How is China's economy coping with the challenges?
At the end of the year, various think tanks and universities in Beijing have invited some well-known economists to discuss the problems and solutions facing China's economy. I also followed their analysis and discussion.
I think Professor Cao Heping of Peking University's School of Economics has a very reasonable point. He said: The problems that China's economy is currently encountering are not caused by a certain policy, but the problems that have accumulated in the course of economic growth over the years have erupted.
In the past, real estate was the main driving force of China's economy, but now that the time has come for economic transformation, we can no longer rely on the financialization of real estate to drive the economy, which will bring huge downward pressure to the economy.
We can learn from the history of the United States. From 1944 to 1984, the United States experienced seven economic cycles in the 40 years after the war, leading to a crisis of inflation, unemployment, and stagnation (then called stagflation). How does the United States solve these problems?
It is to transfer production capacity to other countries, mid-range technology to Japan, South Korea, Taiwan, Europe and other places, low-end technology to China, ASEAN, South America and other places, so that the United States can get rid of the predicament of the Rust Belt.
Now, the economic cycle has a positive boosting effect and a negative "Dutch disease" effect. The so-called "Dutch disease" refers to the overprosperity of one primary commodity sector in a country, especially in small countries, leading to a decline in other sectors. For example, in the 60s of the 20th century, a large amount of oil and gas was discovered in the Netherlands, ** vigorously developed this industry, exports increased significantly, and the economy looked very good. However, the development of this industry squeezed the Dutch agriculture and other industries, reducing the competitiveness of other export industries, and by the beginning of the 70s, the Netherlands was mired in inflation, declining exports, reduced incomes, and increased unemployment, which is a typical example of the "Dutch disease".
Dutch disease "occurs not only in Western countries, but also in China. Real estate is a clear example of this, with soaring housing prices in Beijing, Shanghai, Shenzhen, Wenzhou, Ordos and elsewhere seemingly learning from Hong Kong's model, but in fact repeating the mistakes of Tokyo. Tokyo also saw a boom in housing prices from 1990 to 2000, and Japan's "Lost Thirty Years" began at that time.
In China, some people who claim to be real estate experts always say that they have a way to restore China's economy to 30 years of rapid growth.
So, what is their solution? In fact, they are just showing off their own cleverness, they do not respect the history of China, nor do they respect the history of the United States, Europe, and Japan, they just look at the problem one-sidedly and boast of their "supernatural powers".
Professor Cao Heping pointed out that in the early years, housing prices in some cities in Indonesia in Asia were also very high, and in earlier years, the United Kingdom, the Netherlands, Brazil, Argentina, and the United States in the Rust Belt of Detroit, Toledo, Yangstang, Akron, Philadelphia and other places are also the same, although the problems are not all caused by real estate, but also caused by the accumulation of multiple economic cycles caused by the "Dutch disease".
So, what solutions do we have to solve China's economic problems?
Professor Cao Heping believes that there are two ways:
The first is a large-scale balance sheet reduction, that is, to quickly clear out the bad debts of local governments, enterprises and financial institutions, and dispose of them in the asset disposal market, while quickly issuing money to maintain sufficient liquidity.
Do we dare to do this? Can the big financial mouth do it? It's hard to say.
The second is to rely on large-scale technological innovation and use the Internet sharing economy supported by digital technology to open up new growth points. At present, it is a more feasible way to build large-scale new infrastructure, digital upgrading of existing infrastructure and housing, and large-scale revolution in laboratory technology of specialization, specialization and novelty.
In other words, new infrastructure and digital twin cities can give us the confidence to weather the trough of the economic cycle.
Now, the United States is leading the world, European countries are following the United States to sing down China, and anti-China forces at home and abroad have also begun to spread rumors, shouting that China's economy is finished. But is China's economy really finished?
Now, confidence is more important than gold, we must have the confidence to survive the economic cycle, and we must not let the outside ** affect our judgment. More innovative and loose technological progress is the key to getting our economy out of the woods.
Finally, I would like to say that I have found that a lot of experts like to talk about problems, which are getting more and more exaggerated and serious, and they have made up two new words to mean that the problem is more serious.
But is there anything they can do about it? How do they solve the problem?
What we need is a solution to the problem, what we need is constructive advice, and without constructive advice, what's the point of just talking about the problem?
China's economy, which used to grow close to 10 percent and now maintains growth of more than 5 percent, does look to be slowing down. But, think about it, how many countries in this world can do this?
I can tell you that China is the only one.