Statement: This article is a reprint and not my original work.
Source: X@hiCaptainZ (https://x.com/hicaptainz/status/1862290656796057906?s=61)
As the year comes to a close, although HSBC has been emphasizing that everyone should not record or film, it is highly likely that you cannot stop it. I will be more cautious in my speech here, very careful, as it is highly probable that someone will leak it and put it on YouTube. Basically, everyone who has met me says, "I saw your video on YouTube," and I say that those are all pirated versions, and there are quite a few who have made money off piracy.
The content I am sharing with you today is mostly official, with more of a review and less of a forecast, because after this month’s outlook, what will happen next month? Some things are very simple for me. Essentially, we originally came from a hedge fund background, so our overall logical framework has a very strong continuity. It is not about discussing this year or next year.
Since 2016, I have been emphasizing to everyone that this world has completely changed. Of course, after experiencing the past few years, I believe everyone here should have a deeper understanding of this statement.
2016 was actually the year of Donald Trump's first election in the United States. I have a characteristic: if I feel there is an investment opportunity somewhere, I might go for on-site research at the first opportunity. I do not like watching YouTube, nor do I like browsing the internet for information. Of course, you might say that ChatGPT is very powerful now, and artificial intelligence seems to solve many problems for you. But have you ever thought that much of the widely circulated or disseminated information could be wrong? I realized this deeply after returning from research in Japan in 2012.
Of course, there was an important figure in Japan named Benson, who will soon be very familiar to everyone. He is currently the U.S. Treasury Secretary nominated by the Trump administration. Benson was originally the actual controller of the Soros Fund, as Soros is quite old. Last year, he just handed over the fund's business to his son, Alexander. But before that, the main battles were essentially led by Benson.
In 2012, when I went from Beijing to Hong Kong to meet friends for dinner, the Soros Fund in Hong Kong told me that Benson had gone to Japan. I said, "OK." I often say, "Stand on the shoulders of giants to see problems."
Of course, you know that the most terrifying thing about internet users is that Buffett is an "SB," Soros is an "SB," and I am the most "awesome." You must remember that all their actions must have significant changes. Many people may not know that Buffett's first visit was in 2011, when we were discussing the Fukushima nuclear power plant leak and the seafood was inedible due to nuclear wastewater contamination. An 80-year-old man went to Japan to eat seafood despite the nuclear radiation leak. Of course, the key is why he went to Japan.
After we returned from Japan and conducted research in the following years, I gradually told many people that Japan was undergoing changes, and Japan's interest rate structure would change accordingly, including Japan's securities market. This year, the Japanese stock market finally emerged from a 35-year slump, setting a historic record.
However, many people online still say they don't see any situation from the economic data. This is what we call "information asymmetry," because sometimes you know that people's understanding of society and the economy carries inertia. In recent years, I have often popularized the understanding of Japan. Many people always think about economic growth. Is there a possibility that the economy can be enjoyable even without growth? For example, after China's reform and opening up over the past 30 or 40 years, we have become accustomed to the economy needing to grow. If the economy does not grow, we find it difficult to cope. Have you ever thought of a way to enjoy without growth? The answer is redistribution. Why do you always think about division of labor, effort, work, earning money, and growth? Is there another possibility for redistribution?
Why do you think growth is necessary in Japan? In my words, for the past 30 years, the size of the cake has remained unchanged. However, the fundamental reason for the rise in long-term interest rates now is that young people can eat more. Why can young people eat more? Do you know what Japan's death data was in 2012? Have you noticed the changes in its population structure? Until today, you suddenly find that in Japan, how come the interviewees are sitting below while the recruiters are standing above? Rest assured, the problem in China now is not recruitment; it is about HR laying off people. What is the root cause of this change? Many people simply have inertia in their thinking; you may not be able to understand the world.
In the past 40 years, tremendous changes have occurred. Since 2016, China is no longer the China of the past 40 years, the United States is no longer the United States of the past 40 years, Japan is no longer the Japan of the past 40 years, and Southeast Asia is no longer the Southeast Asia of the past 40 years. The logical framework of your capital operation is undergoing tremendous changes. At such a moment, if you maintain past thinking, you cannot understand what I am talking about.
I can only say that everyone should see it as fate. I do not need to say, "Fu is talking nonsense; I do not agree." It does not matter; if you can understand, you understand. If you can understand early, you can follow this line to grasp the tremendous changes in the world after 2016.
In the latest U.S. election, Trump is back, but this time it is different from 2016 because he has become more right-wing than in 2016. The major political shift in 2016 was essentially about de-globalization and right-wing politics. In 2016, I organized my manuscript, but I did not have time to publish it that year. Last year, after my child returned home and started a media company, I sent the manuscript to him as part of the media company's publishing business. This is the book you later saw, "Witnessing the Countercurrent." However, this book is incomplete; the full text is nearly 700,000 words, but you only received 500,000 words. About 200,000 words were cut, and these 200,000 words are crucial, involving our core framework of the top-level logic of major global assets. What is the pyramid? The base is all our assets and markets. The market is actually the lowest level in the framework. Everyone is always asking about rising housing prices and stock prices; this is actually the lowest level of the pyramid.
A little higher, some say macroeconomics is very important, especially after the 2008 subprime mortgage crisis, Chinese investors began to undergo significant changes. Before the 2008 financial crisis, most Chinese investors talked about "the dragon-catching method," how to catch limit-up stocks. However, the 2008 subprime mortgage crisis and the global shock made many people engaged in financial trading and asset trading realize that the global financial market is interconnected. From that moment on, true finance began to take root and sprout slowly in China.
Some people began to realize the importance of macroeconomics. Of course, among the current leadership team of the China Securities Regulatory Commission, I have always said that I am the least serious one because I am not an academic, nor do I come from the government; I am from the market front line, and our understanding of many issues is completely different.
A few days ago, on Fox News, Benson was arguing with several Nobel economists about the role of tariffs. You suddenly realize that a person standing from a market perspective understands what role tariffs play as a tool, and it is different from what those old scholars say, even different from what you see on the news. You will find that if you are a bit smarter, you will know that many things are not right. This time, Trump's team is composed of practical people, and the second is that it has completely eliminated constraints. It can be understood that right-wing politics has no restraint at all, and the third is that all are practical people. What do you think the outcome will be? This battle will not be easy; it is even harder than the last one in 2016.
What is above that? Some say we finally talk about politics. That's right; above that is politics, the Democratic Party, the Republican Party, and global political changes. But what is at the very top of the pyramid? In fact, it is ideology.
I teach many researchers not to blindly make simple comparisons when studying the world economy. I estimate that many research reports will make such mistakes, easily making comparisons with the 1970s and 1980s. Such comparisons are purely for filling out reports. From my perspective, I would not even finish reading them; I would tear them up and throw them in the trash. I actually feel sorry for these brokerage researchers. Why? Because whenever there is a matter, they have to write a report, and writing a report requires tens of thousands of words. It is hard work, yet no one reads it.
What is the top-level discontinuity that people often talk about? Remember one thing: the top-level discontinuity is ideology. The development of social politics is essentially a periodic change in collective ideology, which is what you learned in ideological and political courses: "left" and "right," left-leaning and right-leaning, left-wing and right-wing, collective and individual. These changes are the biggest fluctuations in the world economic cycle.
