All industrial countries in the world have deficits. Why is China the only one with a surplus, and the surplus is still growing?

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Author: brother Mao, this article is reproduced under the authorization of official account brother Mao’s vision (id:maogeshijue).

one

Global trade surplus and deficit

Recently, a group of data has been swiped on social networks, which roughly describes the fact that all the world’s top ten industrial countries except China have trade deficits.

Germany’s deficit in May was 1.04 billion US dollars, the first deficit since 1991;

France’s deficit in May was 11.5 billion euros, a record high;

Britain’s deficit in May was 8.5 billion pounds;

Italy’s deficit in May was 3.6 billion euros;

Spain’s deficit in May was 6.4 billion euros;

The US deficit in May was 104.3 billion US dollars;

Japan’s deficit in May was US $17.8 billion;

South Korea’s deficit in May was $2.47 billion;

India even set a record high of US $24billion in a single month;

Even Vietnam, which is wildly advocated by some people, has a deficit of $1.73 billion in orders per month in such a small volume.

If there is a deficit, there is a surplus. Which countries have trade surpluses at present?

Mainly resource exporting countries.

Thanks to the impact of the sharp rise in international energy prices, almost all resource exporting countries – including oil producing countries in the Middle East, Russia, Australia, Canada and Brazil, have trade surpluses.

Of course, there are exceptions.

When almost all industrial countries in the world have trade deficits, only China is the only exception. China’s trade surplus in May reached US $78.76 billion, an increase of 82% year-on-year! Not only in May, our import and export surplus in the first half of this year was as high as 2.48 trillion, which is close to $400billion!

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Why can China become the exception of industrial countries all over the world?

Strangely, the world’s media, whether foreign or domestic, only reported that China maintained a huge import and export surplus in the first half of this year, and remained silent about the reasons.

Why?

Now I have to break through the window paper that the foreign media hide and don’t want to admit – the reason is actually very simple, because our epidemic is well controlled, which directly leads to the growing gap between the production efficiency of our manufacturing industry and that of other countries in the world.

Let’s randomly list a group of data on China’s import and export before and after the outbreak of the epidemic.

In 2019, the export was 17.2 trillion, the import was 14.3 trillion, and the surplus was 2.9 trillion;

In 2020, the export was 17.9 trillion, the import was 14.2 trillion, and the surplus was 3.7 trillion;

In 2021, the export was 21.7 trillion, the import was 17.3 trillion, and the surplus was 4.3 trillion;

Since the outbreak of the COVID-19 in 2020, China’s import and export surplus has expanded sharply. In 2021, compared with 2019 before the epidemic, our surplus increased by 48%. How to explain this?

Although we firmly promote the industrial upgrading plan, it is not enough to improve the efficiency of China’s manufacturing industry so fast in just two years – the surplus will increase by 48% in two years. Not only that, by 2022, our surplus will further expand.

In the first half of the year alone, the surplus was as high as 2.48 trillion yuan, and the annual surplus could easily reach the level of 5.3-5.5 trillion yuan, which was almost more than 800 billion dollars – compared with 2019,

The surplus has doubled.

Sri Lanka’s financial collapse has recently been swiped on social networks. To be honest, a small country like Sri Lanka can’t have billions of dollars in foreign exchange reserves, and billions of dollars for China’s foreign trade will earn back in a few days!

Therefore, it must be admitted that China’s epidemic prevention policy of dynamic zeroing is really a great and far sighted policy.

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It is hard for ordinary people to imagine how disastrous our current economy would be if we followed the example of foreign countries (we will talk about this later).

Note: Here’s a knowledge point. Some Xiaobai explained the reason for China’s huge surplus as the export tax rebate policy, and even in the past, they erroneously interpreted China’s export tax rebate policy as that the Chinese government subsidized foreign countries with national taxes.

It must be said here that all countries in the world should implement the tax rebate policy for export commodities.

Why?

We assume that a factory is set up in country a, and the local government defaults that the goods sold by this factory are in this country, so the value-added tax and consumption tax will be levied on the enterprise goods. As a result, the actual sales place of this commodity is country B.

