Article/Ren Zeping, columnist of Sina Financial Opinion Leader
On April 6, Ren Zeping, an "online celebrity economist", raised a heated discussion again and organized the alliance Soochow Securities The following is the full text of the first report meeting.
I am optimistic about the prospect of China's economic transformation
I went to the sea in 2014 and put forward some ideas. As a long-term observer of China's economy, I have traveled around many countries in recent years, first as a think tank in the State Council, and then as a chief economist in the world's largest real estate enterprise. This time, I returned to the capital market and the securities industry, and would like to introduce some of our thoughts and observations on China's economy.
In the past few years, we have put forward some opinions and judgments every year. Fortunately, these judgments are basically OK.
For example, in 2014, we proposed that the new 5% is better than the old 8%, and 5000 points is not a dream; In 2015, we gave early warning before the stock market crash, called the altitude has been high and the wind is strong, and predicted that the first-line house price will double, and there will be an economic L-shaped; Propose a new cycle in 2017; In 2019, when the market was very pessimistic, we proposed that China would be the best investment opportunity in the future.
In 2020, I advocated new infrastructure, and then moved from academic discussion to national strategy. In the second half of last year, I advocated the liberalization of fertility. This time, I think there will be relatively large adjustments in our fertility and population policies in the future.
Over the years, I have been thinking, what is the mission of our generation of scholars? I always believe that a person's value depends on his value to others, the organization he serves, and the society.
At the beginning of this year, when the market was full of disputes, I said that the biggest logic or theme of the market this year should be inflation expectations.
In addition, I have proposed an analytical framework for the real estate sector, which calls for the long-term view of population, the medium-term view of land, and the short-term view of finance. This analysis framework may be widely spread in the real estate field, including an analysis framework used by large developers, many investors and practitioners.
On the whole, as an economist and an observer of China's economy, although in 2015, when the market was crazy, we rationally warned about risks. But since 2014, I am optimistic among economists about the prospects of China's economic transformation.
Many people say that Dr. Ren is the largest bull in China's economy and capital market. From the current point of time, we can see how to recognize our times and our current economic situation in the future.
I would like to share some of our observations and latest views from an objective, rational, professional and independent perspective.
The new 5% is better than the old 8%. Don't worry about shifting economic growth. The most important thing is to improve the quality of growth
I will talk about three aspects: the first is about China's medium - and long-term economic development trend, the second is about our current economic situation, and the last is about the four major contradictions that China is facing and how to deal with them.
First, the trend of China's economic development.
What kind of environment are we in? How can we recognize the characteristics of the environment and the times we live in?
In the past 10 years, China's economy has undergone a very obvious change.
Over the past 10 years, including the next 10 years, China's economic situation cannot be simply explained by economic fluctuations. That is, 10 years ago, all mainstream economists participated in a big debate in the macro field. China's economy (growth rate) has gone from 14%, 10%, 9%, 8%, 7% to 6% now. What is the reason for this continuous decline? How do we deal with it?
At that time, there were two schools. One was that China's economy could return to high growth, so large-scale stimulus was needed to stimulate demand; The other school was that we proposed in the Development Center of the State Council that China might have to shift its growth rate, and our way out was to improve our total factor productivity through reform and build a new mechanism for our growth platform and power.
This was the biggest debate in the macro field 10 years ago. Against that background, I went to the sea and put forward a view that the new 5% was better than the old 8%.
I have spent a long time studying economic history, including those economies in Latin America and Southeast Asia that fell into the middle-income trap, as well as Germany, Japan and South Korea that have successfully transformed.
We find that at the critical point of moving from a developing country to a developed country, China's per capita GDP is $10000, and we will become a developed country by 12600, that is, in the next 5-10 years.
However, many economies refused to shift their growth and tried to pull it back to the platform of high growth through monetary pair stimulus. As a result, they maintained the old growth model, triggered a major financial crisis, and finally fell into the so-called middle-income trap.