What is the current situation? The statement made by the top leader is very accurate: "A great change unprecedented in a century" (百年未有之大变局), which essentially marks the end of a complete cycle from the Great Depression of 1929 to the post-World War II era. The world has gradually developed from the extreme right after World War II to the center-right, then to the center-left, and finally to the extreme left over the past 20 years, ultimately leading to a return to the right. This world is very interesting; no direction is absolutely correct.
I have always advised everyone not to argue online. I stand on the left, and you stand on the right, PK, and we must discuss who is the most awesome and who is the most correct. There is no such thing. It is like looking for a girlfriend who is beautiful, tall, has a big chest, a slim waist, is rich, and loves you very much. You are thinking too much; just pick one. Where is perfection? The final result is that during the process of movement, it affects politics, which in turn affects the economy, and then affects the financial market. Always remember the logic of the pyramid.
Most of the time, we do not need to care about the top level because, in the past century, the direction of the top level has been fixed, moving continuously from extreme right to left. Therefore, under the condition that the direction of the top level does not change, a set of operational logic will form below.
For example, taking the United States as a representative, you should see Ray Dalio's book on the debt crisis. There is an interest rate curve in it. Before World War II, our interest rates were 0, reaching a peak in the 1980s. During the 2008 subprime mortgage crisis and the pandemic, interest rates again reached 0. What does the low point of interest rates mean? Why has the low point of interest rates in the past century always been the starting point of wars? There is a reason for this because the essence of interest rates is actually the wealth gap. When interest rates are lower, the wealth gap is larger; when interest rates are higher, the wealth gap is smaller.
Of course, each of us is influenced by our own interests. For example, if you have a bunch of financial assets and a lot of leverage, I can tell you that you will always shout that low interest rates are correct, just like everyone’s understanding of the United States. They always believe that the logic of the United States over the past 40 years is that interest rates cannot be raised; raising interest rates will lead to collapse, and collapse will lead to lowering interest rates. Interest rates will always be low, and the dollar will always be the borrowing side of carry. But you have never thought that this logic could change.
A few years ago, when I talked to many people, I said, "Remember one thing: China is moving from high interest rates to low interest rates, while overseas is moving from low interest rates to high interest rates." The so-called few cents still say that Fu said high interest rates are 4-5, which are high interest rates. What about low interest rates? Is there much difference between 0, 1, and 2? There is not; this is the key point. Some people insist on correcting it, directly turning my words into Fu saying that China will not raise interest rates and will always lower interest rates, while the United States will always raise interest rates and will not lower them. Raising a little and lowering a little is very normal, right? For example, if Trump comes back, is there a possibility of unexpected changes next year? For instance, lowering by 50, lowering by 25, returning to around 4.75 or 5, and suddenly raising back to 5.25. Isn't that normal? The entanglement of 4 and 5 is not important; what is important is that it will never return to 0 or 1 or 2. This is very crucial.
For labor, interest rates are very important. If the rise in interest rates comes from the growth of labor income, that is a good thing. Think about China; if you turn back the clock 20 years, were interest rates high? At that time, did you feel uncomfortable? No. Now are interest rates low? Yes. Do you feel uncomfortable? Yes. Why? So you need to know whether you earn income through labor or through capital leverage. Your feeling about interest rates is completely reversed.
However, when society as a whole discusses wealth and poverty, wealth and poverty mainly come from labor value. Simply put, those who deliver takeout and drive for ride-hailing are the lost generation. In the past two or three decades, those who relied on labor have been eliminated; it is an inevitable result of social development. However, when this contradiction becomes severe, it will transform into social contradictions and can even be translated into political influence through votes and ideological influence. Therefore, when wealth and poverty reach extremes, there will definitely be corrections, whether it is extreme left or extreme right wealth and poverty, which will ultimately produce contradictions. This is the law of social operation.
The great cycle that has occurred in the past century is a complete cycle. By 2016, on the surface, it was called the China-U.S. trade war. On the surface, it seemed to be a confrontation and game between the two major powers, but in fact, it was a display of contradictions within various countries globally. Internally, it is about internal distribution, and externally, it is about external distribution. Against this backdrop, the risk of war will increase.
A few days ago, we also saw that for the first time in human history, intercontinental ballistic missiles were used, except that they were not equipped with nuclear warheads. Do you think this is far from you? Our generation can be said to be a fortunate generation, but we will also experience an unprecedented great change in a century.
Many people, when thinking about this world, really should not think that we can return to the past; we cannot go back. The path of global integration and continuous leftward advancement has completely ended since 2016.
Many people misjudged 2016, thinking it was just a trade war. When I returned from Washington after two weeks of research, I told many people that it was not a trade war. It is not that whichever party, the Democratic Party or the Republican Party, comes to power will be gentle with China; it will not be. The consensus between the two parties is that there is only a slight difference between who is more left and who is more right, but both are moving to the right. The core of the change in American politics is that regardless of whether it is the Democratic Party or the Republican Party, the pressure on China is the same; it is just a matter of who has more pressure and who has less pressure, who has more diplomatic pressure, and who has more economic pressure. That is all.
For China, it is also troublesome. In the past 1980s and 1990s, the West was continuously integrating and accommodating right-wing politics, while China was also moving to the right. Of course, this does not refer to China's rightward tilt. Note that the concept of right-wing in the West is completely opposite to that in China. Do not think it is wrong. If you think it is wrong, first understand what left and right, left-leaning and right-leaning, left-wing and right-wing are. If you cannot understand this, you will definitely have a completely reversed understanding of left and right in the frameworks of China and the West.
China is also moving towards integration and accommodation, which is why we have had a series of good operations such as entering the market, WTO, and reform and opening up. I often say that women in the family are naturally right-wing. Right-wing has a typical characteristic: it can be called populism, nationalism, or patriotism. Extreme right-wing can be called Nazism. But the characteristics of the right are very clear: "I am not wrong; it is all your fault." This is the right.
Women in the family inherently carry this. Of course, I am not discriminating against you ladies; this is in your DNA, carried in your two X chromosomes. If the men in the family are left-wing, the family is happy. What does that mean? "Wife, it’s okay; it’s all my fault." If the man is left-wing, the family is good; left + right.
If both men and women are left-wing, it is simply incredibly happy. The man comes home, and the woman puts down the slippers and says, "Honey, play some games; I am cooking. I will call you when it’s ready." This man really goes to play games. After dinner, he says, "You take a break and watch a show; I will wash the dishes." You must not be a typical straight man who throws the pot and goes to play; that won't work. Over time, she will become right-wing.
At this point, you also show left-wing characteristics, and your family is integrated. If both are right-wing, it is doomed. It is all your fault; I am not wrong. Why is it my fault? It is your fault; you are the one who is wrong. When a straight man meets a woman, generally speaking, there is no good combination. Two right-wingers will lead to war, fighting, and divorce.
Do not think this is discussing family and marriage; it is also discussing nations and global issues. When the combination between countries becomes entirely left-wing, it is a favorable historical environment for inclusion, integration, and global growth. When it is all right-wing, it is war.
Where is our current big trouble? It is here. The whole world has been gradually moving to the right over the past 5 or 6 years. The characteristics of right-wing politics have already manifested, the return of votes to traditional characteristics has been reflected, and the characteristics of anti-immigration have emerged.