There is a problem. After the commodity is subject to value-added tax and consumption tax in country a, it will also be subject to value-added tax and consumption tax by the local government in country B. This is the problem of secondary taxation, which will greatly weaken the competitiveness of this commodity in country B.

Moreover, for factory investors, if they are subject to secondary taxation just because they set up a factory in country a, they might as well directly transfer the factory to country B, which will lead to the outflow of manufacturing industry, and the industrial chain, employment and some taxes (corporate income tax) all go abroad.

These are the reasons why all countries in the world have to implement tax rebates for export goods.

two

global outbreak

I haven’t mentioned the COVID-19 for a long time. Now let me tell you about the epidemic situation abroad.

With regard to the epidemic situation abroad, China now has a large number of people leaving the country, and some news can be heard more or less. For example, what I have heard is such descriptions of foreign countries (of course, developed countries):

Foreign countries have coexisted with Xinguan. Xinguan is now much less toxic after evolutionary iteration. If you get Xinguan, you will get a cold. Just rest at home for a few days.

Then, if there are competitions and concerts in foreign countries, there are many people, and few people wear masks. Visually, their living conditions have returned to normal.

Is that true?

It’s a fact, but it’s part of it. Many people in foreign countries have been completely laid flat after three years of epidemic toss. For young and middle-aged people who have no basic diseases, many people do have covid-19 infection and just rest at home for a few days.

However, the above is definitely not all the facts abroad!

Opening up foreign social media, Xinguan is still a hot topic. Many hot topics every day are related to Xinguan, which has been affecting all aspects of foreigners’ life.

For example, Stephen King, a famous American horror writer, recently made a tweet popular. He was very depressed and said that “Xinguan won”. This tweet was forwarded to tens of thousands of people, and many people left their feelings of infecting Xinguan in the comment area.

If the impact of covid-19 on everyone is a mild cold, why is Stephen King so depressed about the win of novel coronavirus?

Now the number of people infected with covid-19 in the United States has exceeded 30% of the total number. Are these people infected with covid-19 just getting a mild cold?

Let’s take a look at the reports of American media.

Report 1: the number of people with “long-term covid-19” symptoms in the United States is “quite terrible”, with a incidence rate of 20% in adults and 25% in children.

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Fatigue, shortness of breath, brain fog, chest pain and headache, these patients with long-term covid-19 symptoms sit at home, unable to work and take care of their families.

According to the statistical data published by American news and world report, among the people infected with covid-19, the incidence rate of adults with long-term covid-19 symptoms is 20% and that of children is 25%.

If you see 80% of adults who do not have long-term covid-19 symptoms, it may be a cold. If it happens to be the 20% who has the disease, it is a painful and sad story.

The incidence rate of children is even higher, 25%. Four children have a long-term covid-19 syndrome. If it is China, how many families dare to bet that their children are not 25%?

So at present, the dropout rate of primary and junior high schools in developed countries is particularly serious. I didn’t find the data of the United States, but the data of the United Kingdom. At present, the dropout rate of primary and junior high schools in the United Kingdom is nearly 20%.

Report 2: novel coronavirus has become the leading cause of death among people aged 45-54 in the United States, surpassing heart disease and cancer.

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In Taiwan, this wave of epidemic has continued to kill people. Although the DPP authorities tried hard to whitewash the data, Taiwan’s population is only 23million, which is similar to that of Shanghai, the death toll announced in the past two months has exceeded 7000, and there are people of any age in the death toll.

Young people, the elderly, children and their families cry bitterly on social media, but it doesn’t affect many people to go out and play as usual. At most, remind relatives and friends to take good care of their children.

I can’t imagine what this figure will be like in Shanghai.

Taiwan is still sinking into ba 2 virus, and the latest ba 5 has begun to sweep the world, the first is Europe.

At present, Germany, France and Italy are infected by more than 100000 people every day. The population of these countries is similar to that of Zhejiang Province. There are more than 100000 cases. For one month, nearly 10% of the people are infected. I don’t know how much panic it will cause in Zhejiang, China.

