The 2024 NetEase Economist Annual Conference and Summer Forum will be themed "Intelligent Manufacturing, Cohesion, Quality Rejuvenation", and top economists and outstanding scholars in various fields will be invited to conduct in-depth exchanges.
China is in a critical period of transition to high-quality development, with both challenges and opportunities. In this context, the NetEase Economists Annual Conference Summer Forum launched a special program called "Summer of Speculation" to understand the general trend of China's economy and measure the huge resilience and potential of China's economy with a ruler of speculation through in-depth dialogues with well-known economists in the industry.
3rd Installment: Interview with Zhang Jun, Dean of the School of Economics of Fudan University: Real estate is a victim of the economic contraction, not the causeHere's the full video:
60S key points speed reading:1. Real estate is a victim, not a cause, of the economic contraction. Therefore, if the entire economy cannot return to a relatively normal track, real estate is unlikely to make a big difference.
2. At present, our policy thinking is to balance the short-term and medium- and long-term, exchange time for space, and gradually solve short-term problems without sacrificing long-term development. This is the new normal of China's economy, and everyone must slowly adapt and adjust.
3. The main problem of the current economy is not the problem of poor liquidity transmission, but the lack of willingness to spend in many departments. China is in a special stage of development, most of the medium technology has been popularized, the threshold is low, the involution is serious, and the production capacity is being built rapidly; Technological breakthroughs and upgrades are not easy, and the obstacles to increasing the speed of upgrades are getting bigger and bigger. This results in a lack of unsaturated investable space.
Body: 1. About the positioning of the property market: If real estate is good, can the economy be good? Or is the economy good, real estate can be good? Real estate is a victim of the economic contraction, not the cause of it。 Therefore, if it is difficult for the entire economy to return to a relatively normal track, it is difficult for real estate to make a big difference.
Because after the economic contraction, the demand side will shrink with it, and the real estate industry will also contract with the demand, leading to sales difficulties and debt pressure in the industry today. The economic contraction is related to the impact of the pandemic in the previous three years, and is not mainly caused by the real estate sector. In fact, the real estate industry has been in a correction for many years, destocking.
So, why do many people think that real estate is holding back China's economy? In China, about 30%-40% of investment is related to real estate. Therefore, when the real estate industry is sluggish, the fixed asset investment of the whole society will also be relatively sluggish. Looking back at the economic recovery in the past two years, real estate is the only sector in fixed investment that has declined, so it can be said that real estate is a sector that has dragged down the economy, but looking back, you will find that real estate itself is also a victim of the contraction of the entire economy.
In the past two months, the central government has issued a number of policies for the real estate industry, including the "517 New Deal", which has cancelled many restrictive policies in the past, to help and support the recovery of the real estate industry from the policy level. However, it should be noted that some of the policies introduced by the state are conditional bailouts for real estate. For example, the whitelist system, especially for some local governments with financial difficulties, if they can promise not to engage in "large-scale development" in the next few years, they can receive some emergency liquidity support from the central bank, or special debt support, etc. This is equivalent to a self-choice, and local governments can weigh it for themselves, and if they choose this policy package, they must commit to "washing their hands of the golden basin". It's a soft policy to deal with hard issues.
It seems to be a matter of balancing. On the one hand, real estate needs to be stabilized in order to reduce its drag utility in the economic recovery process; But on the other hand, it needs to be emphasized that in the future, we will no longer be able to rely on real estate to support economic development. This is one of the basic ideas of the current real estate policy - when dealing with problems, we should not be too aggressive, but choose to act modestly, so as not to let the situation evolve out of control.
Therefore, our current response to real estate cannot be simply summarized by "whether to save the market" or "whether to save real estate". Now it is not a question of "whether to save or not", but to solve the problem conditionally in view of the practical difficulties in reality. This is similar to the IMF (International Monetary Fund) bailing out South Korea in the 90s. At the end of the 90s of last century, the Southeast Asian financial crisis spread from Southeast Asia to Asia, of which South Korea was the most affected, so South Korea chose to ask the IMF for help, and the IMF put forward the conditions for assistance - South Korea should carry out certain economic reforms, such as fiscal and financial austerity, economic and financial liberalization, financial market opening, etc. In the end, South Korea accepted this conditional assistance.
In my opinion, at present, our government and relevant departments may have similar ideas.
2. About future housing prices: Up or down?At present, housing prices are not determined only by the supply and demand of real estate itself, but also largely by the recovery of the economy as a whole.
We recently did a study where we extrapolated the growth of Chinese residents' incomes from what was going on before 2019, i.e., what would have been the growth of Chinese residents' incomes if it hadn't been for the pandemic. We found that the current post-pandemic real household income is four to five points lower than the data derived from the trend line. This means that the impact of the three-year pandemic on residents' incomes is far from recovering.
In addition, we find that the most affected income is housing-related income.
For example, rental income. Some people may have rented out their houses to migrant workers or other migrant workers, but due to the impact of the epidemic, many people have left the cities where they were originally employed, resulting in the loss of this part of the rental income; Or some people may still stay in the city where they were originally employed, but they may have encountered the process of unemployment and re-employment, which leads to a decrease in wage income, which in turn leads to a downgrade in rental consumption, so rental income declines.
In addition to the loss of housing-related income, there is also a decline in the family's operating income, which has also largely contributed to the decline in rental income. For example, I once took a taxi and met a driver who once had two lighting stores in a lighting city in Guangdong and spent millions of dollars on decoration, but the epidemic closed for three years and suffered serious losses. Now, she's driving a car, and her husband is doing other work to make up for the loss. She said she couldn't go back to the city of lights.