Many economies in Latin America and Southeast Asia have made such serious mistakes. Only a few economies, accounting for about 10%, Germany, Japan, South Korea, and Taiwan, China, have successfully promoted reform and adopted the way of promoting reform when moving from developing economies to the threshold of developed economies.
At that time, we proposed to shift the speed of growth. We must promote the reform of new energy, rather than a simple monetary stimulus, which can solve the problem of this era.
What is the reason why the new 5% is better than the old 8%? That is, we should not worry about the shift of economic growth. The most important thing is to improve the quality of your growth.
The new 5% growth platform built through reform in the future is better than the old 8% growth platform that was barely maintained by itself in the past. The interest rate has come down, the stock market has gone up, the industry has upgraded, the corporate profits have risen, the residents' lives have improved, the government's prestige has improved. Reform is the only way out, which will stimulate the brewing of crisis.
I also mentioned the L-type economy. The new normal, from high-speed growth to high-quality development, has confirmed the views of our economists.
Why among economists, we are optimistic about the prospect of this round of reform and transformation of China's economy? First of all, in the past 10 years, in this great debate in the macro field, I have solved a very important problem, that is, understanding the problem, recognizing that we need to change gears in growth rate, and after realizing that the new 5% is better than the old 8%, although the future is not high-speed growth, But it is high-quality development.
After we solved the problem of understanding, our policies and reform measures have been in place over the years. At that time, in order to study the transformation experience of South Korea, Japan and Germany, I read about hundreds of monographs before and after, and was very addicted to this research at that time.
The best textbook is actually economic history, because economics can't do experiments, but economic history gives us great inspiration.
We are still in a critical period, but many early reform measures have entered the dividend release period
Many people say that every year our policy invents a new word, which is a lack of sufficient observation and status of China.
In fact, these statements are precisely the result of our understanding of China's current problems and the deepening of response measures. As a front-line economist, I am very touched.
This round of reform in China is divided into three stages. The first stage is the process of forming reform expectations; The second stage is the painful period of landing; The third stage is the dividend release period.
The first stage is the period of formation and controversy of reform expectations. It is roughly from 2012 to 2015. It is a painful period of landing and tackling difficulties. It is 2016, 2017 and 2018. At that time, the whole society, including our capital market, was filled with a very pessimistic atmosphere. What about leaving the scene and sleeping, it is because we are in a painful period.
In fact, since 2019, frankly speaking, we are still in a critical period, but many of our early reform measures have entered the dividend release period.
In fact, a major turning point was that at the end of 2015, the central government proposed the supply side structural reform, which is very significant.
At that time, we proposed "three reductions, one reduction and one compensation" to reduce production capacity, inventory, leverage, cost and weak points. In short, economics is called "breaking the old and creating the new". We should break down the excess capacity, excessive inventory and financial leverage risks accumulated from high growth in the past.
In the past few years, in the face of Sino US trade frictions and epidemics, China has not experienced major financial risks, because we have tied the risk fence in advance and made preparations in advance.
To reduce costs and remedy weaknesses is Lixin. We cultivate our own new economy, new technology and new industries. Later, there were three major battles, including the "double cycle", in which we were constantly deepening the reform to meet the challenge of high-quality development that the new 5% was better than the old 8%.
In fact, it is logically self consistent to promote the reform of the registration system, build a multi-level capital market, and rely on innovation to promote the high-quality development of the real economy.
The innovative development finally depends on the capital market. The traditional bank led financing model matches our original era of heavy chemical industry. In the future, China will have a large number of venture capital and new economy. It needs multi-level capital markets.
This time, the capital market has risen to a very important position, including the registration system reform and anti-monopoly. These things are logically self consistent, including carbon peaking, carbon neutrality, high-level opening up, and so on. I will not repeat them.
The general conclusion is that the best investment opportunity in the future is in China, and we are standing at the beginning of the new cycle. Because in the past 10 years, we have found the crux of China's problems, and because of some early adjustments, we have a very strong executive force.