BA. The symptoms of 5 are high fever, splitting headache and difficulty in falling asleep. In this case, patients’ demand for medical treatment is particularly strong, but the medical systems of these old developed countries have been overwhelmed. Italy has even begun to ask the military for help, hoping that the military will support enough ambulances, but patients not only have difficulty in calling an ambulance, but also have to queue for a long time even when they call the ambulance to the door of the hospital.

Covid-19 has been popular for three years, and the number of people infected with covid-19 in developed countries has exceeded 1/3 of the total population. Such a large proportion of the population is infected with covid-19. You say it has no impact on the economy, work and production, and I won’t believe it if you kill it.

When communicating with friends working abroad, the most common complaint I heard was that the project progress was constantly delayed. Anyway, people kept asking for sick leave, one after another, and the project landing (completion) time was repeatedly delayed, which made it impossible to deliver.

Now we all know why China’s foreign trade surplus has increased significantly after the new crown? It is because our country implements a strict dynamic zeroing policy, which minimizes the impact of the epidemic on our production and business activities. At the same time, foreign countries are too affected by the new crown, which leads to our production and business efficiency being far ahead of foreign countries.

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three

If we choose to lie flat?

If, I mean, if we also implement the lying down policy of foreign countries, and everyone is rotten in the quagmire of the epidemic, what will be the result?

First of all, there is no need to think about the huge surplus. In the case of soaring international commodity prices, our import and export are likely to have an unprecedented deficit like Germany.

If the trade deficit is superimposed on the Fed’s interest rate hike, our RMB exchange rate will also plummet.

Since last year, the exchange rate of the euro has fallen by 20%, the Korean won has fallen by 20%, and the yen has fallen by 25%. What about the RMB? In the first half of this year, it fell by about 6% (it appreciated last year) – mainly due to the impact of the epidemic.

Originally, the RMB should go through the appreciation cycle, but unfortunately, in June, US Treasury Secretary Yellen called us and begged us to take measures to prevent the appreciation of the RMB (this is the information revealed by Mr. Jin Canrong. Further appreciation of the RMB is equivalent to more expensive export commodities, which is fuelling us inflation).

We also consider that the exchange rates of major industrial countries in the world have depreciated by more than 20%, which is equivalent to a 20% discount on their exports. If the RMB continues to appreciate, it will bring some pressure on our exports. Therefore, the RMB exchange rate is currently floating around 6.7.

Therefore, if we do not implement the dynamic zeroing policy and choose to lie flat, the RMB exchange rate is also likely to plummet by 20%, which is very tragic.

The sharp fall in the exchange rate is equivalent to that imported goods are more expensive, and the price of international bulk products has soared. If the RMB exchange rate falls by another 20%, it is equivalent to that the price of imported oil, natural gas and iron ore will rise by another 20%.

In this way, domestic inflation will not be able to hold down, and the inflation index will suddenly rise from the current 2% to more than 5%.

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China experienced an inflation index of 5% in 2010. At that time, the domestic people were boiling with resentment and public sentiment was surging. Under the huge inflationary pressure, the country had to adopt a monetary tightening policy to control inflation.

Now, because we have the dividend of the zeroing policy and the confidence of the world’s unique huge trade surplus, we can directly ignore the Fed’s interest rate hike cycle (fearing that the Fed’s interest rate hike will lead to the outflow of international hot money) and implement quantitative easing policy at home.

Even so, many of us still feel that life is difficult. Let’s think about it. If China’s inflation index also bursts, forcing the central bank to tighten monetary policy, what will happen now?

It’s definitely worse than death!

four

vicious spiral

If we simply compare a country to a family, then the import and export of foreign trade represents the income and expenditure of the family. The trade deficit is that income exceeds expenditure, and the trade surplus is that income exceeds expenditure.

In the case of trade deficit, this family (country) can only live by consuming savings (foreign exchange reserves). When the savings (foreign exchange reserves) are spent, it means that the family (country) is bankrupt – Sri Lanka is an example.