I have said before that in the past two years, the famous trade has been "long the U.S., short Canada." The reason is that Canada has let in so many people of Indian descent, and it is doomed. What is the core contradiction in Canada? Economic growth created five cakes. Originally, Canadian citizens could each eat one. Now, with 10 Indians coming in, the problem in Canada is distribution. When distribution is insufficient, it will definitely trend towards conservatism, definitely towards right-wing politics, and definitely towards anti-immigration.
The same goes for other countries. In the 1970s and 1980s, the UK had anti-Chinese sentiments, and now it is starting to be anti-Muslim again. This is normal. The turmoil in the world is not simply reflected in pure assets. A few days ago, the UK introduced a new policy that anyone who is not a British citizen will, in principle, have to pay inheritance tax. The UK government will also collect your inheritance tax. I have told many wealthy people not to think about tax avoidance every day. When there is inclusion and integration, hiding some private money is fine. When everything becomes right-wing, if you hide private money, you will be doomed. What is the current global big trouble? Finding a place with a low tax rate to pay what you owe. When Trump came to power, he said that if you were willing to bring your money back to the U.S., you could legalize it at a 20% tax rate. Look at how much capital flowed back. So you know the general framework and characteristics of left and right; this is the true essence of my book, but it was cut out.
If you understand this, you can penetrate it into the economy, penetrate it into interest rates, penetrate it into assets, and you will be clear. This is the essence of major assets, the true essence. If you ask who created this, it is people like Soros and Benson. The overall framework is the same.
What am I really talking about? In fact, I am talking about a review because, from that moment on, several questions have been gradually exposed. The U.S. is undergoing reconstruction, and after Trump came to power, the direction continues to be reconstructed. This actually involves why the Democratic Party is wrong, why many of the Democratic Party's policies are extreme left, and that left-wing policies are not necessarily correct. Why does the right-wing lead the U.S. into an environment of growth, inflation, and interest rates?
Including some Chinese who carry ideology, I can only say one thing: as global investors, the best choice is to have no ideology at all. For me, I am very clear about the problems on the left and the problems on the right, the benefits of the left, and the benefits of the right. I will not stand on either side. My answer is that if the whole world chooses to move left, I know what my trading path is. If the whole world chooses to move right, I also know what my trading path is. But I will never take sides and say who is absolutely correct; otherwise, I will bet on the wrong horse. Sometimes the world does not necessarily follow our consciousness. This U.S. election is also a typical result. In fact, I did not expect the speed of right-wing politics to be so fast and the pace of advancement to be so rapid. Originally, I thought the Democratic Party could hold on, but now it seems to be a complete defeat.
For China, the problems we face now are not only external troubles but also internal worries. When combined, there will be a very peculiar answer. Previously, many people asked me whether China is the same as Japan. This statement has been widely circulated online. Some say China will follow Japan's old path, while others say China will not follow Japan's old path. If you ask me for the correct answer, I will tell you that this question is meaningless. Why? It is too broad. If you break it down a bit, I can answer you. For example, if you ask whether China's household sector is the same as Japan's household sector, my answer is yes. Are China's corporate sectors the same as Japan's corporate sectors back then? My answer is no. Are China's government sectors the same as Japan's government sectors back then? My answer is no. Are China's financial institutions the same as Japan's financial institutions back then? No. Is the international environment China currently faces the same as the international environment Japan faced in the 1990s? No.
What is the final answer? If viewed purely from the household perspective, I can tell you that 99.99% can be replicated. But if viewed from a larger international environment, the final answer may be completely different from Japan. In my words, is it the same or not? It is meaningless.
So most of the time, I break down the comparison between Japan's household sector and China's household sector. I have also shared about Japan's corporate sector, financial sector, and development model. Last year, you should have all known that Buffett bought Mitsui, Mitsubishi, Marubeni, and Itochu, issuing large amounts of yen bonds to acquire these assets in Japan. What was he doing?
At that time, First Financial asked me to talk about why Buffett bought these. I found that many commentators were simply discussing how Mitsui, Mitsubishi, Marubeni, and Itochu's assets were doing. The slightly smarter ones would mention that these trading companies were Japan's overseas assets and the main income source for Japan's carry trade. The even smarter ones would talk about how Buffett was participating in the redistribution of Japan's wealth accumulated over the past 40 years.
I might send my youngest son to Japan next year. I will tell him very clearly that I do not need you to study artificial intelligence or AI. Why? You do not seem that smart, nor are you an IT tech guy. If you can learn Japanese well and get into a good school, that would be great. There are many traditional noble girls there; just marry one. It would be best if their families are all 80 or 90 years old. You would win by lying down. When those 80 or 90-year-olds pass away in the next few years, the house will be yours, the equity will be yours, the land will be yours, the wealth will be yours, and the savings will be yours. We will participate in the redistribution of Japan's wealth accumulated over 40 years. Buffett participates with money; we participate with people. Essentially, they are the same. You buy stocks, and I marry my son off. This is all about participating in the redistribution of wealth.
You need to understand what the core of Japan is. The core of Japan is participation in distribution, not participation in growth. Many people do not quite understand this because they have never participated in distribution domestically. They always think about where growth is, how close they are to power, resources, and capital, and how they can eat more. When economic growth slows down, the bottom layer will have nothing to eat. Economic growth of 5 may feel completely different across various classes, so some people online say that economic data is fabricated. Is it really fabricated? Maybe not. 5 represents the overall cake, while your feeling only represents your class.
In the past few years of research on the Chinese economy, what have we done right?
First, after the pandemic in 2020, during the Changbai Mountain Forum, I told everyone very clearly that I said very bluntly that the Chinese household balance sheet had problems. At that time, the brokerages were all very happy because they always needed to be happy and could only go long. But for us, coming from a hedge fund background, I could not do that; if I did, I would be doomed because my money was in there. After October 8, was anyone still in there? Do not self-anesthetize; that is nonsense. Generally speaking, you can fool others with such things online, but if you believe it yourself, you are doomed. It is like back then when "6000 points is not a dream, and 10,000 points is just the beginning." Remember that statement was made for retail investors. If you believe it, then you are finished. The core is very clear from our perspective: everyone’s expectations are very high, but reality is very cruel.
In those two years, when I communicated with various public funds every quarter, they could not understand the current economic situation. For example, at that time, I talked to them about ride-hailing drivers and takeout delivery. In those two years, my large sample parameters for research were at the bottom. When economic growth and consumption expansion upgrade, the sample parameters are the rich first entering five-star hotels, the rich first buying supercars, the rich first eating seafood, and then your sample parameters sink down to the point where ordinary people eat seafood, drive cars, and enter five-star hotels.
However, when the economy contracts, the first to shrink is the bottom layer. A few years ago, I said that now there are several million new ride-hailing drivers every year. Have you ever thought about where these people come from? Some said rural labor is moving to the city. I said, "What era is this? Rural labor is moving to the city? This is not when you were doing large-scale infrastructure urbanization and needed migrant workers." Now, if you go to the countryside, where is the labor force? Besides the elderly, weak, sick, and young, is there any labor force left? You have not thought about where the suddenly increased two million ride-hailing drivers in the past two years came from. The answer is very simple: the fall of the middle class. It is just that your class is different, and you see the problem differently.
