Original: Tianya Supplement Source: WeChat official account: Tianya current events have been reprinted with authorization
I believe many people may have a feeling: the epidemic is over, and it is reasonable to say that the Chinese economy should improve. However, why does the economy seem to have not improved this year, but rather become even more difficult.
What exactly is the problem? When will the economy improve?
In recent months, people have clearly felt that the economy is becoming increasingly sluggish, and many data seem to prove this, mainly reflected in two aspects:
Firstly, the price index is very low and there is suspicion of “deflation”;
We have previously told everyone that the price index is an extremely important indicator for measuring the quality of the economy: usually, the price index> 3.0% indicates that the economy is overheating; A price index between 2-3% indicates that the economy is normal; Price Index< 2.0% indicates that the economy is too cold.
Nowadays, the world is experiencing inflation, but our price index is only 0.1%, which indicates that the Chinese economy is relatively poor – ordinary people are afraid to spend money, and commodity prices will decrease, leading to a low price index.
From the trend of the price index, in fact, the overall economic situation in China has been not very good since 2015- most of the time, the price index in China is below 2.0%.
The PPI index, which measures the trend and degree of changes in factory prices of industrial enterprises’ products, also shows a downward trend: the PPI in April decreased by 3.6% year-on-year.
Secondly, the youth unemployment rate is very high.
The so-called youth unemployment rate refers to the proportion of the population aged between 16 and 24 who are looking for work but cannot find one. Students who are currently studying are not counted as unemployed.
In capitalist countries, the youth unemployment rate is an important indicator for judging the quality of the economy: when the economic situation is good, enterprises are in the expansion stage, so they are more willing to recruit and cultivate young people with less experience. However, when the economic situation is not good, companies do not want young people with relatively little experience.
Let’s give a typical example: BYD.
In recent years, the development of new energy vehicles has been very rapid, requiring a large number of engineers and workers to be recruited. However, as new energy vehicles have only developed rapidly in recent years, there are not enough engineers in the market for you to recruit. Therefore, you can only go to universities to recruit college students with no work experience, and then pay a high price to cultivate them yourself.
BYD Chairman Wang Chuanfu said in an interview that BYD currently has 60-70000 engineers and will recruit 30000 fresh graduates this year, including 7800 from Tsinghua University and Peking University, which they did not even recruit before.
Due to the large rural population in China for a long period of time, it is not very meaningful to collect this data. However, with the continuous increase of China’s urbanization rate and the significant increase in the number and proportion of college students, we have been collecting the youth unemployment rate since 2018.
Overall, the unemployment rate of young people in China has been very pessimistic in recent years. This year, the unemployment rate of young people has reached 20.4%, far exceeding the world average. According to the “2022 Global Youth Employment Trends” report released by the International Labour Organization, the global youth unemployment rate in 2022 was an average of 14.9%, with Europe and Central Asia at 16.4%, Asia Pacific at 14.9%, and North America at the lowest of 8.3%.
Although China’s price index and youth unemployment rate, two important indicators for judging the quality of the economy, are relatively poor, there seem to be contradictions.
Mainly reflected in two aspects:
Firstly, China’s GDP growth rate far exceeds last year’s;
In the first quarter, China’s GDP was 28.5 trillion yuan, an increase of 4.5% year-on-year. Among them, the growth rate of the primary industry agriculture is 3.7%, the growth rate of the secondary industry industry is 3.3%, and the growth rate of the tertiary service industry is 5.4%.
The International Monetary Fund (IMF) released its latest World Economic Outlook report on April 11th, predicting a global economic growth rate of 2.8% this year, while China’s economic growth rate is 5.2%.
Secondly, China’s exports are strong, and its trade surplus has reached a new high.
According to customs data, in the first four months of this year, China’s total import and export value was RMB 13.32 trillion, an increase of 5.8% year-on-year. Among them, exports reached 7.67 trillion yuan, an increase of 10.6%; Import reached 5.65 trillion yuan, an increase of 0.02%; The trade surplus reached 2.02 trillion yuan, an increase of 56.7%.