Don’t think Sri Lanka is an isolated case. Behind Sri Lanka, there are a lot of countries such as Laos, Pakistan, Nepal and so on queuing up to enter the ranks of bankruptcy.

The national economy is more complicated than the family.

The trade deficit will lead to the depreciation of the exchange rate of the local currency, which means that the rise in the price of imported goods will further push up the domestic inflation index, and the rise of inflation will lead to the outflow of overseas funds, which will further devalue the exchange rate of the local currency, thus forming a vicious circle.

Therefore, any country will try its best to protect its foreign exchange when its exchange rate continues to depreciate and its foreign exchange reserves continue to decrease.

Take India as an example.

Last year, India’s foreign exchange reserves were roughly US $620billion, the third largest in the world, after China and Japan. In this large class, the global village has a relatively strong foundation.

However, since last year, the price of international bulk products has risen, and India has gradually been unable to withstand it. After a series of trade deficits, India’s foreign exchange reserves fell to $580billion in May this year, resulting in a huge gap of $24billion trade deficit in June.

In this case, the Central Bank of India announced in July that the import and export trade was settled in rupees, which was a risk to follow Russia’s strategy of stabilizing the rupee exchange rate and maintain foreign exchange reserves in order to stabilize the rupee exchange rate.

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However, India’s import and export trade is settled in rupees, which is essentially different from Russia’s compulsory settlement in rubles against “unfriendly countries”.

India’s industrial products are not worth mentioning. Its exports are mainly agricultural products and minerals. Er, generic drugs are another big part.

It’s incredible to say that one-third of India’s population is hungry. The hunger index compiled by the United Nations is higher than that of North Korea, but it doesn’t prevent India from being the world’s largest rice exporter – it’s really tightening its belt and exporting to earn foreign exchange.

It is precisely because India exports mainly resource-based products that India believes it can learn from Russia and settle its import and export trade in rupees.

However, India’s rupee exchange rate is extremely unstable. It is hard to imagine that foreign traders are willing to accept rupee payment when India imports goods abroad. On the contrary, when India exports resource-based products, because the rupee exchange rate has been depreciating, there is considerable arbitrage space to pay in rupees.

So India used rupees to settle its import and export trade. The original intention was good, hoping to reduce foreign exchange consumption, but the result was not good – maybe there would be the worst case. India’s exports would be replaced by a pile of rupees printed by itself, but imports would still consume valuable foreign exchange. If this happened, it would be a tiger that cannot turn into a dog.

Press: India recently imported oil from Russia. Even though the two sides agreed to settle by currency swap (de dollarization), the currency exchange rate anchored by the local currencies of the two sides is still RMB.

five

High inflation in the US economy

There is only one country in the world that is not worried about the trade deficit. This country is the United States. There is no other reason, because his family in the United States runs a bank, and the trade deficit can be solved by printing dollars directly.

Although the United States is not worried about the trade deficit, high inflation is deadly. Because high inflation consumes residents’ purchasing power too much, if it is not solved, the U.S. economy will easily fall into recession.

After the COVID-19, because the U.S. government tried hard to pay residents, residents’ savings once hit a new high. It is precisely because of the strong savings data of U.S. residents that the market is very optimistic about the U.S. economy until 2021.

At that time, we tried to follow this logic. After the epidemic, residents’ savings were converted into consumption, which led to strong economic growth in the United States.

But after 2021, inflation is like a dark horse in a thorn, which will quickly consume the savings of American residents.

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In other words, the U.S. economy has not yet had time to recover, inflation is still rising, and the money in the pockets of ordinary people is about to run out.

What should I do?

The problem of high inflation must be solved quickly.

There are two reasons for high inflation in the United States, one is the problem of the supply chain (or the impact of the COVID-19), and the other is the rise in international commodity prices

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The United States is unable to solve the supply chain problem, which has swept the world recently Maybe it will further worsen the supply chain problem in the United States, so the United States can only make an issue of international commodity prices now.