These changes are very microscopic, but they involve thousands of households, so the total impact on the whole is very large. Many people's incomes have not returned to what they used to be. Wage income has recovered to a certain extent after the epidemic, but there is still a certain deviation from the previous trend line.
The growth of household expenditure is inevitably affected by income. In fact, judging from the data, among household consumption expenditures, housing-related expenditures have declined the most. From this point of view, the expenditure data is also consistent with the income data performance.
Therefore, although there are many policies related to real estate, none of them are enough to bring real estate back to what it used to be. Because the market conditions of the economy as a whole have changed a lot.
It can be seen that the real estate problem is not isolated, on the surface, it seems to be dragging down the recovery of the economy, but it needs to be emphasized that it is not the cause of economic contraction, but a result, and it is very affected by it.
3. Fiscal and monetary policies: Should it be more active and accommodative?A few days ago, I had a conversation with the Japanese scholar Koo Chaoming, who repeatedly stressed that when the private sector is unwilling to spend money, government departments should increase their efforts to spend money. As for what to do with the money, he did not give a positive answer, but emphasized that he should spend money first and wait for the economy to stabilize before thinking about other things.
In fact, for quite some time, "whether the government spends enough money" has been a topic of much concern and controversy. Even when conventional monetary policy tools were sufficient, many people raised the need for "quantitative easing".
In my opinion, it is not the point that the government spends more or less money, but where it is spent. If it is mainly spent on infrastructure investment, and does not tilt towards households, it may not help much to rebalance the economy.
"Quantitative easing" is an all-or-nothing gamble that will only be considered when there is little room for conventional monetary policy. When I asked Koo whether Japan's "quantitative easing" was forced, Koo Chaoming said that at that time, Japan had no choice but to do so, and the conventional monetary policy was basically ineffective. In fact, "quantitative easing" will not make the Japanese economy better, it will only prevent the Japanese economy from getting worse. However, it has led to a high level of government debt, about twice the size of GDP, and how to compress or deal with these debts is another problem.
For the Chinese government, it may be right to remain relatively accommodative and aggressive in monetary and fiscal policy, but also to avoid being too aggressive and not making sharp U-turns. China needs to take care of it
A balance between short-term economic stability and long-term economic high-quality development.After all, China's economy still has a real growth rate of about 5%, and the potential growth rate is not low. In the long run, it is necessary to lay out many emerging industries in advance in the future.
This pattern may be the new normal of China's economy. Everyone has to adapt and adjust slowly.
In fact, we already have a lot of structural monetary policies that are releasing liquidity, such as supplementing mortgage loans, lending facilities, etc., and providing targeted liquidity support. However, in my opinion, the main problem of the current economy is not the problem of poor liquidity transmission, but many sectors
Lack of willingness to spend capitalproblems.
Through in-depth communication with local government officials, I found that it is not difficult for local governments to obtain financial support, including special bonds, but only if they have projects in hand. The problem now is that many local governments do not have the right projects to do, which makes them less willing to spend on capital expenditure.
So, why are there no projects to do? At present, China is in a special stage of development, most of the medium technology has been popularized, the threshold is low, the involution is serious, and the production capacity is being built rapidly; Technological breakthroughs and upgrades are not easy, and the obstacles to increasing the speed of upgrades are getting bigger and bigger. This results in a lack of unsaturated investable space.
This shows that it is irrational and unnecessary for the government to focus its spending on investment. Now it is necessary to change the way of thinking, adjust more spending to households, increase transfer payments to households, support household consumption expenditure, and increase household real income. Why should government spending gradually shift towards households in the future? Let's look at the current anxiety of the family and the involution of education. The involution is a wake-up call, reminding us that we now need to pay close attention to the problems that families are very anxious about, these problems are family problems that we did not pay enough attention to in economic development in the past, and today they have become the most important issues in society, especially including childbirth, childcare, school entrance examinations, employment, medical care and pension. You know, the involution of education is terrible and will further reduce the fertility rate. These problems will affect long-term economic development and must be solved by the government at its expense today.
Therefore, the issue of household consumption expenditure is becoming more and more important to the economy. Of course, investment is also important, but now the question is how to overcome the imbalance caused by too much investment.
In terms of manufacturing capacity, China has a large share in the world, facing structural upgrading, and upgrading often needs to go out first, I think China is entering this stage, there will be more than ten years of going to sea. In fact, China's overseas direct investment (FDI) has been at a low level, and if the cumulative FDI is spread out among the capitaries, we are only about 1/14 or 1/15 of Singapore's. So, I think there will be a rapid increase in our overseas direct investment in the next 10 years.
It is not easy for enterprises to go overseas. From my research in Europe, the biggest challenge faced by Chinese companies going overseas is the "double standard" of some overseas countries against China, especially at the legal level.
Therefore, we should consciously increase the investment and construction of overseas lawyer teams and lobbying organizations. Because this kind of problem is often difficult to solve by a single enterprise.
Produced by NetEase Finance Think Tank (WeChat public account: wyyjj163). NetEase Finance Think TankIt is a professional financial think tank built by NetEase News, integrating the original multimedia matrix of NetEase Finance, relying on the wisdom of hundreds of top economists at home and abroad, conducting rational and objective analysis and interpretation of hot topics in economics, and creating a cutting-edge financial think tank with attitude. Manuscripts are welcome (submission email: [email protected]).