From the current month, in April this year, China’s import and export reached 3.43 trillion yuan, an increase of 8.9%. Among them, exports reached 2.02 trillion yuan, an increase of 16.8%; Import reached 1.41 trillion yuan, a decrease of 0.8%; The trade surplus was 618.44 billion yuan, an increase of 96.5%.
That is to say, from a macro perspective, our export situation is very good, and the GDP growth rate is also good. In theory, everyone should feel that the economy is improving, the price index should not be so low, and the youth unemployment rate should not be so high.
Why is there a significant deviation between macro data and people’s perception? Why do macro data and important individual indicators exhibit contradictory characteristics?
In fact, there are two main possibilities for this situation to occur:
Firstly, there were errors or errors in the statistics;
Secondly, China’s economic structure has undergone significant changes.
What kind is it?
It is obviously the second type.
So, what is economic structural change?
Let’s give an inappropriate example: you are a worker and I am a farmer. You earn 50000 yuan a year, and I earn 30000 yuan a year. Previously, the economy was good, and our incomes were increasing every year. However, due to our increased industrial exports and agricultural product imports this year, your income has increased significantly, and my income has decreased significantly. Your income has increased from 50000 to 80000, while my income has decreased from 30000 to 20000.
From a macro perspective, your income has increased by 30000, while my income has decreased by 10000, totaling an increase of 20000. However, structurally speaking, you have earned more and feel like life is getting better. But I’m earning even less, and I feel like life is tough.
This is called ‘economic structural change’.
Why has there been such a significant change in economic structure?
The answer is simple: With the continuous breakthroughs in high-end technology in China, the high-end manufacturing industry is constantly developing, driving the overall improvement of the economy. But at the same time, the pace of the world’s anti globalization is constantly accelerating, and traditional low-end manufacturing is facing huge difficulties.
In fact, we can see this from the composition of China’s export projects.
Let’s take a look at the year-on-year breakdown volume price scatter chart of China’s exports in April. From this chart, we can clearly see that China’s automobile exports have significantly increased, and export prices have also risen significantly. However, the vast majority of traditional industries have either experienced a decrease in export quantity, a decrease in export prices, or a decrease in both quantity and price.
To put it bluntly, it is a sentence we often see in the news: China is undergoing economic structural transformation, transitioning from traditional low-end manufacturing to high-end manufacturing.
During the period of economic structural transformation, it was quite painful.
The advantages of high-end manufacturing are capital intensive, technology intensive, and the added value of products is very high. However, its drawbacks are also very obvious. It is not a labor-intensive industry and cannot provide too many job positions.
It only takes 10 people to make a car worth 500000 yuan, but it takes 100 people to make clothes worth 500000 yuan. This is the difference in labor between high-end manufacturing and mid to low-end manufacturing.
High end manufacturing has driven the economy, but it has not generated much employment; The production value of mid to low end manufacturing has not decreased significantly, but it has caused many people to lose their jobs. This is the “pain” in the process of economic structural transformation.
This’ pain ‘is something we must bear.
The proportion of traditional manufacturing in the economic structure is constantly decreasing, leading to a large number of unemployed people. Among the large number of unemployed people, only a small number of people with strong technical abilities have transitioned to engage in high-end manufacturing (such as the technical workers of traditional fuel vehicles who have lost their jobs in the new energy vehicle industry), and the remaining people can only be forced to concentrate in other mid to low end manufacturing industries, leading to intensified competition, and various industries are “rolling” very fiercely, Wages have decreased and working hours have been extended.
If a graduate student loses his job, he will go to grab the job of an undergraduate student; If an undergraduate loses his job, he will grab the job of a vocational college student; If a junior college student loses their job, they will grab the job of a high school student… ultimately leading to an extremely difficult life for the bottom class.