Now, on the one hand, Biden personally visited the oil producing countries in the Middle East, hoping to increase production in the oil producing countries in the Middle East; On the other hand, the Federal Reserve has to take more radical measures to curb inflation.

At present, the market predicts that the Federal Reserve may directly raise interest rates by 100 basis points in July – a one-time increase of 75 basis points by the Federal Reserve in June has set the most radical interest rate increase record in nearly 30 years. If the Federal Reserve raises interest rates by 100 basis points in July, it will refresh this record again.

The Fed’s interest rate hike means that the US dollar exchange rate is stronger, and the stronger US dollar exchange rate means that American imported goods become cheaper. This is the logic of the Fed’s interest rate hike to curb inflation, but logic is logic, and the effect of logic to become real depends on the dose – the so-called talking about the effect without dose is all playing hooligans.

In theory, how much does the Federal Reserve need to raise interest rates to control inflation?

Let’s compare the two sets of data.

After the Fed’s monetary policy shift last year, the Fed raised interest rates by 1.5%, and the dollar index rose from about 90 to 107, an increase of almost 20%, but the inflation index rose to 9.1% in June.

In the last century, there was a fierce man named Paul Volcker in the Federal Reserve. In order to control the inflation of more than ten percentage points at that time, this fierce man once raised the interest rate to 20% at one go!

Now the U.S. inflation index is approaching 10%. If the Federal Reserve only raises interest rates to control it, its interest rates should at least be increased to more than 10%!

However, the U.S. economy has been experiencing negative growth for two consecutive months. In this case, if the federal interest rate is increased to 10%, the economy will collapse directly. Therefore, if the fed only raises interest rates to control inflation, it will certainly not work.

Now it depends on the results of Biden’s Middle East trip. However, if the war between Russia and Ukraine does not end, even if Saudi Arabia and other Middle East oil producing countries promise to increase production, it is difficult for international energy prices to fall significantly, and Biden’s administration has great difficulty in controlling inflation.

Compared with other countries in the world, which are either overwhelmed by trade deficits or high inflation, China is the most calm. We don’t have to worry about trade deficits or inflation,

It’s a bit of scenery. It’s unique here.

At present, although the epidemic situation in China presents a situation of multiple outbreaks, our epidemic prevention strategies and methods have reached a new height.

More than 1800 cases in Sixian County, Anhui Province, have been cleared in 17 days since June 26, and sporadic outbreaks are also under effective control. There is a high risk in Yuehai street in Shenzhen, but based on the normalization detection, only one building is classified as a high-risk area. Recently, the state has renewed the covid-19 epidemic prevention guidance standards again, striving to find the best balance between epidemic prevention and economic development.

Therefore, China is the only major country in the world that can truly give consideration to epidemic prevention (that is, human life) and economic development. The economic recovery in the second half of the year is predictable.

In other words, the global economy has become a worse pattern, and the U.S. economy is very bad, right? But the European economy is worse, so the United States can still suck a tube of blood on Europe to survive. Is the European economy terrible? But compared with Japan, it seems to be so good.

Japan’s economy is very poor, isn’t it? But looking around Asia, as long as you pretend not to see China, it is basically a unique image. At least it is much better than India. Does India feel hip pulling? However, India also holds 580billion US dollars of foreign exchange reserves, which makes Laos, Pakistan, Myanmar, Indonesia and other countries drool.

Is it hard for a group of countries in Southeast Asia? But compared with Sri Lanka, it’s not much better

However, all countries in the world cannot be compared with China, which is also a big manufacturing country and also highly dependent on energy and agricultural imports. How can China achieve the world’s largest trade surplus? 800 billion dollars a year! This is the decisive financial force that can control the situation.

Let’s see what kind of waves we have caused in the world by spending $30billion on Airbus aircraft!

$800billion is 26 times more than $30billion!

Therefore, as long as we achieve rapid economic recovery in the second half of the year, we believe that we will do more in this great change that has not been seen in a century.

This article is reproduced under the authorization of official account brother Mao’s vision (id:maogeshijue).

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