Economic recovery to go out of the "high savings and low consumption" cycle

⊙ Liu Yuhui China's economic recovery needs to be rammed because the softening of manufacturing suggests that the fundamentals of economic recovery are weak, and that a significant contribution to current consumption growth comes from a better-than-expected recovery in real estate, which in essence reflects a sharp drop in exports. The key to China's economic recovery is to get out of the past cycle of "high savings, low consumption". To start with six, incremental reform, adjust the distribution mechanism of interest: 1, straighten out the price, loosen the control of the price; 2. Structural tax reduction regulates the direction of resource allocation; 3, break monopoly, vigorously open private capital into the monopoly sector; 4, substantially reducing taxes to subsidize residents and increase their ability to endure inflation; 5,　　The fiscal and taxation system should be reformed radically, and the transition to public finance should be realized as soon as possible. 6, improve the purchase price of agricultural products, so that farmers can really enjoy the benefits of economic growth and industrialization.　　⊙ Liu Yuhui China's economic recovery needs to tamp down the basic market is magical, and death can sometimes become alive. The light of the Firefly, after many analysts, has been misinterpreted as the beginning of a strong economic recovery.　　The stock market, driven by liquidity, has risen by more than 40% in the past two months. Is the stock market really so sensitive to reflect the economic rain? Look for signs of economic recovery from the country's skeptical statistics bureau.　　Although the data may "fight" each other, several basic facts can be sorted out. First, the manufacturing sector is soft and the fundamentals of economic recovery are shaky. According to past rules, 12% of industrial growth corresponds to 8% GDP growth, the first quarter of this year's GDP growth rate of 6.1%, corresponding to the industrial growth of more than 9%. Obviously, these two indicators are still not right.　　Industrial growth in the first quarter of this year was 5.1%, rebounding to 8.3% in March and falling to 7.3% in April, suggesting that economic growth is largely dependent on construction (mainly infrastructure). International organizations are more concerned about China's power data, which excludes inventories and corresponds to industrial growth.　　From this year's electricity data, the previous March was a quarter-on-quarter growth trend, but April failed to continue, May, the decline of the second half of the trend has deepened, which shows that China's industrial base is indeed soft.　　In addition to the machinery industry, electrical appliances, transportation in the recent signs of warming, the rest of the industry in the first quarter is not optimistic.　　In addition, in April, the short-term loans of commercial banks showed negative growth (78.6 billion yuan negative), enterprises to reduce short-term loans, indicating that short-term loans expired after the company will not be renewed, may imply that the continuous rebound of production and business activities is not as good as the first quarter of macro-data shows. If there is no strong support for industrial growth, how long will the recovery continue, depending almost entirely on how long government investment can persist. This 1-April, the credit scale has reached 5.2 trillion, the estimated impact on investment will continue to the 4 quarter of this year, but how to maintain the investment boom in the future? It depends on private investment, household consumption and the recovery of the external world.。 Second, the housing market's hyper-anticipated recovery has made an important contribution to the current consumption growth.　　In terms of consumption growth this year, retail sales of consumer goods rose 15.9% in the first quarter to 14.8% in April, while consumption accounted for more than 4.3% of GDP in the first quarter. The author believes that the recovery from the real estate exceeding expectations has become the biggest contributor to stabilizing the current consumption growth. Based on sales data for April this year, the total saleable area of the country's main core cities is between 6-8 and six months.　　Previously, the country's main city's new houses were digested for 15-25 months, based on sales figures from last October.　　The volume of sales of the market for consumer durables is obvious, auto, home furnishings, household appliances and a significant rebound in the manufacturing sector.　　The remaining question is whether the "small spring" of the real estate market can be sustained is crucial. How long will the centralized release of rigid demand last?　　From the current potential of housing demand analysis, the younger generation mostly rely on the accumulation of three generations of savings to buy a house (which amplifies the group's actual capacity to pay), at this time, parents and grandparents have entered an "anti-savings" stage, relying on "anti-savings" People's purchasing power to prop up prices, this is a unique phenomenon in China. There are, of course, improved and investment-type needs. Among them, the improvement and income growth expectations are very strong, in the next few years the global recession may inhibit the majority of the consumer desire.　　