This is the background of our environment.
In 2021, we will face the resonance of global economic recovery
Now let's report our current economic situation.
There is no doubt that China is ahead of the world in combating the epidemic and resuming production.
The GDP growth rate of the four quarters last year was - 6.8%, 3.2%, 4.9% and 6.5% respectively. What is the concept of 6.5%? In 2019, China's GDP growth rate was 6.1%. In the fourth quarter of last year, China has returned to the potential growth rate.
And among the major economies in the world, China was the only one that achieved positive growth last year.
So since 2019, we have begun to enjoy the dividend of reform, but it does not mean that the task of reform has been completed. We still face many challenges, but the big idea has been reversed.
An important feature of 2021 is that we will face the resonance of global economic recovery.
In the second quarter of last year, China's economy recovered. This year, with the mass vaccination in the United States, Europe and Japan, and Biden's plan to launch a $3 trillion infrastructure stimulus plan, we may usher in a global recovery resonance.
What is the concept of 3 trillion dollars? In 2009, our 4 trillion stimulus, 3 trillion US dollars, was an infrastructure stimulus plan of nearly 20 trillion yuan.
China is returning to the normalization of monetary policy Europe and the United States still have strong demands for monetary release and stimulus
Because China, the United States and Europe have different cyclical stages of recovery, China is the first to recover, and the United States and Europe only began to enter the recovery stage this year. In this way, everyone's policy mix and demands are different.
China is ushering in a cyclical inflection point of broad liquidity, because with the rise of inflation expectations and the return of the economy to the level of potential growth rate, we began to normalize monetary policy and tighten structural credit policies in real estate, local debt and other fields.
At the beginning of this year, I put forward that China is ushering in the inflection point of liquidity. At that time, everyone was very ambitious, and recently, they also verified this judgment.
China is returning to the normalization of monetary policy, but because the economies of Europe and the United States have just come out of the trough and are even quite fragile, including the epidemic situation, which still worries people, it still has a strong demand for the release of money and stimulus.
So the round of global economic recovery in Europe and the United States, including China, has different tracks, leading to different policy demands. We have begun to normalize monetary policy. Europe and the United States may still be in a stage of low interest rates and water incentives, which has brought global inflation expectations.
If we want to define a theme for short-term macroeconomic form in 2021, or the biggest feature, it is inflation expectations.
We ushered in inflation expectations, including the resonance of the global economic recovery, including Biden's plan to revitalize the United States, the introduction of a $3 trillion infrastructure stimulus plan, and the flooding of dollar liquidity.
US dollar liquidity is rampant, and China is facing the pressure of imported inflation
Why do we finally talk about the overflow of US dollar liquidity?
Biden told the public that where the 3 trillion dollars came from, he would raise corporate income tax and tax the rich.
However, in fact, from the economic and macroeconomic perspective, this logic cannot be passed. It is unlikely that $3 trillion will be realized through short-term taxation. In fact, the vast majority of the $3 trillion infrastructure stimulus plan is through excessive monetary issuance.
This is why I want to focus on a question for you.
Many people say that the global inflation this time is due to the recovery of demand, which is far from enough to support such high inflation, including the bubble of asset prices in broad sense.
Now the European and American economies are still lying on the floor, just showing signs of recovery. The stock market of the United States has reached new highs, and the house prices of the two major coastlines have reached new highs. What is the reason? Overissuance of currency and overflow of US dollar liquidity.
Since the outbreak last year, the United States has launched QE, QQE, and unlimited QE. It has printed money to buy U.S. government bonds and even commercial bills. The growth rate of broad money supply in the United States is the highest in 20 years, and it is surprisingly high.
I will tell you later that there is a dilemma and change in the whole field of macroeconomics. Either you go on the road of releasing water, 63% of the world's foreign exchange reserves are dollars, and the United States' over issuance of dollars actually means that it shares the cost to the world, but we can't.