Many people's research is problematic. Many people say that inflation in the U.S. has caused American households to suffer greatly. I ask them why. They say, "I called my friends in the U.S., and they are all miserable." I said, "What is the status of your friends' sample?" When they describe it, I say, "Of course they are miserable. When they were doing well, the husband earned inflation-adjusted money in China while the wife spent deflation-adjusted money overseas, enjoying social welfare without paying taxes. Now it has reversed; the husband cannot earn money domestically, and overseas, someone charges you an extra $50 an hour to clean your lawn. Your income has not increased, but your expenses have increased, so of course, you feel miserable. If I were the one cleaning the lawn, I would tell you that inflation is nothing. A $5 sandwich rising to $7.5, a 50% increase, is not important to me. What matters is that I earn over $50 an hour from cleaning your lawn; the value of labor has increased. Those engaged in labor feel very comfortable, while those engaged in pure expenditure feel miserable.
You must have the same sample for your research. In the past two years, when the sample shrinks, the bottom layer suffers first, but it does not significantly affect macroeconomic data. Remember one thing.
I said ride-hailing drivers; if you do research in Guangzhou, their characteristics are whether they have money or not, they all eat Longjiang pig trotter rice today. But do you know how much the ride-hailing drivers in Beijing's North Fourth Ring eat for lunch? It costs 15 yuan for a boxed meal with a bottle of water and includes sweet and sour pork, pork stewed with vermicelli, and tender meat. But remember, do not ask how old the meat is; if you ask, you will not be able to eat it because it is basically all 80-year-old Lafite. It must be frozen meat, frozen for over 20 or 10 years; otherwise, how could it be so cheap? So do not look down on pre-prepared dishes; I think pre-prepared dishes are great. Without pre-prepared dishes, ordinary people would have a harder life. With pre-prepared dishes, ordinary people have a slightly better life. Why? Because for 12 yuan, you can fill your stomach and get enough protein.
Just remember one thing: when you are eating for 12 yuan, do you still care how old the meat is? It is very interesting when statistics in China talk about demand. I never use a single number; I never use China's CPI. China's CPI has always had a big problem. When the macroeconomic data was set up, the first goal of the Chinese people was to solve food and clothing, to ensure basic living standards. Therefore, for us, fluctuations in vegetable prices, pork prices, grain prices, and oil prices are more significant than anything else.
At that time, generally speaking, when leaders went down to visit, the first thing they did was to lift the lid of the pot at home. The action was very standard: open the pot and see what you are eating. This action was actually because our important issue back then was to solve the eating, wearing, and living conditions of the people. So the first thing I pay attention to is your eating situation. However, after the reform and opening up, if eating becomes a problem, that is a big problem.
Why not use data? Because the fluctuations in this part of the data are significant, and this part of the fluctuation is no longer related to demand. For example, if there is flooding in the city, vegetable prices will soar in those few days. Such fluctuations are no longer significant. Now, when we talk about demand, for example, the Chinese economy has had major problems since 2019. Do not think that the current economic problems started now; they began in 2019 and have worsened this year. So you do not know how severe the situation is this year; the data has already told you it is very severe, and it is even more severe during research.
In August and September, we must turn around. At that time, many people did not understand because everyone had developed a habit over the past year. This is also a characteristic of right-wing politics. The characteristic of right-wing politics is that I am not wrong; it is all your fault. I will not allow you to say I am wrong. Think about it; do you dare to say your wife is wrong at home? In the end, the man just goes out to smoke and does not say a word.
In the past few years, the right-wing characteristics we have manifested show that everyone has a habit: domestic economic issues cannot be said to be unwell. Whoever says it is unwell is a traitor; whoever says it is unwell does not love the country; whoever says it is unwell will be attacked online. The problem is that another type of business has emerged. What business? You understand, as long as you say this thing is far ahead, something worth 8,000 yuan can be sold for 18,000.
From my perspective, it is very simple; this is the core of the overall ideological change in society. However, what is truly terrifying is that if everyone does not speak up, at critical moments, all information feedback will form erroneous fallacies. In the end, you will find that even the decision-making level makes wrong judgments, and that will be disastrous.
In the end, who is the one who misleads the country and the people? History will have a correct evaluation. At the top, at critical moments, research must be conducted, and you must speak up. What happened in China in August and September? Most people did not understand at that time. Starting from August 27, you should pay attention to all financial summits and forums, where you were all allowed to speak openly about the core issues of the Chinese economy.
Of course, it was just that my speaking time at the Greater Bay Area Forum was not long enough, and the dissemination was broader. But it is not that I was bold in speaking. After finishing my speech that afternoon, friends sent me messages saying, "Fu, can this be said?" I said, "If it can be said, think about why?" In less than 24 hours, about 12 hours later, the next morning, Comrade Yi Gang immediately told you the core issues of the current Chinese economy at the financial forum on the Bund in Shanghai: the risk of deflation and insufficient effective demand. From August to September, everyone used the same term: the current core issue of the Chinese economy is insufficient effective demand. In fact, I want to say that effective demand has been declining since 2019, and this time, the effective demand is very troublesome. It can be said to be an unprecedented great change in a century since our reform and opening up.
In early September, in the policy suggestions I put forward, I did not use the term "solve." I used "hedge." On September 11, I was afraid that everyone would not understand this matter deeply. The original title of my speech was to pay attention to the issue of effective demand and quickly issue policies to hedge. On September 11, I wrote it out again and spoke it again.
But at that time, the overall atmosphere in society was still immersed in "we must not say we are not doing well; we are doing great." Until now, what is the reality? Do you think the capital market's sudden surge has anything to do with the economy being good? The situation that has emerged is that the economy is bad, which is why it surged, not because the economy is good. Have all the policies that have been issued achieved their goals? There is one to say one; there has not been. Can the goal of hedging be achieved? I think it can be hedged a little, but it is definitely impossible to solve because if you carefully understand the complexity of this effective demand, it means that this matter is quite difficult because it involves short-term and long-term factors. In fact, after the pandemic, we made a very high expectation for the domestic economy in China, but the reality is very poor, and the root cause also comes from the contradictions behind effective demand.
Does anyone remember that in the various public speeches I have given over the past two years, I have always emphasized what the core variable of the domestic economy is? I often talk to you about population issues, often about aging issues. A few years ago, I told you that up to now, through the data behind the financial market, capital market, and banks, you can roughly understand what has happened. Aging is not a good thing for China, South Korea, and Japan.
In Western economic research, immigration policies are studied, while China, South Korea, and Japan study population birth rates because the history of these countries determines that they will not have large-scale immigration. Do not casually say that aging and low birth rates are like how it is in Northern Europe. Goodness, if you cut it out like that, have you played "Civilization"? Soon "Civilization" will be updated, and everyone can download it on Steam to play. The starting resources and factors are different, and the civilization and empire development strategies you form will also be different. Do not casually make blind comparisons; it is useless. This is a big problem for the Chinese economy.
This is the combination of all the effective demand this time, including the policy suggestions we have made below, which do not need to be looked at; they are not significant.
The core can be summarized with these two charts, which are enough and very simple.
