From: CJZK(ID:CJ_Thinktank)
"It is important to understand the micro-foundations on both the supply and demand sides of the overall economy. From a policy perspective, we can use microscopic analysis to grasp the micro-behavior of people in real economic life and make correct macro judgments. From the perspective of direct operators and operating institutions, only by understanding the actual problems existing in the real economy and people's behavior can we make the best decisions. ”
——Cai Fang, former vice president of the Chinese Academy of Social Sciences and member of the Monetary Policy Committee of the Central Bank of China
(The following is Cai Fang's keynote speech at the "2021 Global Wealth Management Forum" on October 24, the full text is as follows)
The title of my talk today is "Micro Foundations of Financial Development and Wealth Management."
From a policy perspective, we can use microscopic analysis to grasp the micro-behavior of people in real economic life and make correct macro judgments. From the perspective of direct operators and operating institutions, only by understanding the actual problems existing in the real economy and people's behavior can we make the best decisions.
It is important to understand the micro-foundations of the supply and demand sides of the overall economy. The so-called supply and demand sides, the supply side is a perspective to improve China's potential growth capacity, and the future constraints to China's economic growth may increasingly come from the demand side factors. In addition to investment and exports, it is more about consumer demand. The micro foundation of these two perspectives lays the foundation for the long-term sustainability of China's economy and the wealth management of financial development.
The health of the macro economy should be based on the vitality of business operations. The health of financial development should also be based on the development of the real economy. As an important part of financial development, financial management activities should also be based on reasonable household budgets and their consumption and saving behaviors. At the same time, we can also see that the macro-economy corresponds to corporate activities, financial development corresponds to the real economy, and financial management activities correspond to household budgets. That is to say, the interaction between macro and micro, micro and micro, constitutes the general expectation of the future development of our Chinese economy.
01 The proportion of middle-income groups and the income of residents are low
Overall, China has made great achievements in recent years, and there are already more than 400 million middle-income groups. However, in terms of big judgments, the proportion of our existing middle-income groups is not large enough, the income is not high enough, and it is mainly concentrated in the upper middle and high income groups. According to the classification of the National Bureau of Statistics, we divide the per capita disposable income of residents into five equal parts, and every 20% is a group. It can be seen that there is a relatively large gap between the minimum and lower middle, middle income, middle and upper income, and the highest income, and the overall level is not high.
Here I cite a study, the official statement is that we have more than 400 million middle-income groups, but how is this 400 million calculated? According to what standards? I didn't see a particularly detailed description. But I found that several authors made an estimate, and the total number they estimated was also more than 400 million. Their estimates have in common with our official estimates, resulting in the same totals, but the approach they used is interesting, using the concept of "discretionary income" to define middle-income groups. The implication is that the disposable income minus the expenditure on the purchase of necessities of life, while subtracting some fixed expenses, such as repaying loans, tuition fees, etc., is the rest of the real financial freedom. According to this calculation, they believe that the per capita disposable income of the middle-income group is between 4,000 and 31,000 yuan, and the real financial freedom is still relatively small.
We also know that when Americans were studying the trend of shrinking middle class in the United States, about 61 percent of American households could not come up with $400 in cash during an emergency. That $400 is a definition of arbitrary disposable income. The size, stability and level of the middle-income group are directly related to its discretionary disposable income.
02 The degree of urban employment irregularization is too high
I'm in employment research, and we used to talk about flexible employment, but now we've come up with a new concept called the gig economy. This is not only a historical legacy, but also has a certain relationship with the development of the platform economy and digital economy in recent years. It has a good side, that is, it can achieve full employment, it can absorb more people, it is very flexible, but it also has a non-formalized side. If it is formal employment, it should at least have the characteristics of stable employment, decent income and adequate social security, but informal employment does not have such conditions.
At present, there are 460 million people employed in our cities and towns. Among them, according to the economic components, there are state-owned parts, there are several collective and joint-stock cooperative systems, there are parts of the company system, there are parts of the private economy, and there are parts of Hong Kong, Macao, Taiwan, and foreign investment abroad, and the rest are the employment of individual industrial and commercial households, as well as the "residuals." "Residuals" is the total number of urban employment obtained from household surveys, minus the number of unit employment above. From these components, it can be seen that the part of individual employment and the part of "residuals" are typical of informal employment. There is also informal employment in other parts, but this degree of informality is clearly the highest.