Because we are a non reserve currency country, if China's currency is over issued, it is actually shared by residents, or residents' cash flow assets are diluted.
This is why since last year, the stock market, housing market, bulk commodities, including gold, have been rising, and Bitcoin has even reached a new high. The fundamental reason is that we have ushered in the flood of dollar liquidity, which is what we are facing.
Gold is a physical currency and Bitcoin is a super sovereign currency. The sharp rise of gold and Bitcoin, including the obvious rise of broad inflation, shows that people do not trust the credit currency of national sovereignty represented by the US dollar. This has led to a significant increase in inflation expectations this year.
The concept of inflation is quite controversial in economics, but it tells a very common sense problem. Inflation is a monetary phenomenon at any time and anywhere. When money is printed too much, something will rise. If money is flooded, commodities will rise.
Since the second half of last year, China has started to promote the normalization of monetary policy. As Premier Li Keqiang said at the two sessions this time, we did not issue money excessively last year, so this year we do not need to make a sharp turn, but instead implement the normalization of monetary policy. However, it is worth noting that because bulk commodities are priced globally, China's overall inflation is not high, But PPI and industrial product prices are rising.
The price of our basic raw materials, including copper and steel, has risen sharply recently. Because it is globally priced, China's CPI has not risen very high. First, because our monetary policy has normalized, and second, because it is just in the downward range of the pig cycle, China is facing the main problem of imported inflation pressure.
This round of economic recovery is a K-shaped recovery, and the global economy and macro policies have come to a crossroads
In this round of economic recovery, we are facing an important new phenomenon, called K-shaped recovery. This is a topic that has been discussed a lot in the macroeconomic field recently.
In the past, economic recovery generally included U-shaped recovery and V-shaped recovery. That is, in the context of economic recovery, the situation of most people has improved, the overall income has improved, and employment has improved.
The K-shaped recovery is that some people have improved and some people have become worse. Although the economy is recovering as a whole, the stock market and housing market are rising, and the prices of various assets are rising, the situation of some people, even most people, is getting worse.
Why is there a K-shaped recovery? That means returning to the global over dependence on currency.
I think the global economy and macro policies have come to a crossroads. I remember one year when Dalio came to China to promote his new book, he found four people to help him on the platform, and I was one of them. He finally mentioned that the income distribution gap in the United States is very similar to that before the Great Depression, which was a financial crisis, economic crisis, social crisis, political crisis, and finally a military crisis - war broke out.
According to this logic, the root cause is not economic problems, but social problems, or income distribution problems.
In fact, the world is facing similar challenges, because the excessive dependence on currency has led to the K-shaped recovery and the widening wealth income gap, which has led to populism, anti globalization and other trends of thought.
MMT may be an innovation of monetary finance, but it may be a great regression of macroeconomic thinking
The history is very similar, and it was similar 100 years ago. What should I do when I stand at this crossroads? Economists need to provide solutions. Now there are two schools in the whole field of economics. One is represented by China, which wants to return to the normalization of monetary policy, promote reform and improve total factor productivity.
The other school is MMT, modern monetary theory. In short, its idea is to determine the issuance of currency by taxation. As long as there is no problem with national sovereignty, the issue of currency can be unlimited, that is, there should be no ceiling on government debt. It can be recycled indefinitely through government debt issuance, including the issue of currency.
This is the modern monetary theory that everyone is talking about now. That is, it is really on the way of releasing water to stimulate people. My understanding of the modern monetary theory is that this may be an innovation of monetary finance, but it may be a great regression of macroeconomic thinking.
But we are lucky that China did not choose this theory, so last year the mainstream public policy voice in China was critical of MMT.
When it comes to the views on major categories of assets, the clues are very clear. As an old researcher who has done macroeconomic situation analysis for 20 years, I think we must return to the bottom logic finally. The main logic of this year's economic situation is inflation expectations, which means that this year's benefits must be Low value and varieties with expected price rise.
