The macro economy is like a boat sailing against the current, and if it does not advance, it will retreat.
When it comes to the macro economy, I believe you can generally feel that the macroeconomic changes this year are cold, negative and pessimistic, just like the cold snap that has swept across the country.
In the face of a cold snap, people's first choice is to huddle together to keep warm, and in the face of a slowdown in economic growth, the choice between enterprises and individuals naturally becomes to reduce expenses and make prudent decisions.
This year has come to an end, and many people are hoping that something different will emerge in the new year, such as more optimistic general sentiment, more consumption, and more investment by businesses.
Looking at the market from a human perspective, it is understandable to have such expectations.
But we know that time is linear, it is not a year as a unit, the macroeconomic challenges faced in the past year, in the new year, there is a high probability that these challenges will also be faced, the problem will not be solved in years, it will inevitably need the market's time to adjust, and our attitude towards consumption, the same.
So what are the macroeconomic challenges in 2024?
Some of the challenges are the "historical legacy" of the past, which can be called new challenges in the context of 2024, and some may be new trend developments, which may turn into pessimism or optimism.
Although as early as 2021, we saw that many real estate developers were forced to deleverage due to the tightening of financing for real estate companies, deleveraging is not without a price, and the cash flow problems of some real estate developers were detonated in advance, and by the end of 2023, there is still no sign of improvement.
This will probably continue until 2024.
The reason why real estate is important is not only because it accounted for one-fifth of China's GDP in the past, but more importantly, real estate itself is very widely implicated, from local income to employment groups, real estate can be said to have played a leading role in the past.
Today, we should have gathered such a consensus a long time ago:That is, there is a bubble in real estate.
There is no bubble in real estate, this sentence is almost unconvincing, objectively speaking, acknowledging the bubble in real estate will help us solve and face up to the problems of real estate.
The level of an asset is the best way to measure the size of its bubble, and the level is equal to our income, and the bubble of real estate can be viewed from two perspectives.
The first is the house-price-to-income ratio, and the average house-price-to-income ratio in China is 129, which means that you need to go without food or drink for about 13 years to be able to afford a house, and in South Korea, where the competition is fierce, the national average house price to income ratio is only 63. Speaking of which, the average house-price-to-income ratio in China is more than twice that of South Korea, which also indirectly confirms the real estate bubble.
The second is the real estate rent-to-sale ratio, China's real estate rent-to-sale ratio is about 1:600, which means that 600 months' rent can buy a suite, and a good real estate investment rent-to-sale ratio should be about 1:200, the rent is cheap and the house price is high, which shows that the market demand is seriously upside down, and there is also a tendency to bubble.
These two points are a good illustration of the fact that there is a bubble in real estate, and the biggest crisis in real estate today may not be in the debt of real estate developers, but in the prisoner's dilemma of "housing prices are too high to fall".
Why is the debt problem of real estate developers not the biggest crisis?
Even from the perspective of Evergrande's debt of two trillion yuan, although the problem is already large, and the unfinished buildings and upstream and downstream chains involved are also very wide, the debt of two trillion yuan can still only be regarded as a drop in the bucket compared with the existing market value of the country's real estate.
The reason why it is said today that "housing prices are too high to fall" is because if housing prices do not fall, it will affect young people's expectations for the future, and our social groups may fall into the dangerous situation of Japan's "low-desire society", and the more practical impact is that consumption will decrease and consumption will be downgraded.
But if the house price is once **, then the wealth that evaporates out of thin air may be on the order of tens of trillions, which is far from being comparable to Evergrande.
This is not alarmist, when the Japanese real estate bubble burst, Tokyo's housing prices **50%, what is the concept of 50%?Assuming that the housing price of Beijing, Shanghai, Guangzhou and Shenzhen is **50%, what a terrible phenomenon will it be?
Therefore, the bigger problem of real estate is not the debt of real estate developers, but the bigger problem than debt is actually the embarrassing situation of high housing prices, which can almost be called the "prisoner's dilemma".
The Japan Center for Economic Research sees the bursting of the real estate bubble in our country as "a risk that is unlikely, but it is possible", and if it does, according to the agency's estimates, assuming that the crisis breaks out in 2027, then the real GDP growth rate for that year will be 32%, and after 2029, after the crisis, it will be less than 1Low growth of 5%.
The agency also ** that nominal GDP in 2035 will be 1 in 20209 times, the per capita nominal GDP will also stay at 1Around $50,000.
Of course, this is only the first of the institution, and it cannot be taken seriously, but it does indirectly show that the impact of the real estate bubble on the macroeconomic trend is far greater than the trend of the macro economy by real estate developers.
According to the structure of China's family assets, 70% of them are real estate, in the context of per capita buying a house, once the real estate bubble bursts, then the evaporation of wealth is far from two trillion Evergrande can be compared.
Of course, the more practical situation is that next year's real estate should be stable, there will be no risk, but as I said, today's real estate is facing the dilemma of "high housing prices can not fall", as long as housing prices continue to be high, the price to pay is that the growth rate of consumption is not as expected, once the house price is **, then the cost may be short-term pain and drastic.
A short-term pain, a long-term pain, this is the structural dilemma faced by the real estate market.
We urgently need inflation right now, and that's one of the few pieces of consensus today.
Why do we need inflation?That's of course because there is a little bit of a sign in the opposite direction, that is, our CPI and PPI are rising too low, or even not at all, and there is a risk of deflation.
