Tao Dong is a director of the China Chief Economist Forum
This is the law, and it is not subject to human will. Just like on the earth, there are spring, summer, autumn and winter, cloudy and sunny, sunrise and sunset. The business cycle is a basic concept of economics, and economists study cycles of different sizes. I won't talk about esoteric and obscure economics here, but only talk to ordinary people about the three cycles that are directly related to everyone's life and financial management.
First of all, the economy has a short cycle, which is the most familiar growth cycle. The ups and downs of the growth cycle are generally dominated by the credit cycle, which is closely related to the central bank's monetary policy, but the monetary policy must effectively affect private borrowing, investment and consumption in order to guide the economic ups and downs.
In 2023, the first year is very proactive in introducing stimulus policies, and monetary policy has become significantly looser, why is the upward cycle not ending immediately?China's economy has been in a state of monetary and credit expansion for two consecutive decades, bringing sustained investment expansion and consumer confidence, and the real estate market has experienced a boom rarely seen in human history. From a cyclical point of view, how the leverage increases, how to decrease. The current economic deleveraging is in fact a reaction to the increase in leverage over the past two decades. The continuous deleveraging of the private sector has made it impossible for monetary policy to be transmitted to the credit environment, so there has been a situation where the policy is hot and the private sector is cold.
In fact, debt deleveraging led to economic contraction, which happened in the United States in 2008 and Europe in 2012. It is part of the economic cycle that the debt burden is so high that it crushes confidence through extraordinary events. The U.S. and Europe have adopted aggressive monetary expansionary policies, bringing up a V-shaped version of assets through liquidity, and then supporting a U-shaped recovery. To deal with debt-triggered economic deleveraging, the United States and Europe have invented special drugs, whether China will take medicine, when to take medicine, or whether there are other prescriptions, time will tell.
The author believes that when the economy is still in the stage of deleveraging, people should be upright, not impulsive investment, keep their jobs, and maintain their cash flow.
The current economic downturn has implications for all walks of life, but it is still a short-cycle concept. If there is a downward cycle, there must be an upward cycle. However, it must be understood that in addition to the growth cycle, China's economy is also undergoing structural transformation, and the growth momentum is shifting from the era of cement dividends to the era of data dividends. The disappearance of the old model and the emergence of the new model have brought both "danger" and "opportunity", which are worthy of careful reference in terms of employment and investment.
China has its own special advantages in eating data dividends. China is a leader in the world in terms of data infrastructure and public acceptance. The top leadership's focus and enthusiasm for the data age far exceeds that of other leaders in the world, and these will translate into the driving force for the new infrastructure of the future. China's manufacturing industry is also a world leader in 5G environment and AI applications. Although the production line has been moved out in recent years, the author believes that as long as we adhere to intelligence and data, China can make a name for itself in the intelligent manufacturing industry and start a new industrial cycle.
Finally, I would like to talk about the technology cycle. In the middle of next year, Windows will launch a new generation of software system embedded with Chat GPT, which will bring a revolutionary storm to our work and life, and its influence is estimated to far exceed that of the personal computer of the year. The ensuing various applications may lead to the reshuffling of many industries and service industries, and may lead to the reshaping of our lives.
China's own version of ChatGPT is believed to be available soon. The author's generation will change jobs an average of four times in a lifetime, and the next generation may change jobs an average of four times in a lifetime. The next generation will work very differently, so the way of learning must change, change now!
It is necessary to prepare for the next cycle, so that one day we can become the trendsetter of the times.