No one doesn't want the economy to be better, but optimists can't survive the market

Nvidia CEO Jensen Huang said, "Since the first day I founded NVIDIA, I have been thinking about how to keep Nvidia from going out of business, and it is this extremely strong sense of distress that has supported me all the way. ”

This sense of distress is an indispensable quality of the founder of the enterprise, and it is also an important spirit that always motivates the enterprise to develop and innovate.

The same is true for an economy.

What is Economy?

The economy seems to have nothing to do with ordinary people, but we can't do without it at all, so that we rely on it, and the rapid growth of the economy not only determines whether the people in the economy are happy and full of hope for the future, but in a sense, it is also a positive embodiment of optimism.

So far, many people have expressed various concerns about the economy, which can not be described as simply short-selling or bearish, after all, we are in this land, and naturally we have "invested" all our belongings here, and from this logic, no one does not want the economy to be better.

But on the other hand, a mere optimist will never survive in the market, because competition forces us to progress, for individuals, for businesses, and even more so for an economy.

Only with a sense of adversity can we continue to push ourselves to progress and change.

It is a scientific and logical guideline to find problems, solve problems, and follow up feedback and adjust them in time.

In the long run, the mainland's macroeconomy is still facing huge and far-reaching challenges, and we should have to admit this.

The first challenge is the real estate crisis.

The core of the mainland's economic problems is still the real estate problem, and it will inevitably be the real estate problem, and the reason for this lies in the depth and breadth of the problems it involves that are not comparable with ordinary industries.

For example, real estate still firmly occupies one-third of all wealth on the mainland to this day, what is this concept? This means that once housing prices fall by 50 percent like Japan's bubble crisis in the last century, then the wealth that evaporates behind this will be tens of trillions of yuan, which can almost be described as a disaster.

In the past two decades, the real estate industry in mainland China has developed rapidly with the wave of privatization of real estate developers, but the crisis began in 2020, or as early as around 2018, there were constant alarms and concerns about the bubble problem catalyzed by high housing prices.

Why do we think domestic housing prices are on the high side today?

The answer is simple, look at the house-price-to-income ratio.

What is a house?

In essence, the house is just a mixture of steel and concrete, its cost is not high, what really determines the price of the house is the psychological changes that people expect, and the final support for the house price must be people's income.

But obviously, as a middle-income economy, our housing prices are still higher in first-tier cities than in developed countries.

For example, in Japan, the United States, South Korea and other places, their house-price-to-income ratio is only a few years, while the mainland's house-price-to-income ratio is more than 40 years in first-tier cities such as Shenzhen, which means that it takes more than 40 years to buy a house.

Even in places like provincial capitals, the house-price-to-income ratio is still as high as dozens, far exceeding that of developed countries.

Therefore, there is no doubt that the current housing prices in the mainland must be inflated, and asset prices greatly exceed the per capita income level, which is a sign of a bubble.

The real estate problem is actually the problem of wealth evaporation, and it is also the debt problem of housing debt, a large number of families and real estate developers are burdened with debts, and any one of these links has a problem, which may trigger a series of chain effects.

In addition, the quality of real estate has also affected the recovery of consumption in the past year. Many people believe that more than 10 trillion savings in the central bank will usher in retaliatory consumption after liberalization, but due to the decline in housing prices, this has led many people to realize that their assets are shrinking, so they retain savings and consumption has begun to become conservative.

This is cause and effect, and it is also very consistent with the cyclical nature of the economy.

The second challenge is the economic growth model.

The economic growth model in the West is dominated by the tertiary industry, that is, the income of ordinary people is higher, and the income difference between various occupations is not large, which indirectly encourages people to consume, and consumption drives employment and people's income growth, so that a virtuous circle is formed.

In the past, our economic growth model was actually driven by infrastructure, and the special thing at that time was that people's income levels were lower, so they lacked spending power, so it was driven by infrastructure, which is also understandable.

This is true from roads, bridges, trains, and highways.

But today, this model of economic growth is bound to encounter saturation.

For example, if a city has a population of 5 million, it is of course good to build a high-speed rail station, and it may be good to build a second one, but what about the third and tenth infrastructure?

Previously, tiling the river was a similar practice, which seemed to create GDP, but in fact the economic benefits may be infinitely close to zero.

In addition, the mainland's fixed asset investment has grown from a few decades ago to only a few points today, which also shows that the marginal benefits brought about by such investment projects are decreasing, and fixed asset investment cannot be exchanged for higher economic returns, which also shows that the industry is facing saturation.

When infrastructure is saturated, new growth channels need to be opened, and the consumerism-led economic growth path of the West is actually a good example for now.

Only when ordinary people's incomes increase and they dare to consume can the cycle of economic growth be positive.

Since 1990, the average GDP growth rate on the mainland has been around 9%, and in 2023, this figure has become 5.2%, and economic growth is slowing down This is a fact, there is no doubt about it.

However, compared with the growth rate of developed countries, the mainland still has a huge late-mover advantage, and there are billions of people on the mainland whose average monthly household income is less than 3,000, which is a huge room for growth, whether in terms of consumption or others.

The economic growth path of the West is to drive the economy through people's consumption, and promote consumers to buy TV, subscribe to Internet services and travel, etc., which can stimulate the economy well.

In the future, we will inevitably need to face a consumption-led economic growth model, and only in this way can economic path dependence be healthy and sustainable.

This is a big shift, and it is also a huge space for consumption.

The mainland's per capita GDP is still just over $10,000, and nearly 40% of the population still lives in rural areas, which is a very ample space for our future growth potential.

Born in adversity and dying in peace, individuals, enterprises and even economies should hold this concept and take precautions.

One person's consumption is another person's income, and the future of our economy depends on what we trust.

end.

Author: Luo sir, the workplace reference of the new youth. Concerned about the logic behind the development of things, optimistic pessimists. Follow me and grind the knowledge to you.