Investment demand is more dependent on inflationary expectations, but the realization of inflation, in turn, will dampen the flames of economic recovery, which will make housing a "hot potato" in the hands of investors. Third, the industrial downturn in essence reflects a sharp decline in exports.　　At present, more than 40% of China's capacity is facing the external, China's economic external dependence than in the peak period of production expansion in Japan, South Korea is much higher. The depth of imports in the developed world may already be near the bottom, but at the bottom it will probably linger for a long time. The US deficit narrowed sharply in the first quarter, largely as a result of a contraction in consumption, as imports fell fast.　　The corresponding export-oriented economies fell to around 2005 levels for a quarter. China's export trade has regressed, at least back to 2006 levels, shrinking more than 30% from the peak of 2008.　　Will China regain its subsidy to foreign consumers (export rebates) to restructure external demand? In the face of a once-in-a-century financial crisis, governments around the world have made the most powerful counterattack in the history of the crisis. China's massive government stimulus package accounts for almost 20% of national income. But the real recovery depends on continued private consumption as a substitute for government demand, depending on the emergence of new wealth-creating mechanisms to fill the days left by the government's bailout.　　The situation is rather grim. The key to China's economic recovery is to step out of the "high savings, low consumption" cycle China's economic fundamentals depend on the interrelationship between domestic investment and consumption. China's investment rate has been rising to 43% since 2001, not only much higher than China's own past years ' average (38% per cent), but also much higher than the peak levels of industrialisation in other countries (Japan's investment rate was also below 40% in 1970, when South Korea peaked during 1991 's capacity expansion). By contrast, China's consumption rate fell from 59% to 48.8% in 1997-2007 (with a corresponding increase in China's savings rate to 51.2% per cent), with almost all the contribution from a decline in household consumption and a decline in household consumption from 45.3% to 36.7% per cent.　　Not only is this data well below the normal level of consumption in developed countries (around 70% per cent), but even in some developing countries (such as India), household consumption rates have reached 55% per cent. Often, "high savings, low consumption" is attributed to China's lack of a real social security system, health insurance and unemployment insurance.　　Without a social safety net, even if the government distributes coupons like the West, it's hard to see Chinese people stop constraining most of their buying desires. Fundamentally speaking, Chinese people have no money to spend. In fact, initial distribution is more crucial than two allocations, because it depends on the growth path and model that the economy has. In the past decade, with the government's economic dominance more and more strong, China's industrial development has been heavy chemical and capital-intensive direction, of which the industrialization rate reached 43%, far higher than other countries to complete the level of industrialization, while the heavy chemical industry accounted for the overall proportion of industry increased to more than 70%, This necessarily makes the initial distribution of national income more and more biased towards government and capital, and the share of labor remuneration and household savings will shrink: the proportion of labor compensation continues to decline. From 1997-2007, the proportion of Chinese workers ' compensation to GDP fell from 53.4% to 39.74%; China's share of capital income continued to rise, and the share of business surplus in GDP rose from 21.23% to 31.29% per cent.　　, the government's budget revenue as a proportion of GDP rose from 10.95% to 20.57%, if combined with extrabudgetary income, government land transfer income and the central and local state-owned enterprises in the annual unallocated profits, the government's large budget income accounted for almost 30% of national income. Government and enterprises take more and more money, can only do investment and the formation of capacity, domestic purchasing power and consumption can not be sold abroad, will inevitably form a trade surplus. China's current account surplus rose from $17.4 billion in 2001 to $440 billion in 2008, and the share of GDP rose from 1.3% to 10%. The government-led economy is the investment economy, and the investment economy can only go to the export economy eventually.　　Therefore, high savings will inevitably be high investment, high investment reversal and further stimulate high savings, cycle, until one day the external demand really collapsed, the cycle is completely terminated. Frankly, if China cannot fundamentally jump out of this cycle, the only way to restore equilibrium in the future will be through massive closures and massive capacityCleaning, unemployment and government debt are rising to eliminate high savings and restore balance, and the nation's wealth will pay a huge price. Even if China's economic imbalance stems from excessive investment and sluggish consumption, the stimulus target is still to spur investment.　　