How to Control China’s Economy

  The sluggish consumer confidence has made the US “Black Friday” sales in 2009 unfavorable. The “Chick Picking” group and the generous donation will directly affect the US retailers’ procurement plans in China in 2010 and 2011. The principle of purchasing less stocks and less discounts to ensure profits will continue into 2010. Therefore, in the troika of the Chinese economy, the government still needs to continue to care for exports and patiently cultivate domestic horses, and to collect income for investment to smoothly pass through 2010.

  Tom, the master of our company’s engineering department, was born in a family that made carriages. His father was not only a famous craftsman, but also a school that taught people to drive a carriage. Of course, the people who learn to drive a horse are now for entertainment or competition. The transportation function of the carriage has long been replaced by the developed roads and railways in the United States, and it is still visible in some areas of the west. Although Tom did not inherit his father’s business, he also learned the good craftsmanship of driving a horse. According to him, driving a horse is harder than riding a horse. A troika (two or four carriages in a professional game) is much more difficult to navigate than a horse. “The speed and safety of the troika depends on the coordination of the three horses, not the condition of a horse. Whether a driver can win in a match depends on his ability to control the coordination of multiple horses. Coachman The key to the word is the coach.”

  ”If one of the horses is sick or weak, it slows down?” I couldn’t help but think of the Chinese economy’s troika and the “export” horse that is suffering. Tom said: “Stupid drivers will whip the slow horse. In fact, all the horses are very hardworking, not as lazy as people, it needs care and encouragement. A good driver knows how to make the other two Pima has more to help it. But this time, not the other two horses run as fast as possible. Their speed is just right, so that their companions will not feel the strength but also have the feeling of snow and horseshoes. If they run too fast, then It may drag it down, and even make it fall into a hoof, causing people to turn over.” It should be said that the Chinese government has accumulated rich driving experience during the 30 years of reform and opening up. After the export was hit hard, it decisively introduced domestic demand and generous. Investing in infrastructure initiatives, which has achieved excellent results in the international storm of the international driver of the financial turmoil, and when the Chinese economy’s troika entered 2010, Tom’s words actually have a lot of us. Enlightenment.

  The exit is an injured horse

  In February 2009, the State General Administration of Customs said in the interpretation of China’s import and export data in January that exports excluding the Spring Festival factor are actually growing. I clearly disagreed and accurately predicted the trend of long-term and sharp decline in China’s exports. In this general trend, I agree with the counterparts in the European and American retail industry. My prediction is based on not luck or a mathematical model, but through the change of American consumer behavior, so that we can make the most accurate forecast of price and quantity for future product development and procurement from the retailer’s point of view. . Then, according to the same forecasting method, will Chinese exports recover in the new year?

  In the past year, affected by the financial crisis, China’s exports have declined for 12 consecutive months. Obviously, the horse has been injured and injured. The clever motorist of the Chinese government did not whipping it. Instead, it used a series of policies to encourage and care for it, allowing it to recuperate while continuing to participate. However, the crisis has not completely passed. If one sentence is used to predict China’s exports in 2010, it is “not dangerous”. Where is the new year insurance? Let’s take a look at the dilemma facing American consumers.

  The aftershocks of the real estate crisis continued. In October 2009, the number of new homes in the United States was only 529,000, down 6.2%. At the same time, according to the Wall Street Journal, one-fourth of the US home lenders became “negative”, and their loans to banks were higher than the market value of houses after shrinking. In some areas, the proportion was even higher than 65%. This means that if the owner spends $1 million to buy a house, the first period pays $250,000 and the loan is $750,000; today the market value of the house plummets to $45.45 million, and the loan owed to the bank is 1.65 times the market value of the house! With more “negative Weng” appearing, more and more people are disappointed and desperate, the moral bottom line is lowered, and personal bankruptcy protection is chosen to slip away. According to statistics, every homeowner abandoning the house will at least reduce the real estate value of the entire community by 6%, and its lethality is staggering.