First, I will not use the CPI number because it contains things that are actually not closely related to the current effective demand. What do I use? I enlarge the high-definition chart to show that after 2007, we use inflation excluding food and energy. Simply put, I want to care about the prices of things that people can afford after they have enough to eat. If the prices of things you have nothing to do with are high, it indicates that your effective demand is good. If the prices of things you have nothing to do with are low, it indicates that your effective demand is poor. It is that simple. As for eating, it is very easy to solve; Longjiang pig trotter rice.
To be honest, when you order takeout for 20 or 30 yuan, the cost price is only 4 yuan. You can eat deliciously for 4 yuan. You can think about it; the food industry has developed to the point where preservatives and additives are added, and the cost is very low. Of course, it is impossible to have both; you cannot have it cheap, delicious, and healthy, and it must be freshly cut and cooked by the chef. You are thinking too much. If you want to eat freshly cut and cooked, you pay 50, and if I go to your house to cook, you pay 5 yuan. That is pre-prepared food. You must understand that this is a very important factor in solving basic needs.
Sometimes, both sides cannot coexist; health and low prices cannot exist simultaneously, so health is very expensive.
Everyone first looks at the enlarged numbers. 2019 was the peak period for the entire platform. The typical characteristic after 2019 is that the total demand curve has been declining. The October figures are negative. There was no pandemic, and there was no collapse of external demand like in the 2008 financial crisis. From 2002 to 2024, for a long period of 22 years, without any major risks, China has seen effective demand turn negative for the first time. What does a negative number mean? Very simple: the middle class is tightening their belts. This macro data tells you the answer.
As I mentioned earlier, the bottom layer of ordinary people is gradually feedbacking upwards; it will not quickly affect macroeconomic data. So you see that this large platform of numbers has not quickly dropped, but at that time, the bottom layer (ride-hailing drivers, takeout delivery) is actually suffering little by little. However, when going to financial institutions for roadshows, they did not have this feeling. The reason why all financial institutions feel very painful this year is that they have been laid off, their costs have been cut, and they have been asked to return bonuses. When the pressure hits their class, they begin to feel the pain. Do you know what this represents? The reason why the economy has been dropping since March this year is very simple: the big trouble this year is the fall of the middle class.
Do not say this year; in the past two years, the bottom layer is slowly "Pinduoduo," and now the middle class is starting to "Pinduoduo." The best sample parameters for research this year should be in neighboring Hangzhou; Shanghai can also be researched, roughly the same. In March, they cut costs and laid off Old Zhang, and in June, they cut costs and laid off Old Li. I ask you, what about Old Wang? He goes home to celebrate with his wife. Old Zhang and Old Li were laid off, but I was not laid off. Is that so? The reality is that he hurried home to calculate the bills with his wife: how much is the international school, how much is the child, how much is the facial mask, how much is the gym, how much is the necessary and unnecessary spending, and how much is owed on the mortgage. After calculating the numbers, he says to his wife, "You should skip the facial mask and spa center; just buy a mask from Li Jiaqi's live stream." Then he starts to tighten his belt. Your tightening is deadly. Remember one thing: the contraction of the middle class has the most significant impact on the entire macro economy.
The bottom layer really just does a job, runs around, and whether they earn money or not, they have to eat Longjiang pig trotter rice, which is not expensive anyway. If they earn more, they run a single order and tell the boss, "Add an egg to the Longjiang pig trotter rice." Today, everyone on the takeout platform gives a tip of 10 yuan, which is just adding an egg to the Longjiang pig trotter rice.
I do not have many investment groups, but I will lurk in the groups of takeout delivery drivers and ride-hailing drivers nationwide because they are the sample parameters of my extensive research. I even have a sample parameter from the owner of the largest beauty chain in the country. I often use him as a research sample. Why? Because his 2,000+ stores and the women behind those stores are standard consumer research sample parameters. If his business is good, the economy is good; if his business is bad, the economy is bad. This year, there should be 500 beauty stores in Hangzhou that need to be transferred. Does anyone want them? I can connect you. Would you want them? You need to know that whether it is the main wife or the secondary wife, they all have no money. The men behind them have no money.
Are you talking about consumption downgrade? In fact, it is not just a downgrade. You must remember that the end of this great cycle is terrifying because this is the first time most Chinese investors have experienced such a cycle.
The Chinese stock market reacts very accurately. Do not look at the Shanghai Composite Index anymore; it is not significant. We often talk about structural markets, and there is nothing wrong with that. The results reflect the economy and policies very accurately; it is not inaccurate; it is very accurate. So what you really understand about the macro economy in these years is to tell you one thing: there is no increment; it is all structure. How to grasp the structure? The structure here is not the same as the structure from 40 years ago.
A few days ago, I told a company one thing: the black line is PPI. I believe everyone here understands what PPI is. Simply put, it is corporate profit. When PPI is negative, everyone is in a desperate price war and competition. I roll you, you roll me, the upstream rolls the downstream, and the downstream rolls the customers. In the end, it comes down to who can survive. This is the answer to negative PPI.
For more than 20 years, starting from 2002, China’s economy has never encountered major problems. The root cause is very simple: the red line always exists, and the red line above exists.
Any supply problem in the Chinese economy has demand behind it, both internal and external demand. External demand is the support of globalization for us. What is internal demand? Real estate tycoons seem to be stepping on a sewing machine in there. They once said a classic line: "What real estate, supply, demand, land development, urbanization? Nonsense. It is just one thing: we have a large number of people born in the 80s." I think he said it very sincerely because internal demand is essentially a function of population income and debt, a leverage function.
So you know who the large internal demand generation in China is: it is this group of people born in the 80s. They are the largest population base after the "Cultural Revolution," who can spend three times the money, who can spend the six pockets left by the previous generation. They can spend the present, which is the income function given to you by your business owner. They can spend the future, which is the leverage provided to you by financial institutions. You are spending the money of three generations, a peak population of one generation. That is all the trump card of China’s internal demand. Any problem in the Chinese economy can be paid for by this group of people. All debt problems and economic problems are borne by this generation, so there will not be real economic risks.
For example, in 2008, you will also find that some policies are very similar to those in 2008: real estate is loosened, purchase restrictions are lifted, purchase tax is exempted, consumption subsidies are provided, and consumption is stimulated. But you will find that can it still produce the effects of 2008? Can it go back? I can tell you clearly that it cannot go back.
Remember one thing: the phrase that has deceived the people over the past few years is "internal debt is not debt." I do not know who let this phrase come out. Many people shout "internal debt is not debt." This is one of our family’s ancestral couplets. What is the next line? "Internal debt is not debt, as long as the people are still here," with the horizontal inscription "ten thousand taxes, ten thousand taxes, ten thousand taxes." Any country's domestic currency debt is the taxation power over its own residents. What does tax equal? Tax base × tax rate. The tax base equals population and income function. When combined, it is population income × tax rate. This is tax and debt.
What is China’s way of resolving debt? It is either to increase the tax rate, increase the population, or increase income. If the population does not increase and income does not increase, there is only one answer: increase the tax rate. So do you think your inheritance tax can escape? Do you think your property tax can escape? What are you thinking? Young people are not giving birth, so we cannot collect from them. Then we will collect from the elderly. It is the same. You need to know that debt will not be as you think: "internal debt is not debt." You are thinking too much; the essence is the tax source.
