Chinese economy over the next decade What important development characteristic?
I think the most likely is a high probability event, I am afraid the next decade, the growth pattern of the former low after the high, this is the first judgment.
Why low to high before? This judgment is based, I think the Chinese economy today, the speed of operation is lower than the economic growth potential, like driving on the highway, the actual speed is lower than the design speed, this judgment is very important. Why do you say? I have three under or reasons.
The first is based on the international environment. Only global economic growth in Britain and the United States reached its growth potential, the United States is 2.5%, UK 2.0%; other countries are lower than the design speed, almost without exception, for example, 1.7% in Europe, Japan, 0.7%; while emerging in addition to the markets of India and China, the most difficult countries, Russia -3% -3% in Brazil, South Africa is 3%, accompanied by high inflation. This is the first based on my judgment.
The second reason is debt. China’s economy is currently dealing with some problems left over from history, for example, not only our current corporate debt reached the highest level in history, the international community is very high, the rate of corporate debt and liabilities accounted for the total size of 150% GDP in all countries in the top. While this does not mean that we will enter a recession or financial crisis, but this issue must be addressed, which requires reduced growth in the short term.
The third reason is the basic point of growth. Why China’s economic growth below potential, because there is no completely create a new growth point. Urbanization just breaking title, we do not know how to enter the fast track.
This series of reasons, so I judge the Chinese economy is lower than the growth potential in operation. That being the case, the future will gradually return to potential growth or even a little higher. Therefore, my personal judgment of the Chinese economy over the next decade is the former low-high. Chinese economy but also how high? I think the growth potential of the Chinese economy should be more than the current 6.7%.
According to the basic conclusion of our study, in an economy has reached a market economy to take off under the premise, to determine its potential for growth and growth rate, the biggest uncertainty is the potential for growth of the gap between the economy and the world’s most developed economies , which is the per capita GDP gap. China’s current per capita GDP of less than eight thousand US dollars, according to the purchasing power parity is one-fifth of Americans, which means we have a lot of companies in the study, such as insurance to asset management, from business model to business model, management mode to the introduction of technology, all aspects of the space has a huge catch. Why do we say that the Chinese economy still has good growth potential, which is based on the most fundamental.
Chinese economy is a major economy, catching up is very slow, there is some truth to this statement. But do not forget, because it is a large economy, so the potential of our internal market has not yet fully played out. For example, Anhui Province, adjacent to Jiangsu Province, Jiangsu Province, but only half the per capita income of Anhui, Jiangsu Province, the per capita income level is the highest in the country, but it is the sixth-worst in Anhui, and Jiangxi, Guangxi came in together. This example tells us that the country’s economic potential is enormous internal market, if properly realize their potential, it is possible to exploit the advantages of a big country growth. Just through hard work, reform and adjustment in place, our growth rate in the second half of the next decade should also be able to come up a little.
The second judgment is tremendous change over the next decade in the structure of China’s economy will occur. For the following reasons:
The first reason is that our labor costs are already very high, far more than our neighbor, Vietnam and other countries. Over the past seven or eight years, a substantial increase in our labor costs, labor wage growth is much higher than nominal GDP, changes in labor costs will lead to a series of changes in the economic structure.
The second reason is that today people demand is changing, has gone beyond the basic food and clothing. About five or six years ago, BMW sales in China surpassed the United States, but today Mercedes-Benz, BMW, Cadillac also true. This means that in the Chinese market, the number of high-end purchasing power of the population has already surpassed the United States, Cadillac and even 60% of the market in China. Mainland China has a large consumer groups, their high demands to high-quality products, which some people in the future to meet the food and clothing also need better financial services, insurance services, which is the demand for change.
Changes in labor costs and changing demand will trigger a series of changes, which I call “quiet revolution.”
For example, the development of the past two years the financial industry far more than our real economy, some people talk about a bubble, I do not agree. Indeed the financial industry has brought to people’s lives change, including the insurance industry. Last year, the added value of the financial industry has accounted for about 10% of GDP, at around 9.6% last year, the financial industry added value growth rate is 15.9%, which is still under the premise of the second half of the stock market fluctuated wildly, otherwise the increase will be higher . Without the contribution of the financial sector, last year China’s economic growth rate is only 6.2%.
To cite two examples, due to changes in costs, our industry has changed.
Past surrounding cities can tolerate steelmaking iron, because at that time the poor, people’s living standards is low, the air quality requirements are relatively low. Now, every day before going out to see not only the temperature but also look PM2.5, we can not tolerate the surrounding cities and then engage in heavy and chemical industries.
In the past the mainland mining, steel, iron, now buy into iron, to buy coal, carried out in the coastal heavy industry, chemical industry, the fundamental reason is labor costs, we suddenly found themselves than to buy coal dug appropriate, and in Anshan iron ore dug compared to iron ore from abroad to cheap and good, also found contamination in coastal areas with the best steel-making machine imported from Germany, produced lower than our internal traffic dust.