  The banking crisis has not ended. On the surface, Wall Street is in recovery, Goldman Sachs is preparing to issue astronomical bonuses, and Bank of America has announced a high-profile repayment of government loans (the purpose is precisely to get rid of the government’s control over high salaries and high bonuses), which seems to be a thriving scene. A detailed analysis is actually not the case. On November 1, 2009, CIT Group, which specializes in SME loans, declared bankruptcy protection and became the fifth-largest bankruptcy case in US history. The US$2.3 billion loan provided by the US government has also gone. Don’t forget, this is a century-old store with a history of 101 years, and it is one of the few banking industry in the United States that survived the Great Depression. From January 1, 2009 to November 16, 2009, a total of 123 banks in the United States closed down. What is even more worrying is that on the “blacklist” of the Federal Deposit Insurance Corporation (FDIC), the number of “problem banks” has soared to 552.

  The unemployment rate has reached a new high. The real estate crisis did not appear to be a turning point in nature. The banking industry did not experience a substantial recovery, which directly affected the economic recovery. It also made the employment rate, which was lagging behind, a long-term unsettled indicator. The unemployment rate hit 10.2 in October 2009. The new high of % is still high (10%) in November.

  In the face of these three dilemmas, it is no longer strange that the confidence of American consumers has been uncertain and difficult to recover. The confidence of consumers in the downturn has directly affected and changed their consumption behavior. A recent survey by Retail Forward, a retail-savvy retail consultancy, found that consumers’ tendency to reduce consumption, reduce bargains, and reduce consumption levels is quite obvious (Figure 1). The annual “Black Friday” sales in the United States is not good, and it is also a testimony.

  The US retail industry generally unveiled the biggest sales season of the year on Friday after Thanksgiving, and its scale and influence greatly exceeded China’s Spring Festival. The so-called “Black Friday” means that the retail industry’s sales for a year often turn from a loss (deficit) to a profit on this day. In 2009, “Black Friday”, although the store was full of people, but the scared consumers cautiously licked the wallet, “cherry-picking” (specialized discount and is a shopper of large discount goods) ) The public, the generosity of the past.

  This is bad news for both retailers and Chinese exporters, as this will directly negatively influence retailers’ decisions on the 2010 and 2011 procurement plans. Recently, I made a statistic in the industry and found that the average FOB price of exports of department stores other than clothing dropped from 3.2 US dollars in 2008 to 2.4 US dollars in 2009, a drop of 25%. Obviously, American consumers are still spending, but they spend less money than they used to, and they are more restrained. More precisely, the quantity is still there, and the unit price is falling.

  At the same time, US retail sales in November 2009 (Same Store Sales, the most important indicator for the retail industry) increased by only 0.5%, which is quite different from the industry analysts’ expectations of 2.1%. As this small rebound was built on the same base in 2008, the same-store sales plummeted 7.8%, so that the industry has broken below the glasses, and a few shadows for the few weeks before Christmas 2009. . Further peeling off a layer of onion skin to see more changes in consumer behavior: department store sales in the same month fell 4.7%, while same-store sales in low-cost stores increased 2.1%. The same-store sales of the most exclusive Fifth Street department store in the United States (Saks Fifth Ave) plummeted 26.1%, which was terrible. Many experts in the industry predict that American consumers will be afraid of the ropes for ten years, and their consumption behavior may undergo permanent changes, especially the baby boomers who used to be the main force of consumption, and their attention will shift from consumption to savings. To catch up with the wealth lost in the financial crisis. This can be seen from the fact that the personal savings rate of American consumers who have always been known for their food and food is miraculously growing when they have no money.

  Coincidentally, a survey by the British insurance company Hiscox also showed that even wealthy families (with an annual income of more than $152,000 and 2.5 million wealthy families in the UK) also reduced their consumption by losing confidence (Figure 2 ). A survey by another insurance company, Swinton, shows that 42.7% of UK households plan to spend on Christmas cuts.