So these are all the things that have gone well in the market recently. The overvalued ones in the past two years are all killing the valuation because of the rise of interest rates. Finally, these basic logic is tenable.
Sino US trade friction is long-term and severe
Finally, I will tell you about the four major contradictions we are facing and the countermeasures.
The first major contradiction is undoubtedly the Sino US trade friction, which is what we call the biggest change in a century.
What is the essence of Sino US trade friction?
For more than 40 years since China's reform and opening up, our economic scale has already been 70% of that of the United States, and more importantly, we are still growing at a rate of 5~6%. We are 2-3 times the potential growth rate of the United States. According to this trend, around 2030, China's economic scale will surpass that of the United States and become the world's largest economy.
For every Chinese, it means that the Chinese nation will return to the top of the world. And we are lucky to catch up with the tide of the times. We can see the history, but throughout the world economic history, over 100 years ago, since the United States overtook Britain as the world's largest economy, no one has surpassed it.
There have been two challengers, the former Soviet Union and Japan, who have both clashed with the United States, not simply in the field of trade, including geopolitical, ideological, financial and even military confrontation.
In 7-10 years, China will become the world's largest economy again. What will happen in this period of time? The answer is very clear. The essence of the Sino US trade friction is the hegemonic country in power to contain the rise of emerging powers. It is long-term and severe. Our best response is to unswervingly promote a new round of reform and opening up with greater courage. We should remain sober, calm and strategic.
But I also very much agree with the appeal of an elder, Mr. Kissinger: for the sake of world peace and long-term prosperity, China and the United States must have more dialogue and exchanges, and both sides must make adjustments, because the entire governance landscape of the world has undergone profound changes.
From the perspective of the United States, in the next decade, the United States should adjust its mentality and accept a rising China integrated into globalization. China should also adjust its mentality. When we become strong, we should take global responsibilities accordingly and respect the global rules of the game.
The future new infrastructure includes three areas
The second contradiction is innovative development.
We have achieved high growth in the past by relying on demographic dividend, factor dividend, etc. In the future, we need innovation to drive high-quality development. In this regard, I advocate new infrastructure. Over the years, the new infrastructure I advocate has moved from academic discussion to national strategy. For a scholar, this is my greatest contribution.
The new infrastructure is conducive to expanding demand, stabilizing growth and employment in the short term, and to cultivating China's new technology New industry And the new economy to create a new engine for China's economy.
Over the past 40 years, China itself has been the beneficiary of large-scale advanced infrastructure construction. Why can't India grasp the dividends of globalization, but China does? The most important reason is infrastructure construction.
The future new infrastructure includes three major areas:
New infrastructure in science and technology represented by 5G, big data center, artificial intelligence, new energy vehicles and charging piles;
New infrastructure in the field of people's livelihood represented by education and health care;
As well as new infrastructure construction in the system fields such as business environment, service industry opening, multi-level capital market construction, etc.
China will face an aging population, which will be one of the largest grey rhinoceros in the future
The third major contradiction is that China will face accelerated population aging in the next 10 years, which will be one of the largest grey rhinoceroses in China in the future.
In the past 20 or 30 years, people did not care about the problem of population aging at all, but in the next 10 years, this is a major event. Because China's baby boom was from 1962 to 1976, we benefited from the demographic dividend of this baby boom. China's past high growth was achieved by this group of people when they were young, which just superimposed the dividend of globalization.
But the people born in 1962 are now 59 years old and will retire next year.
This is why the public policy field is discussing the extension of retirement, because if there is no policy adjustment, people born during this wave of baby booms in China will accelerate their withdrawal from the labor market in the future - this is not the focus of my talk.
The key point is that China's aging is not coming slowly like Europe and the United States. Because China has family planning, China's population aging will come and accelerate in the next 5-10 years.