This is the change in labor costs to improve the living standards of the economic structure, which I call “quiet revolution.” More and more migrant workers and rural okay, wages go up, it is necessary to change the structure of production, the factory must re-layout, which is the major structural changes brought about.
The third judgment is that the next decade, the pattern of changes in China’s economic growth momentum is converted.
Over the past three decades of development, the first decade brought by consumer durables production capacity expansion investment boom, such as refrigerators and color televisions; the second round by the housing and cars. In the next decade, housing and cars will also be a growth point, but it is far below the task and role of the past decade.
The next ten years or go back to the root of the root, I think it is two things: First, demand change, change in the cost of production, we will let more and more people to the city life, it is the ordinary people spontaneously improve personal the power of life; second, migrant workers and farmers have no relationship, we have entered the city, then we must change the structure of production, which are two fundamental growth drivers of change.
In particular, the Chinese economy over the next decade there will be a new growth point three:
The first is the consumer. Since 2007, the proportion of consumption in GDP has increased annually, increased by 1% per year, official statistics is 38%. But through calculation, we found that consumption accounts for 46% GDP, and is rising each year, by 2020 consumption will be able to occupy half of GDP. Now all production and related industries, you see cement, steel, oil refining, are not optimistic; however, and consumer-related industries, will increase the general interest, such as tourism, catering, hotels, pension, health care are still room for growth, this is the first of a new growth point.
The second is the upgrading of industries. Smelting iron and steel used to be in the mainland, are now on the coast; the past is dug into the mainland, after all imported coal. If the transformation of a million annual steel production capacity, will be able to pull about 11.8% of GDP. In the short term, the government should do is eliminate excess capacity, the price of steel carried up to the government to strengthen environmental protection requirements, it was natural to coastal investment.
The third is the infrastructure investment brought urbanization. I have an observation, most of our people at home in good condition, the housing area is not small, private car is also very good, but out dirty environment, air quality is not good, indicating that public infrastructure is still relatively poor, there is room for optimization.
Three risks l Chinese economy over the next decade
Above speak Chinese new pattern of change in the future decade economy, then there is no risk? Like people anywhere are at risk of various bacteria invade, like the Chinese economy will be at risk. What are the risks?
The first big risk is the risk of financial crisis.
Chinese economy is now the country’s high savings, our savings account of 38% GDP. Over the past 20 years, 30 years, we rely on the savings to invest in the field it? Rely on informal borrowing between people, I call informal non-domestic investment intermediaries. Now the situation is different, now more and more investment to be carried out through intermediaries, such as asset management companies, banks, exchanges, this proportion is increasing.
So many savings to go through intermediary channels into investors, intermediate prone to many errors of judgment, for example, the money borrowed was wrong, lent a bad project. Misjudgments often systemic, but everyone investment decisions are affected by the surrounding environment, in the same environment, the wrong investment may resonate, this situation will occur once the focus of the financial assets in the short term price, and then in turn affect the health of financial institutions.
Through investment intermediaries, and traditional, I call by investing in non-agency completely different. Non-investment agency is free love, free marriage, and now influence each other over the full range of economic, you have me, I have you, this is the financial risk of the Chinese economy.
What this risk by amplifying it? Through international enlarge. China’s stock of money is far from the world, we are the stock of money is $ 20 trillion, if our own vision of the future situation is the case, this 20 trillion every penny might want to go abroad. Because there is always a financial risk, I do not expect the next two years we will be completely open capital account. Next decade, we just need to go abroad to invest, but the overseas investment will be carried out under carefully controlled global.
The second big risk is the risk from the international.
What specifically that? Now we have become accustomed in the international community have a boss, a policeman, he was to maintain order, whether the order is good or bad. The boss tired, powerless, and this round of elections is very clear, people have tired of the United States to the international community to intervene everywhere. US military spending is now a significant decline, accounting for only 4% of US GDP, indicating that Americans do not want to go out the intervention, and want to actively work. People say that the TPP will generate new Chinese oppression, new repression, TPP unlikely became engaged, TPP including large assets and liabilities, the assets can not be there, Congress is now the biggest result is impossible to vote TPP, Once Congress passed TPP, it is impossible in other eras past.
So the coming years we are faced with the situation, the Chinese people in the Middle East must be in Africa, in Latin America must themselves “debt collection.” We lend 400 billion in the debt, the world’s largest creditor. Government run faster than we are, four hundred billion dollars. So regardless of the Americans, and we rely on debt collection. Some local occurrence of deflation feedback to the country will have an impact. This is also the international risks.
So I would like to remind policy makers, to remind people, and not be too hasty on international issues, do not worry too much about the United States in the South China Sea provocation – it was his last fight, is teasing you, has no power, nothing is impossible and then engage in the international arena things. We want to worry about is not to be rushed, but to wait for a later local investment maturity reinvestment another place, not full bloom. This is the second international venture, produces changes in the international situation, Americans may rest several years, finishing the House, we do not go to it vacated prematurely.
