freeze."What made Ms. Qin even more angry was that the maintenance personnel went through the motions in a hurry when they came to repair the two times. The vast majority of farmers in China are very hardworking and honest. The dishonesty practices of some unscrupulous businesses have caused them unforgettable harm. After all, it is too difficult for farmers, especially those in poor areas, to earn some money! The result of deception is that farmers vote with their feet.According to data from the Shaanxi Provincial Department of Commerce, during the 20 days from December 16 to January 4, 2008, a total of 370 home appliances were sold in Shaanxi Province's "Home Appliances to the Countryside", an average of less than 20 home appliances per day. .Not to mention the entire province of Shaanxi, even according to Xi'an's vision, the starting point of hundreds of units is too low. We must realize that people have the desire and motivation to consume in their bones, and consumption has never been driven by external forces.The reason why many people dare not spend is that they must use their savings to deal with the risk of lack of social security! If China wants to really stimulate domestic demand, it must change the current wealth distribution pattern, take the line of people's wealth, increase people's income, and establish a sound social security mechanism.As far as the huge rural market is concerned, in order to activate this market with unlimited potential, it is also necessary to increase farmers' income and establish a systematic social security mechanism as the premise. At the same time, it is also necessary to allow farmers to have channels to appeal for interests and have a smoother right to speak. One of the main reasons for the slow growth of Chinese farmers' income is the rise of various powerful interest groups and the weakening of the weak's right to speak.Even when their interests are damaged, it is difficult to protect their own rights and interests through high-cost legal weapons. More often than not, they embark on the difficult road of petitioning and expect their superiors to resolve them. Let's look at a set of data: In 1978, the per capita income ratio of urban and rural residents was 2.57:1. With the deepening of rural reforms, this ratio gradually decreased, and fell to the lowest point of 1.82:1 in 1983. Since then, the urban-rural income gap has widened. The urban-rural income ratio was 2.2:1 in 1990 and 2.71:1 in 1995.By 2010, the gap between the two was 3.23:1. After 1993, why did it suddenly become a watershed that affects changes in farmers' income? Only in terms of the channel for interest appeals, it is because after this year, the right to speak of farmers has been weakened.Take the proportion of farmers among the deputies to the National People's Congress as an example: in the fourth National People's Congress, farmers accounted for 29.4%, and in the seventh it was still 23%. 9.4%, the ninth session dropped to 8%, and the tenth session was 8.4%.There is such an astonishing convergence between the income changes of our country's farmers and their proportions in the National People's Congress! The decrease in the proportion of peasants among deputies to the National People's Congress makes the peasants' right to speak obviously weak.Especially in the process of my country's democratic politics moving forward, powerful voices are more likely to have a direct impact on relevant policies. The data show that it was precisely after 1993 that the prices of agricultural means of production in my country rose rapidly.In 1995 alone, the price of domestic urea rose by 50% over the previous year, that of pesticides by 18%, and that of agricultural film by 31%.The "scissors gap" of agricultural and industrial products expanded rapidly, and by 1994, it had reached 67 billion yuan. If the taxes paid by agriculture and township enterprises were included, the amount would be even greater. On the surface, farmers are only the bearers of the price increase of production materials, but in essence, farmers bear the cost for the development of urban industry, that is, maintain the rapid development of urban industry by depleting the interests of farmers.If farmers have enough channels to appeal for their interests in the process of discussing relevant policies, can the problem of "scissors difference" caused by policy inclinations still exist for so many years?Some people believe that after the abolition of agricultural tax, the development of my country's rural areas will have a new historical opportunity.However, the benefits brought to farmers by the abolition of agricultural taxes were quickly swallowed up by the rapid rise in the prices of agricultural production materials.Moreover, these problems have not been resolved for a long time because of the weak voice of farmers. The weakening of farmers' right to speak has also affected the quality and quantity of rural public goods.Relevant data show that the gap in the level of public infrastructure construction between urban and rural areas is at least 15 years on average.Due to insufficient public investment, rural residents have to pay a greater burden.For example, in education, the financial investment in rural education is less than a quarter of the national education investment, which has caused many children from poor families in rural areas to drop out of school because they cannot afford tuition fees.The medical differences are even more pronounced.Although my country's rural population is much larger than the urban population, the investment in rural medical and health care was once less than one-sixth of that in urban areas. It is very common in economically backward areas to fall into poverty due to illness or have no money for medical treatment. Economy is the base, politics is the superstructure.The decisive role of politics in economic development is irreplaceable.In the construction of new countryside, it is difficult to achieve the expected goal without the improvement of farmers' ability to participate in politics. Of course, the role of the National People's Congress does not have such a significant impact on the distribution of wealth.I write this point just to inspire others, and hope that people will pay attention to the "three rural" issues from their own perspectives, and appeal for the disadvantaged.From ancient times to the present, is this not the obligation and duty that intellectuals with conscience should fulfill? When intimidated consumption stimulates domestic demand, more importantly, the huge credit extension, the government’s high-priced land sales, and the income from taxes and fees allow the government to accumulate capital for large-scale investment. China has thus solved a deadlock, but the hidden dangers planted are not less than before.As Xu Xiaonian, a professor of economics and finance at China Europe International Business School, said, the economic crisis caused by structural imbalances is far from over. The strong recovery supported by government spending and bank lending may be difficult to sustain, because the government cannot continue to spend like this. Banks cannot lend money like this forever.Residential consumption, the most important part of the national economy, has been neglected for a long time. If the residents' consumption cannot be effectively promoted, the mid- and long-term recovery of the Chinese economy will not be realized. However, it is often easier to bask in the joy of victory and forget about everything else—even if it is only a perceived victory, not a substantive or lasting victory. One of the biggest problems with the expansion of government investment is the substantial increase in government debt. In particular, local government debt is opaque and out of the supervision and public view, forming a huge bottomless pit. This kind of hidden danger is difficult for many people to understand.When China's debt and the huge debt of the United States form a certain connection at the node, it means the formation of a sniper point.China will pay the price. So, how did the United States rescue the market?If you understand this distinction very well, then the development of future trends will gradually become clearer in your mind. Notes: ① Development and Reform Commission: China's auto market has entered an era of diversified competition. Xinhua News Agency, 2010-9-4