But whether government investment can be translated into the savings and consumption of the residents and the private sector's investment will be the key to the success or failure of the government's stimulus plan. The idea is basically the same as the word "drag", boosting the economy through fiscal investment in infrastructure, and then waiting for the return of external demand.　　However, this classic strategy may be ineffective in the crisis, the U.S. economy may not be able to return to the original level of growth in a short time, the Chinese this time to rely on their own to solve the problem. We need incremental reforms to adjust the distribution mechanism for the entire benefit.　　To this end, we can start with the following six aspects. One is to straighten out the price, relax the price control, let the government from the area that can exert influence to withdraw gradually, give full play to the basic function of the market in the resource allocation, let the factor price can reflect the market supply and demand, the resource scarcity degree and the pollution loss cost truly.　　Industry is born in the price, the price is smooth, distorted industrial structure can adjust to come over. Second, structural tax reduction to adjust the direction of resource allocation, through a substantial increase in resource rates (access to mining resources permit, only large enterprises and the rich), to curb heavy chemical and capital-intensive industries extensive growth, significantly reduce the tax burden on private sector and small and medium-sized enterprises, to support their transition to advanced manufacturing and modern services The value chain of modern manufacturing industry extends, makes the raw material purchase upwards, does the research and development design, the downward does the logistics, does the sales network, does the brand and the goodwill, does the retail work to create absorbs the massive employment the modern service industry. In essence, small and medium-sized enterprises are to do employment, do income. In this way, the efficiency decision of the individual on the micro level creates a more equitable and sustainable distribution structure. Solve the problem of laborer income, finally formed the middle class of the olive-type social structure, what is the middle class?　　That is the market for consumer durables such as housing and automobiles, and if social security and China's urbanization accelerates, the competitiveness of China's manufacturing will certainly usher in a substantial boost. The third is to break the monopoly, relax the entry threshold of the industry, and vigorously open up private capital into monopolistic sectors, such as finance, energy, media, telecommunications services, transportation and so on, to form a competition mechanism.　　So private investment can be driven to ease the financing difficulties of SMEs, the efficiency of the economy can be substantially improved. Four is to substantially reduce the tax subsidy to the residents and increase their ability to endure inflation.　　China as a non-welfare country, the weight of individual tax in the world ranked fifth, the front four are all developed high welfare countries (France, Switzerland, Denmark and Norway). Five is the tax system to do a fundamental reform, value-added tax to the circulation of the consumption tax, change the government incentives, from the guarantee of economic growth of the investment financial system to complete transformation, as soon as possible to the transformation of public finance. Not where to invest more, chimney more, whichLocal government revenue is more, but where people's livelihood is good, people's wealth increased, the government's tax base will be rich. Government incentives have changed, the GDP orientation will turn to the service orientation of the people, the government will be free from the economic affairs, then the power of allocating resources will be transferred to the city. To improve the purchase price of agricultural products, reform the land system, realize land circulation, so that farmers can really enjoy the benefits of economic growth and industrialization,　　The reform of household registration system to promote urbanization has a long and far-reaching impact on domestic consumption. In short, if China catches the chance of changing the global economic structure, accelerate the reform of the domestic political and economic system: accelerate the adjustment of the distribution of wealth among residents, government, enterprises, residents and residents, excavate domestic demand, reduce monopoly, loosen administrative control, release economic vigor and promote economic structure transformation,　　We will be able to minimize the pain of rebalancing the global economy, achieve a soft landing, turn adversity into a machine, become passive, and recreate the wonders of China's economy. (Director of China Economic Evaluation Center, Institute of Finance, Chinese Academy of Social Sciences)