As long as government debt drives investment behavior and can collect taxes, all investment behavior is theoretically reasonable. In 2008, two economists discussed whether high-speed rail should be built. At that time, I stood with the latter. It should be built because whether to build or not depends on whether taxes can be collected. But their calculation methods were different. One calculated according to standard market economics. The calculation of market economics is whether this project can make money. After the high-speed rail from Hangzhou to Shanghai is completed, the cost is calculated, and the second-class ticket needs to be 150 yuan. Can the people afford it? If they can afford it and can operate it, the project will break even. Therefore, the slogan he often hangs on his lips is that if the project cannot make money, then in principle, high-speed rail is wasteful and is pure debt. His statement was incorrect at that time because China is very unique. China's taxes are divided into indirect and direct taxes. The cost calculation you just did is direct tax, but China's characteristic is to reduce direct taxes and increase indirect taxes. This gives the Chinese people a very good feeling: our high-speed rail is fast, good, and cheap. The ticket price of 150 yuan only costs us 60 yuan, and the people feel that life is convenient.
How naive and lovely you are! I just want to ask you, who pays the remaining 65 yuan? Then you come to say that "internal debt is not debt." The state pays this money. How could that be? Who pays this money? Do you know why all infrastructure must follow urbanization? It must be built in new cities. The land for high-speed rail in new cities is very cheap. After the circle is completed, the three connections and leveling are done, and the grid is drawn. When the land is sold and houses are built, people born in the 80s can buy houses for 10,000 or 20,000 yuan. What does this mean? This is indirect taxation. We collect indirect taxes to supplement direct taxes.
What is the core? The core is that as long as indirect taxes can be collected, all government infrastructure investments can be made. If indirect tax revenue cannot be collected, the project will fail. Do you think there will be large-scale infrastructure in China in the future? I can tell you clearly that there will not be; there will only be repairs because the largest tax source has disappeared. This is the biggest problem exposed in the Chinese economy in 2015 and 2016.
Do you know what it is? Young people, why are you not giving birth? If you do not give birth, what should I do? If you do not give birth, what about taxes? At that time, the population inflection point opened, and large-scale aging began. Young people no longer give birth, which will be a huge trouble because all our debt safety nets are gone. Who will cover us? At this point, it is very simple: go overseas to collect taxes. So everyone understands that we need to go international. The essence of internationalization is to tax overseas. Governments, enterprises, and finance all tax residents. Remember one thing: taxing enterprises is what we call commodity inflation. If something that costs 1 yuan is sold for 2 yuan, it is collecting 1 yuan tax from the resident sector. However, if domestic PPI continues to be negative, it means that enterprises cannot collect taxes. The vicious cycle of enterprises leads to severe corporate debt. Positive PPI means that enterprises can transfer costs to residents through inflation and prices, which is to collect taxes from you.
As long as the resident sector is there, adjustments from the supply side will bring about periodic recovery of PPI. Simply put, once supply-side reforms are implemented, and real estate is pushed, the people will pay the bill, and corporate debt will not be debt. All government debt, corporate sector debt, and financial sector debt are not debt as long as the resident sector can bear it.
Do you know what the big problem is now? I am now talking about a certain industry. Do you know what huge mistakes some people have made? Up to now, they tell me that Fu, negative PPI is very normal; it is market competition, survival of the fittest, and the weak are eliminated. I say it is not the case now. Now a situation will arise where everyone must die. They do not understand. Can you see this in the chart?
First, look at the cycle from 2011 to 2015. The 4 trillion infrastructure investment in 2008, leveraging, expanded effective demand very well. At that time, when the policy came out, it was absolutely effective. The mistake many officials make now is that they think the people are still the same people as before and use the same policies. The policy back then was that I was preparing 500,000 yuan to honor my mother-in-law and buy a house. Then you tell me that the down payment only needs 400,000 yuan. Do you know how young people will react? The down payment of 400,000 yuan, 100,000 yuan for decoration, still spends 500,000 yuan. What is the current situation? Tell them that it does not need 500,000 yuan; it only needs 499,000 yuan. Young people say, "I do not lack that 100,000 yuan; I now lack that 400,000 yuan."
Leverage has reached its limit. Consumption is a completely different concept. Stimulating the economy through leverage will no longer work. The only policy I am voting for now is to lower leverage to stimulate economic policy, such as lowering the interest rate on existing mortgages. This is a solid reduction in leverage. In simple terms, it is the bank returning money to you so that you can pay 800 or 1,000 yuan less each month. But you still say to lower the down payment ratio. Come on, let’s leverage! I can tell you that it cannot be leveraged anymore. This is the core. After the production capacity is increased, supply exceeds demand, mainly old production capacity, leading to 36 months of negative PPI, vicious competition among enterprises, bankruptcies, and enormous pressure on banks. We did supply-side reforms, and then administratively cleared some production capacity, which actually shifted to new production capacity, stimulating demand again, and the people paid the bill.
The big problem back then was that there was a girl, a rich beauty, and two handsome guys below. The two handsome guys were competing there. After one eliminated the other, he finally married the rich beauty because the rich beauty needed a handsome guy. So you both are golden. The saying that the winner takes all after sufficient market competition assumes that demand remains unchanged. The economic situation is genuinely damaged by self-media and the internet. The assumption that the winner takes all after sufficient market competition is that demand remains unchanged, meaning that the girl is there, and you two are competing.
Do you know what the current numbers mean? The red line is gone, 0. If PPI has been negative since 2019, excluding the pandemic, the two young guys are PKing, aiming for the winner to take all. In the end, after rolling, when one looks around, where is the girl? Just wait and see; this matter will inevitably happen in certain industries two or three years later. Do you really think it is the winner takes all? What is your broader environment? It is an effective demand facing medium to long-term contraction and adjustment. In this case, such vicious competition and rolling will have no winners, and a crisis will inevitably break out. I send this message to the chairpersons of certain enterprises.
This year is different from previous years. In previous years, any surplus market competition ultimately led to the winner takes all because the effective demand from the resident sector was always there, always able to leverage, and always able to pay for your enterprise's production capacity and profits. In the end, there is only one road left. Do you know what that road is? Because this red line only represents internal demand. If the domestic girls are gone, you have to marry overseas beauties. So there is only one road left: going overseas. This is also what many netizens are very happy about. We just want to go overseas; we just want to capture the international market.
What is the current international environment? Is it the same as 20 or 30 years ago when the world was moving leftward and integrating? Can it allow you to go out and marry a beautiful woman? Of course, Japan's Mitsui, Mitsubishi, Marubeni, Itochu, etc., went overseas to marry beautiful women after 1990. The question is whether we can do it now. I believe everyone has a scale in their hearts. The collision between "wanting" and "being able to" in the future environment will be intense. If not, what will you do if there is no effective demand domestically?