Essentially, this is due to consumption not being as expected.
For businesses, what are the consequences when consumption falls short of expectations?
The first is that the inventory will increase, the inventory of the enterprise will increase, the research and development and production of new products will be squeezed, so the enterprise will reduce the price to inventory, according to the economic demand theory, the lower the demand for goods, the higher the demand, and vice versa, the lower the demand.
Therefore, price reduction and destocking has become a big trend in the consumer market this year, from cars to milk tea, coffee, catering, snacks, many brands have launched relatively cheap goods, or through price reductions to inventory.
For consumers, things are cheaper, which seems to be a good thing, but because it is sacrificing corporate profits, enterprises may further reduce to cope with the consumption cycle, so reducing costs and increasing efficiency is also a main theme, whether it is manpower optimization or reducing production, and the ultimate impact is still the consumers themselves.
In other words, this year, the pressure on employment is greater, income growth is more difficult, and eventually it will backfire on consumption.
So, is the battle good?It's not good, but businesses have no choice but to follow up in order to survive.
Prices are lower and seem to be consumer-friendly, but behind the scenes comes at the expense of corporate profit margins, which in turn leads to less demand in the job market, and it is still the consumer who pays the price.
Therefore, what we think is good may not be really good;What we think is bad is not necessarily really bad, and this is the charm of the market.
Considering that at the end of this year, major banks will continue to reduce interest rates, and this trend should continue next year, with loose monetary policy to drive inflation upward, but as for the effect, this still needs to be observed.
All in all, if the downgrade of consumption becomes a long-term trend, then our monetary easing in the future will also be a long-term trend, which is almost the same as the interest rate countermeasures adopted by Japan, but it is not as low as Japan today, but the response is similar.
The use of monetary interest rates to regulate the consumer market is the main method of Keynesian economics, and it is also the traditional approach to the economic cycle that has been adopted by many economies so far.
But is it possible that QE will fail?
This year, for 20 consecutive months, the M2 issuance rate has exceeded double digits, far exceeding the nominal growth rate of GDP.
As a result, the savings rate remains high, and it becomes illiquid capital in the bank, and when money does not flow, it will be difficult for economic consumption to grow, and at this time, the traditional monetary policy may be at risk of failure.
And next year, the trend of consumption and the war is still worth our attention.
If consumer confidence is difficult to establish in the short term, we will most likely continue to see the first war caused by the involution of the enterprise side, which will have an intensifying trend, and how to recover and build the confidence of consumption and enterprises will still be a highlight next year.
Since 2008, the era of high leverage has indeed leveraged the rapid growth of the economy, but this is also based on the blessing of debt, leverage is essentially borrowing, using tomorrow's money to inject nourishment into today's economy, so whether leverage can be continued is largely closely related to population.
For an economy that will rely on consumption for growth in the future, population equals economy.
Population determines the size of the market, and the quality of population determines productivity, and today our population has officially entered negative growth, which means that every year after that, population decline is an irreversible trend.
The decline in the population is mainly due to the low birth rate of newborns, which has brought a large number of aging population, and a significant feature of the aging population is that it is not engaged in economic production, and in the context of the hollowing out of the wallet, a small number of elderly people will have strong consumption power, but for most of the elderly, not engaged in economic production, will not have too high consumption power.
And what does debt need?
In the past, the highly leveraged debt backlog required a higher GDP to sustain it, whether it was principal or interest, and in essence, the higher the economic growth, the smaller the debt problem, and vice versa.
Therefore, today's local debt, or real estate debt, in essence, are closely related to economic growth, taking real estate debt as an example, real estate developers want to return funds, they have to sell the house, but under the market wait-and-see mood, people's enthusiasm to buy a house has decreased, and it has become more difficult for real estate developers to withdraw funds than in the past, but the debt problem will not wait for people, and the shortage of capital chain will cause risks.
The same is true for local governments, where the economy is good, local incomes will be better, and the more serious the economic slowdown, the more severe the local debt problem will naturally become.
In addition, in the past, local income was heavily dependent on land sales, and when real estate began to decline, local land sales revenue fell sharply, which was also a very serious test for local revenue and expenditure balance.
Therefore, there is another challenge next year, that is, it is related to debt, and for local governments, reducing costs and increasing efficiency may also be an inevitable trend.
Finally, as far as the economy is concerned, it is probably the vulnerable young people who are most vulnerable to the economic cycle, and this generation of young people is the most vulnerable to economic fluctuations, which may change their mindsets, expectations for the future, and even their own behavioral decisions under the shaping of the times.
Japan and South Korea are prime examples, with extremely low fertility rates, young people's reluctance to marry and have children, and even finding a presence in virtual reality.
But what really matters is why young people think and do this, we see that the macro economy has created a group of post-80s and post-90s in the past, they are optimistic and positive, and they are willing to endure hardships and work hard, and today, the new generation of post-00s and post-95s have a biased view of the future.
For individuals, the cost of getting married and having children is getting higher and higherFrom a macro point of view, there are not many outlets, in the past, as long as individuals stepped on the tuyere, a little effort can get rich, but today, there are fewer and fewer outlets, the competition is becoming more and more fierce, and the cost of individuals has not been reduced at all.
It's not just about macroeconomic resilience, it's about the mindset of today's young people and their expectations for the future.