The current situation in China is somewhat similar to this pattern.
So, how can we solve this problem?
Two methods:
Firstly, further accelerate industrial upgrading, develop high-end manufacturing industry, and strive to provide job opportunities for more people in the shortest possible time;
At present, the momentum of our industrial upgrading is very good. For example, the new energy vehicles we mentioned above have developed quite well, and the export trend is very good.
We can be sure that in a long time, China’s new energy vehicle manufacturing industry will have a very good development, because in the world today, China has a absolute advantage in the new energy vehicle industry. We have not only established a relatively complete industrial system, but also formed many very famous brands.
At present, there are dozens of domestic new energy vehicle brands, including Xiaopeng, NIO, Ideal, Weima, Nezha, Geely, BYD, Jihu, Zero Run, and Aian.
On February 14th this year, the European Parliament passed a resolution banning the sale of new fuel vehicles in the EU region from 2035 onwards.
Not only the European Union, but also many countries around the world have formulated plans to ban the sale of fuel vehicles.
In the next 10-15 years, it will be a period of explosive new energy vehicles in China, which will provide a huge number of job opportunities for China.
China not only has huge advantages in the field of new energy, but also provides us with favorable conditions in the semiconductor field.
In order to hinder the great rejuvenation of the Chinese nation, the United States has continuously launched trade wars and technology wars against China, especially the implementation of chip bans by the United States, which provides extremely favorable conditions for our breakthroughs in the field of chips.
Due to the high technological content, high investment, and slow effectiveness of high-end chips, it is not wise for Chinese companies to invest a huge amount of research and development funds in high-end chips in the context of globalization. However, after the United States launched the chip war against us, the entire situation changed, forcing companies to invest huge amounts of funds in research and development.
In recent years, China’s chip industry has developed very rapidly, with numerous semiconductor companies represented by SMIC breaking through 28 nanometer chip technology. Now, 14 nanometer chips have also made significant progress.
You should know that China’s annual semiconductor imports amount to over 400 billion US dollars, which is larger than the amount of oil imports. How many jobs would be created if the chips of Chinese goods were provided by Chinese companies?
Although I do not understand the chip industry, I believe that with the efforts of Chinese enterprises and the support of various policies of the Chinese government, the chip industry will inevitably be unstoppable to the Chinese people.
In addition to the new energy vehicle and chip industries, our C919 has also completed its commercial debut and will inevitably provide us with a large number of job opportunities in the future.
Secondly, strengthen the construction of the service industry.
I don’t know if you have paid attention to a question: the proportion of the tertiary industry in GDP in developed countries is very high, but the proportion of our tertiary industry in GDP is relatively low.
Let’s take a look at the following chart: The service industry in the United States accounts for 80.1% of GDP, but the service industry in China accounts for only 53.3% of GDP, ranking only 104 in the world.
Why is the proportion of China’s service industry in GDP so low?
In fact, it is not difficult to understand: developed countries mainly engage in high-end manufacturing, and industrial workers have very high wages, so they have money and dare to consume. However, China only began to develop rapidly after joining the WTO. Overall, the proportion of the middle class is relatively low, and the vast majority of people have just solved some rigid needs, such as housing and cars.
However, with the continuous development of China’s high-end manufacturing industry, a large number of middle-class people will be “produced”. Those middle-class people have access to healthcare and elderly care, so they dare to consume. This will inevitably lead to the gradual outbreak of China’s high-end service industry in the coming years.
In addition, we need to further increase the pace of opening up and continuously open up markets in other countries.
After understanding the above content, you may understand why many people feel the main reason for the economic downturn this year and also know the direction of future development.
According to legend, every 500 years, the phoenix will burn itself in the flames and be reborn from the ashes.
Phoenix Nirvana, reborn from the ashes.
At present, China’s economy is in a period of transformation, which will inevitably be very painful. But once we get through it, we will become even stronger.
—–This concludes the entire article.