Now all economic problems exist in both supply surplus and insufficient effective demand. We need to solve the problem. The answer is to boost internal demand, and the core of internal demand is redistribution. Redistribution between the government and residents, redistribution between the rich and the poor, and redistribution between debt and leverage. If we do not do this, we will be like Japan for 35 years. Do you know how Japan's 35-year cycle came about? Now you know the answer, right? If you do not know, I have already sent my son over there. Do you still not understand what redistribution means? The core of Japan's economy is intergenerational distribution, not growth. Just growth without distribution means the rich stay rich, and the poor stay poor. What does this mean when translated into the stock market? If listed companies do not distribute dividends and do not grow, the answer is always that the rich stay rich, and the poor stay poor. The post-00s expect to trade stocks to share the wealth of the post-60s. You are thinking too much. You might as well go to Xiaoshan to be a son-in-law; it would be faster, and you do not have to work hard. Just make yourself look good and marry into a wealthy family in Xiaoshan. Wealth redistribution across generations means lying down to win. Why do you have to trade stocks every day, exhausting yourself, thinking that you can defeat the post-60s? They have become refined; can you really do it? They can run faster than you, shouting, "Young people, hurry up! This is the only chance in life. If you do not all-in this time, you will have no chance in the future." They are all-in while we are withdrawing, letting them stand on high hills.
The market and the economy are the same. While creating increments, redistribution must also occur; without redistribution, it is meaningless. Some things are essentially the same. This is the biggest problem in the current Chinese economy.
In 2006, during the supply-side reform, I want to remind everyone of a few particularly emphasized erroneous viewpoints. Why do I say they are erroneous? This viewpoint, in my words, we must know, does not necessarily need to let the people know.
For example, the stock market creates a wealth effect to change the national fortune. Is this not a voice often heard outside? What are you thinking? If a house does not have income and rental returns and living functions, in other words, if a house does not create its own value, pure turnover still leads to the answer that the rich stay rich and the poor stay poor. Can it create a short-term wealth effect? Yes, just like in 2015 and 2016, when I gave you examples of being fully invested and leveraged, and then you find that stocks are hitting the limit up one after another, and your account is full of money. You go out and buy a bag for your wife, creating a wealth effect.
And then? When it drops, do you know what you regret buying? You regret not selling the stocks. Rest assured, stocks cannot be sold because they hit the limit down at the opening. What you really regret is that you did not buy this bag. I often advise them to buy a bag for your wife because at least she still has a bag left. If you had not bought this bag, you would not have even that bag left.
This kind of turnover game only results in the rich staying rich and the poor staying poor, and the consequences will only get worse. China is a typical example of this logic. Do not deceive the people by treating bubbles as family wealth; this is nonsense, deviating from income and corporate growth and dividend distribution. We all know this is for turnover. If you treat it as family wealth allocation, it will be disastrous, ultimately leading to the current situation in the economy.
When you look at turnover, you see consumption is very enjoyable. For example, the house prices in China have risen the most not from 2008 to 2015, but precisely after the stock market crash in 2015 and 2016. At that time, I remember clearly that during the housing speculation in 2009, the price in the Asian Games Village was 17,500. By the end of 2015, the price was 25,000, and by 2019, the price was 100,000. The black line shows the year-on-year increase, and the year-on-year increase in 70 large and medium-sized cities shows that the increase in housing prices was the largest during that time. Therefore, we are talking about the wave of 2015 and 2016, where housing prices brought everyone’s consumption expectations and hopes. However, from this chart, you can clearly see that consumption has deviated from income. This kind of consumption is built on the wealth effect, but at this time, the wealth is not supported by income.
The problem arises. Four or five years ago, I shot some short videos in collaboration with platforms, and I made it very clear at that time: if a house is purely for turnover, what is it? I bought a house for 2 million yuan and sold it for 6 million yuan to young people. What I take away is the present cash discount of the young people's future 40 years. I can enjoy myself for the next 40 years, while they bear the debt for 40 years. If there is no income growth, they have to repay the debt for 40 years, and they will be the lost generation. I have lived an extra 40 years for them; it is that simple.
The same goes for stock prices. What we exchange is time value. I am a major shareholder; I take it now and am happy, while I trap you in there for 10 years. After 10 years, can you break free? Maybe you can, but do you feel happy? You have lost 10 years. The cost of financial asset exchange must consider the time function; without the time function, it is nonsense.
The problem is that if income does not grow, pure turnover creates a wealth effect that equals the short-term accumulated debt of another group of people. In other words, when we are happy, their debt reaches a certain level, which will cause a comprehensive collapse. The entire asset cannot be sustained. When they bought the house for 8 million yuan, expecting to sell it for 10 million yuan to the next young person, they find that there are no young people left. The next young person cannot take on 10 million yuan. At this point, their balance sheet begins to deteriorate, and consumption begins to experience a cliff-like return. This is the result after 2019. After 2019, it began to decline layer by layer, returning to real income.
Do not dare to tell the people to treat stocks and houses as family wealth. In the past, when there were young people, they were our wealth. Whether through stocks or houses, young people are the source of wealth for everyone. To be honest, the fundamental reason why housing prices in China have risen for nearly 20 years is this: if any house can be bought by young people, we take away the wealth. My house is their debt. What we are all consuming is just the leverage ratio of the resident sector. What everyone consumes is this red line.
Some researchers say that the current leverage ratio of the resident sector in China is lower than that of overseas because they simply compare numbers. I can tell you it is not low. Do you know the reason? Our leverage does not have high welfare. High welfare countries have a leverage ratio of 70%, while low welfare countries have 60%. If you tell me that 60% is lower than 70%, do you not have a clear understanding of your actual leverage pressure? How much do you need to spend on education, healthcare, and pensions? Do you not have a clear understanding of how much you need to spend? Are you the leverage ratio of the resident sector of a country established in the 1970s and 1980s with social welfare? No. Observing from various phenomena, this leverage ratio has reached its limit.
The capital market is very smart. From 2002 to now, for about 18 to 20 years, it has traded on China's consumption upgrade. Whether the Shanghai Composite Index is at 3,000 points or 3,500 points is not important. The large cycle of the consumption sector is the leverage of the resident sector born in the 80s.
Starting from 2019 and 2020, all my educational logic regarding Chinese consumption is: first, consumption will undergo structural changes, which are actually intergenerational changes; second, consumption will begin to downgrade.
At that time, the sentence I mentioned in my speech was that coffee is no longer consumed at 20, 30, 40, or 50 yuan, but rather starts at 9.9 yuan for a buy-one-get-one-free deal. Young people start saving KFC coupons on Thursdays.
Young people are beginning to change their consumption patterns. For example, my child drinks tea. I see them drinking tea and immediately tell my wife to sell all the stored Pu'er tea cakes. Why? Do you know how my daughter drinks tea? She goes to her office, takes out red tea and green tea, and when you say red tea, she takes out Dongfang Shuyue, opens it, and pours it into a small kawaii cup without even needing water. She will not take a cake and knead it for a long time before brewing it; that is the previous generation.
During Japan's economic peak, making Japanese sake and whiskey was popular. However, after 1990, what really became popular were Suntory and Jim Beam. Young people say, "What kind of wine do I want for 1,000 yuan? I want 10 yuan wine that is sweet and can get me tipsy." My social scene has changed; I will no longer sit down for a meal with guests. My consumption scene has changed to two kids sitting there watching esports live broadcasts.
This era has arrived. Do not think it has not arrived. The stamps and wood you are hoarding, remember, there is no inheritance. If you hoard stamps, my son does not even know what a stamp looks like. He knows that My Little Pony is valuable. This is the change of the times; consumption is undergoing structural changes and changes in total volume.
The Chinese capital market reacts to the economy very accurately. You can look at the entire sector index. Real estate has ended, and the food, beverage, consumption, and retail sectors of the resident sector have ended. As for whether new energy vehicles have ended, my answer is to wait and see. In fact, there is only one sector expanding: semiconductors.