  The fires in the city gates and the fish in the market, the changes in consumer behavior in the United States and other developed countries and the sluggish domestic demand market are precisely an early warning that China’s exports will be challenged for a long time. This is the risk that China’s exports will face. Then why do you say “no surprise”?

  From the consumer’s point of view, there have been too many bad news in this year, so it is a bit numb; in addition, everyone has awakened from the initial shock, and attention has begun to address the risks.

  From the retailer’s point of view, the worst year (2008) has passed. In 2009, everyone generally hoped for less purchases, less inventory, less discounts, no sales, and guaranteed profits. This big strategy should be the first to bear fruit. Everyone has not been as violent as the 2008 price war in the big sale, and the losers are hurt. Therefore, although retailers are not living, most of them are not a problem. Therefore, this procurement principle will almost certainly continue into 2010.

  From the perspective of Chinese export enterprises, the tsunami-like impact of the financial crisis has passed, the sinking boat has been sinking, and the trees of the disease are almost ill. Under the support of the government, some enterprises have recovered, and some have There is a lingering fear, but it is not the panic of the original, and confidence is slowly recovering. Therefore, for the government driver, it is still a top priority to continue to care for the horse. Exports have always been a fast-moving move for China’s economic growth. Exports have brought capital to China, brought employment opportunities, brought new technologies, new ideas and new challenges, which are driving domestic demand, promoting investment and infrastructure. It has become an immeasurable effect. Therefore, the relationship between exporting and stimulating domestic demand and investment is the relationship between “the skin is not preserved and the hair will be attached”. Protecting exports and stimulating domestic demand and investment are not only contradictory, but also complement each other.

  Domestic demand is a great potential

  Domestic demand is a slow horse, slow because of youth, but its potential is great. Such a good thing needs cultivation, and it is a long-term patient cultivation. The most important and most sustainable strategy is to cultivate consumers. In our country with a population of 1.3 billion, the most effective way to cultivate consumers is to create jobs. The labor-intensive export manufacturing industry is precisely a huge consumer cultivation center.

  The economic development of the United States does not lie in the fact that there are more billionaires like Bill Gates or Buffett, but a large middle class. On the White House’s website, there is a striking article: “A strong middle class equals a strong America!” In early 2009, US President Barack Obama signed a memorandum to set up a special working group. President Biden led a powerful national policy to improve the living standards of the middle class. This is thought-provoking. We often say that the country is rich and strong, but in fact it may be more logical, that is, the people are rich and strong.

  Investing in this horse

  In the financial crisis, it is the third horse to invest in it. It has largely supported China’s economic growth in 2009, and it has contributed to the export of this injured horse. The wave provided a channel for flood discharge, which laid a solid foundation for the recovery of China’s exports and the growth of domestic demand. The government’s 4 trillion investment in stimulating the economy is mainly concentrated in the so-called “iron-based” (railway, highway, infrastructure), which has become one of China’s core competitiveness.

  It is worth noting that investing in this horse, although running fast, may lead to blundering through physical exertion. Domestic work has always been vigorous and vigorous, and the benefits are immediate. The shortcoming is that the argument is not enough. Especially in the short-term, large-scale investment will often bury hidden dangers, such as the bank’s non-performing loans, insufficient reserves, rushing to lead to repeated construction, and inevitable The brakes bring waste caused by the suspension of construction, as well as unavoidable corruption. In the past 30 years, such a lesson has been too profound. According to the author’s opinion, this third horse arrived when it was time to receive a reins. Good drivers know that the ropes need to be early and the strength is small so as not to affect the stability and speed of the carriage, and to take care of the speed and coordination of the other two horses.

  China is fortunate. The reform and opening up has brought about the historical opportunity of globalization and industrial transfer. The economic model of the troika constitutes such a core competitiveness that is difficult to replicate. Now, we should continue to carefully care for the export that is recovering. Ma, patiently nurturing the horse of domestic demand, and collecting the horse for a great investment, in order to safely and smoothly drive through 2010.