The "residual" part and the individual part have a tendency to disappear over the years, but in fact, to some extent, it is related to statistics. Because we have recently strengthened the statistics of the market, the part that was not registered in the past has been included in the individual employment. In any case, the proportion of employment in these two parts is still very high, about 30%, which is also a very important reason for the informality of the real economy, unstable employment, unseemly income, and insufficient degree of social security.
03 Population mobility and urbanization decelerating
There are two kinds of population mobility, one is labor mobility, also known as horizontal mobility, which is from the past farming to non-agricultural industry, from rural to urban. Horizontal mobility is also closely linked to vertical mobility, i.e. social mobility. In the final analysis, social mobility is an important way to change social disparities and achieve common prosperity, and if social mobility is not smooth, common prosperity is more difficult to achieve. There is a trend that about 30 per cent of the urban permanent population does not have urban hukou, which hinders the upward mobility of their occupations and identities. More than 20% of the rural household registration population does not live in the countryside permanently, which leads to family separation, and they have to worry about the future, but they have to go out to work.
Last year, we suffered from the impact of the new crown pneumonia epidemic, and the number of migrant workers outside the country decreased by 2.7%, which is also the first absolute reduction in many years. But in fact, this 2.7% is still underestimated. I cite two authors here who found that while many people are counted as out of town, they are likely to be in neighboring townships or counties. Because the original employment of migrant workers was to leave the township to engage in non-agricultural industries, but now, the rural employment circle is relatively expanded, and people can ride electric vehicles out of the township. That is to say, the proportion of them entering medium-sized cities and large cities has declined to a higher extent than the above statistics.
Therefore, the employment of migrant workers tends to be localized. Although from the perspective of townships, his proportion of cross-provincial areas is getting lower and lower, and the proportion of people entering medium-sized cities and large cities is getting lower and lower, which means that employment is more and more localized. Relative to the countryside, the lower the labor productivity of this part of the population, the lower the degree of formalization, and the lower the income. Therefore, our current population mobility and urbanization trends are somewhat unsustainable.
04 Basic endowment insurance is not uniform
The data from the seventh census reveal a new trend, that is, the aging is accelerating, and the proportion of the population over 65 years old has reached 13.5%, which means that the aging population must be actively coped with, and the most important thing is to support the elderly.
At present, urban and rural endowment insurance has reached a relatively high level of coverage, and about 1 billion people are covered by basic social endowment insurance. However, the scope of this coverage and the treatment enjoyed are not uniform enough, and there is still a certain trend of fragmentation. First, 56.6% of people receive old-age insurance for urban and rural residents, but the proportion of pensions received is less than 6%, and the gap is very large. At the same time, the basic endowment insurance for urban workers is also divided into enterprises and non-enterprises, and the difference between enterprise employees and mass undertaking workers is 1:0.18, and their payment standards vary greatly. Pension fragmentation will affect the saving behavior and consumption behavior of residents, which will also affect the development of finance and wealth management, and we also know that the future is more and more dependent on consumer demand, and pension fragmentation will affect the consumption tendency of the elderly. Therefore, since the proportion of the elderly, 190 million is over 65 years old, and the number of people over 60 years old is as high as 264 million, these people's consumption is sluggish, and the overall consumption industry will be affected.
We now say that pension insurance should rely on three pillars, but the second pillar, especially the third pillar, is not developed enough for the individual commercial pension. The basic social endowment insurance is not sufficient at present, and the future is not sustainable, why? Because of our social endowment insurance, the overall or pay-as-you-go system, even if today can still afford to pay, but the population's dependency ratio will change dramatically in the future, that is to say, there are more and more elderly people who need to be supported by on-the-job workers, and it is difficult to ensure that there will be no huge gap at that time. Therefore, it is urgent to support the second pillar and the third pillar. But if we don't understand the micro-basic information I'm talking about today, what the income status of our residents is, what the income situation of the elderly is, what the income gap is, we will fall into a paradox. I call it the Jin Hui emperor paradox. Emperor Hui of Jin saw that the people had no food to eat, and said why don't they eat meatballs. In fact, it is poverty that causes the people to have no food to eat, let alone eat meat. That is to say, the basic micro situation of residents determines that their income is not high enough, and the income distribution gap is relatively large. Therefore, the basic endowment insurance is not unified and related to this, let alone the third pillar. Therefore, in this sense, we must have a better understanding of the micro environment, starting from solving practical problems, it is possible to break through the constraints of the micro environment and better solve the social pension problem.