Therefore, during the 14th Five Year Plan period, including this government work report, it is proposed to raise the response to population aging to the national strategy. Because we are still in the process of getting old before getting rich, Europe, the United States and Japan started population aging after entering the developed countries, and our per capita GDP just exceeded 10000 US dollars, ushering in an aging challenge, so I also call for the liberalization of fertility.
From the perspective of development trend, the speed and scale of China's population aging is unprecedented. In 2022, there will be a deep aging society, and in 2033, there will be a super aging society. By 2060, one of the three people will be over 65 years old. At the same time, there will be fewer children.
What problems will the aging population bring?
The potential growth rate of China's economy will decline; Rising labor costs; Investment rate and savings rate declined; The social support ratio and pension burden are heavier; Government debt and social security pressure will rise, and more importantly, social vitality will decline.
Therefore, in response to the challenges of aging population and fewer children, we should open up childbearing as soon as possible, let the right to bear return to the family, speed up the construction of a fertility support system, and actively respond to the aging population to build an elderly friendly society, which is a great challenge for us.
The fundamental problem of real estate is people land mismatch and currency excess
The fourth major contradiction is our hardest bubble - real estate.
As I mentioned earlier, the real estate industry is based on population in the long run, land in the medium run, and finance in the short run. We have studied the real estate and housing system cases of more than a dozen representative economies over the past hundred years. The basic conclusion is that the housing system determines the real estate market, the system is its gene, and the gene has a strong ability of self reproduction.
What countries have succeeded in real estate reform? Germany and Singapore are engaged in leasing, including strong control over currency.
According to our research on international experience, we believe that the key to the long-term stable and healthy development of China's real estate is People land linkage and financial stability. People are demand, land is supply, and finance is leverage.
Frankly speaking, there is still a big gap between our understanding of real estate and academic discussion and the real solution of the problem. The real estate chaos we have seen in the past two years is not unusual in our research framework.
The fundamental problem of China's real estate is the mismatch between people and land and the once excessive distribution of currency in the past.
In the past, we had the wrong idea of controlling large cities, developing small and medium-sized towns, and developing regions in a balanced way with the thought of planned economy. This idea led to people gathering in large metropolitan areas, but the land indicators were not available, leading to the mismatch between people and land, high housing prices in first and second tier cities, and high inventory in third and fourth tier cities - which is completely understandable.
Economically and technically, as a scholar, I can responsibly tell you that China's real estate still has a solution today, and we still have a window of time for the last ten years But we need to solve the problem of cognition first, which is the main point of my report to you.
Taking the seven major reforms as a breakthrough, China will start a new cycle and new development pattern
In the future, with the seven major reforms as the breakthrough, we believe that China will start a new cycle and new development pattern.
The seven major reforms include——
The first is new infrastructure;
The second is the urbanization of the metropolitan area and urban agglomeration with people and land linked and elements flowing;
The third is to open up childbearing;
The fourth is to get through the double cycle of capital market and scientific and technological innovation;
The fifth is large-scale tax and fee reduction;
The sixth is to take the Sino US trade friction as an opportunity to promote a new round of reform and opening up;
Seventh, establish our new national strategy. What is the statebuilding strategy? It is the similar strategy of keeping a low profile that we have benefited from in the past 40 years. Under the background of seeing the trends and trends of the world economy in the coming decades, we have developed a strategy that is beneficial to us in the long run. We are now in a strategic transition period.
These are the main points I will report to you today. We are in a great change situation that has not been seen in a century, and we are also ushering in a great opportunity that has not been seen in a century. We firmly believe that with the new round of reform and opening up and the release of future reform dividends, as long-term optimists of China's economy and capital market, we believe that the best investment opportunities in the future are in China, thank you!
This article was originally published on NetEase
(The author of this article introduces: Chief Economist of Evergrande Group, President of Evergrande Economic Research Institute. He once served as Deputy Director of the Research Office of the Macro Department of the Development Research Center of the State Council, Director General Manager and Chief Macro Analyst of Guotai Jun'an Securities Research Institute.)