The third risk is that our reform and adjustment to put more, not doing enough.
Specifically, the lever now in tune, but now we leverage, business is too high, the government is not enough, not enough production capacity to reform and adjustment is not in place. Today Chinese economy encountered a number of difficulties, including excess capacity, including corporate debt is too high, the bank’s bad debt, real look into the historical backdrop is completely addressed. According to the latest IMF report, our bank accounts for 7% GDP of bad debt. Provision for bank probably this number, even if the provision is not enough in the bank and then to come up with assets inside hit. Chinese household savings rate of 38%, to digest what little afraid of bad and doubtful debts.
Now some say 1.8 million laid-off workers, what is that? We create new employment 13 million a year, and this year even if all 1.8 million laid-off, which compared to 1.8 million in 1999 to 20 million or small numbers, not to mention today’s 1.8 million laid-off workers and then totally owned enterprises laid-off workers quite different. All past employees are university professors, tenured professor, it has the right to a lifetime of today’s 1.8 million laid-off workers are contract workers, what is so amazing? So much difficulty, the key is how can landing. I also call this regard, some of the policies that may be simple, clear, and not only talk Party talk Party.
Just say that the development is the last word, but wages are also important. Now many of the policies are too complex, exhaustive, but wanted to get the focus, I grabbed one thing. Deleveraging, price, money would be finished. 1.8 million laid-off workers make 10,000 dollars a month, that is, 180 billion, compared to our 14 trillion revenue, a not really much money. The economic accounts can be calculated, the key is to political determination.
Talk about reform and adjustment is not in place. State-owned enterprise reform, the debate to debate, and I see the direction is very clear. Eighteen report clearly tube regardless of operating assets, mixed ownership, business managers hire market, which is more than good. Now missing is like Deng Xiaoping said, it is to Just do it.
l three opportunities for Chinese economy over the next decade
Finally, for businesses what opportunity? Three opportunities.
The first opportunity is in structural adjustment, we must grasp the opportunity.
At this point, Ma is right, but Ma is now doing the job, half economic experts in the dry. Ma mean I understand is this: No matter good or bad economy, the economic structure is changing, there are opportunities for entrepreneurs in the process of change, such as financial services just said. Through economic poverty, we the people have at least 300 million people entered the high-income class, which is more than 300 million population of concern is its own assets can not increase the value of the future retirement pension there is no guarantee. So the first one is the structural change in Seize opportunity.
The second opportunity is in the process of technological change, we must seize opportunity.
Now we caught up with the new round of technological change, the autopilot probably have ten years, we can now see and feel is the Internet. I say an example, such as insurance companies can engage in a APP, to large customers to provide the necessary services and information, such as insurance, real estate and so on inheritance or pension. Using Internet technology can greatly improve the efficiency of communication, reduce a lot of labor costs. Internet technology has come to this level, this round of Chinese economy must seize the current new technological revolution (mainly the information revolution) opportunities.
The third opportunity is international.
Financial risk, can not be fully liberalized capital account, but we must know that macro level and micro-level perspective, our asset is the layout should be to go around the world. The reason is simple, our future consumption, our future life, from a large number of other economies in the international offering. Our coal, iron ore, and other high-end consumer goods from Germany, high-tech product development from the United States, many companies in these countries are our consumer driven.
How to do it must not let outsiders fields? I often tell you the truth, before you buy the first BMW car, BMW’s first to buy the stock, BMW stock an average of 200% appreciation, turned out to be 80 dollars, and now more than 100 dollars, and how come? Not all Chinese people to pull together. Apple stock is the same, Apple the world’s largest market capitalization, not all Chinese people to engage them, and we gave it and gave it to appreciate the production, so do not buy a BMW stock, do not buy Apple stock is also loss. Assets must be configured to the rest of the world, in order to achieve must not let outsiders off the field, but also hedge our risk. Internationalization of this course, we must do next.
Let me tell you an experience that many countries affected by the Chinese economy to far more than our own, such as Latin America, Africa and Central Asia. At this moment, Kazakhstan is engaged in a ascarat forum, originally I was going to, but for various reasons did not go, please me a lot of years, I do not pay attention to them, they rely on a lot of tells me why ? Because China is already the world’s largest foreign investors, and this status was rising. Americans, Europeans complain that we in Africa have a lot of influence in Latin America, in fact, plainly they are very difficult, not the investment chain. Conversely, this also shows the importance of our international.
Overall, the next decade should be the decade full of expectations, but also a challenging decade. As an entrepreneur, as our major customers, we recommend that you continue to grasp the changes of the times. Thanksgiving era, the era of understanding, but also to seize the opportunity in the process of changing times, so that our business to the next level.