05 Family time budget constraints are tight
There is also a situation, that is, the time constraint in the household of the resident. Time is budgeted, 24 hours is fixed, we must rest, and the time for employment is fixed. So how should time be allocated between employment and domestic activities?
In 2008, the National Bureau of Statistics conducted a survey that found that we were engaged in SCN, the part of gdp creation within the SNA, including employment, operations and transportation, which was carried out for 311 minutes a day. Unpaid work or non-SNA activities, including domestic work, care activities and other related activities. Between the two is 1:0.53. That is, if there is 1 minute of employment activity, it generates income. Then there are 0.53 points for activities that are incomeless and belong to the main domestic labor service. Among them, women's housework hours are 2.6 times that of men, which is at a high level in the world. China's labor force participation rate is the highest in the world, especially for women, which is twice as high as that of many developing countries. In this case, women's working hours are very long, and on this basis there is so much time to engage in housework, which is obviously the highest level in the world. And this excessive burden will affect the income of the family, the family income situation affects people's mental outlook, affects people's spirit of innovation and entrepreneurship, and ultimately affects the social mobility of employees, but also affects consumption, no time to travel, no time to go out shopping, which will hinder the growth of consumption, but also affect savings, because the family time budget constraints and the family's financial budget constraints are mutually influential. Ultimately, there is a more important factor, that is, too much time for family care, too much time for housework, especially for women, and at the same time employment, so it reduces our willingness to have children and is not conducive to the sustainable development of our population.
In the past, we talked a lot about what new means of finance, what new ideas and new fields of finance, and today I try to let you look at some of the constraints of the micro-environment in reality, which is conducive to promoting common prosperity and deepening supply-side reforms under the framework of the primary distribution field, the redistribution field and the third distribution field, so as to promote social mobility, especially vertical mobility, expand household budget factors and residents' income, and shorten the income gap, wealth gap and the gap in the supply of basic public services. In this process, both the financial industry and the wealth management industry can turn these challenges into new development opportunities, and at the same time, in a macro sense, it can also become our new economic growth.
Q&A session
Moderator (Zhang Yandong): Judging from the statistics from January to October, our growth pressure has increased. In the face of increasing pressure to grow, as well as our goal of common prosperity, where are the breakthroughs and key points of the series of opportunities you have proposed?
Cai Fang: China's epidemic occurred relatively early, but it responded very well and took the lead in recovering the economy from the epidemic. But at the end of the day, covid-19 is still a pandemic around the world, and we will still have sporadic outbreaks.
First, in this process, China's economic recovery has formed a supply side before the demand side, some consumption behavior will be subject to certain restrictions, while income growth has also slowed down, employment has also been affected, so our supply side is ahead of the demand side. However, when foreign countries recover the economy later, there is a feature that the demand side is ahead of the supply side, because the supply side is constrained by supply chain breaks and bottlenecks, and is also subject to the constraints of labor shortage, but because they are in the stimulus policy, such as the United States to pay more money to residents, which can generally guarantee this year's consumption capacity. Our recovery characteristics with foreign countries have formed a chimeric way of each other, our supply is stronger than demand, foreign demand is stronger than supply, so our exports have supported economic recovery for a long time, which is different from the trend in the past few years. As the global pandemic eventually recovers faster, supply bottlenecks will eventually break, so our exports will be less robust.
Second, our longer sustainable supply and demand pull factors, or rely on domestic demand, from the perspective of policy, for us, both to use the current favorable environment, to give full play to our capabilities, but also should pay more and more attention to expanding domestic consumer demand, in this sense, our six guarantees of the factors to take into account the protection of the main body of the market, the protection of the basic people's livelihood, the balance between the protection of employment, the protection of the main body of the market is not really aimed, is not really able to restore employment, improve people's livelihood, only this part of us fully guaranteed, Otherwise, there should be some policies for underemployed people, people with relatively low incomes, people who have just been lifted out of poverty in rural areas, and the elderly population, so that our longest-term sustainable economic growth drivers still come from residents' consumption.