Do you understand what this means? The bank's couplet says, "Only do the icing on the cake, never provide charcoal in the snow," with the horizontal inscription "My bank." If you do not operate well, the first thing we do is to withdraw loans. "Internal debt is not debt, as long as taxes are still there." There is also a secret about the economy with Chinese characteristics that does not exist overseas. We are in a non-market economy with "J, Q, K."
What does "J" mean? Come on, old man. "Q," old man, invest some money and lock it up. "K" is to go out, KO. China's rapid economic development is actually closely related to this hand. Everyone knows that when the economy is worse, this hand moves. Some people ask whether China's stock market has anything to do with the economy. I can tell you that the two ends are inversely related, while the middle is positively related.
The inverse relationship at both ends means that the worse the economy, the more this hand will move, and you will have an inverse relationship. The middle must return to being related to the economy. Then, at the other end, if it is too excited, it is also an administrative relationship. For example, in 2015 and 2016, it was very typical. I posted on Weibo, saying, "Whoever loves to play can play; we are leaving." Of course, I did not short China; I shorted Hong Kong. If I shorted China, I would not be able to come back.
At that time, I went to Jiangsu, Zhejiang, and Shanghai to research the off-balance sheet financing configuration of umbrella trusts. When the CSRC issued a policy, I said very simply, "Whoever loves to play can play; I am leaving." The fundamental reason is that this hand is key. What do you mean by 6,000 points is not a dream, and 10,000 points is just the beginning? Which one supported that? Once the debt leverage is withdrawn, the game collapses, and you must run quickly. Do you not think something will go wrong? That is also a hand, not the economy. The middle part is the normal economic development, while the index compilation in China determines that most of the time, the economy reflects structure, not increment. Now, with the emergence of A500, it is an attempt to make A500 similar to the S&P, reflecting both total volume and structure.
What do "JQK" mean? China is very unique. In the investment process, we only do the JQ part and never do K. What is the JQ part? Has the industry risen? No. Does the industry have nationalistic significance? Yes. You must remember one thing: we are right-wing. The right-wing industrial policy is all inclined towards nationalism. Therefore, nationalism does anything not to make money but to have. Remember this sentence. So the purpose of all JQ is for political achievements, for having.
Old stockholders all understand the logic of watching the news broadcast to trade stocks. You tell me, do you watch the news broadcast to trade the economy? You watch the news broadcast to trade stocks, which means you are looking for what is missing from him. You just invest. At this time, there is no falsifiability, and he will pour all resources into you, pouring land, taxes, local guiding funds, and all resources. The stock market is also a resource used for financing, and he will give you all resources. You are the happiest. Once you achieve a leading position, after his political goals are achieved, he will throw you into the market economy for a KO. At this time, you will discover the secret of PPI. You will find the periodicity of PPI. The periodicity of PPI is very simple. If you further break down the industries in PPI into production materials and living materials, you will find the relationship between periodicity and policies.
What is it? If I do not have it, I will make PPI positive. I can pour all resources and methods to allow you to earn money in there without needing competition. But once I achieve my goal and throw you into the market economy, you will rapidly develop. If it is a formal market economy, competition fluctuations will be relatively mild. In other words, as soon as someone makes a little money, someone will come in, and it will flatten out. The cycle will be longer, requiring 30 years to cultivate a large enterprise.
But it is not the case in China. In China, it takes 5 years for the industrial chain to achieve global leadership. During the JQ protection period, everyone can survive, but it will also create many "everyone." Once the protection period is over and thrown into the market economy, you will find that everyone becomes non-self, starting to PK, compete, and involute, and PPI will begin to turn negative. It is that simple. Then a round of industrial surplus begins to eliminate, and the government drives to guide new industries. Using this method of the previous wave pushing the next wave, the entire cycle of various links in the industry is shortened to five years. However, the cost is that many industries will quickly enter a state of negative PPI, and all industries that can reach negative PPI must thank their own debt side, as the resident sector can pay the bill. Once internal demand is insufficient and this continues, a crisis will occur, which is the current state.
Ordinary people's investment is to say that you see how much the penetration rate of new energy vehicles has reached, and more and more ordinary people are driving them. Why are stocks still falling? This is his mistake; he does not understand when policies actually invest. When it matures, it cannot be invested because when it is released to the market, it will not be so profitable. When it is not released to the market, it will be particularly profitable.
Of course, this also involves the supply-side reform back then. You may not have thought that the supply-side reform is highly related to the stock market crash and the housing market back then. When Zhou Xingtong was in the market, at the end of 2015 and the beginning of 2016, he held a meeting in Shanghai and asked me to talk about supply-side reform. I said supply-side reform is very simple. In 1997, Premier Zhu Rongji flipped it over; the term supply-side reform came from there. The starting point of this round in China is 2002, with positive PPI, positive core CPI, and positive effective demand, lasting until 2012. Supply began to exceed demand, but effective demand could continue to leverage. Here lies the contradiction of supply. In 2009, both supply and demand fell, marking the end of this round of the great cycle in China that began in 2012.
When was the last end? The reform and opening up lasted until the late 1990s and early 2000s. You can buy "Zhu Rongji Answers Questions from Reporters" on JD for 150 yuan. It is a three-volume set, and all the events have occurred: real estate bubbles, financial crises, and encouraging the people to have confidence. Do you know how they encouraged the people to have confidence back then? "As long as the heart is there, the dream is there; at worst, we will start over." Comrade Liu Huan became popular from that. That was how they encouraged you to have confidence.
You know how to prevent the unemployment rate of young people from rising too high? By expanding university enrollment because our young unemployment rate does not count students. They send you all to university, and the unemployment rate can be delayed by three years.
What is the ratio of undergraduates to master's students at Tsinghua and Peking University this year? It is 1 to 3, with 5,000 undergraduates and 15,000 master's students. Of course, the policies from back then directly resulted in what? Once, a bachelor's degree was very valuable, and now it is not valuable. I have a high probability of thinking that master's degrees may not be valuable in the future either. If the economic problems are still not foundational three years later, I estimate they will start encouraging you to pursue a Ph.D. and start working at 30. For those of you with children at home, if your child is not a rich second generation, do not compete. The rich second generation does not need to compete either. In my words, think clearly; the value of pursuing a degree later will not be significant.
What else did they do back then? Bank risks, the four major asset management companies handling bad debts, supply-side reforms, debt reduction, and the stock market and government reducing debt. If you want to know what the stock market is for, please consider what happened back then. From 2002 to 2004, the economy had already recovered, and the A-shares fell to 2004. Why? There were many reasons, so you know how to reduce debt, right? The answer is very simple. Remember the upper and lower couplets: "As long as the people are still here, any debt can be reduced." As long as the people are not here, how can this debt be reduced? Tax rates. If the quantity cannot be collected, then grab the rate. In the past, some people said that China had high tax rates, with high tax rates for the resident sector and low tax rates for the corporate sector. Because of various tax rebates and subsidies, you are given low tax rates. Everyone must understand that when it is time to grab tax rates, you must grab them; otherwise, it will not be enough. This segment of the great cycle has now entered its end, which is the most troublesome point currently and the surrounding environment.
I will not analyze overseas issues because you can just reverse the past 40 years. Overseas is slowly changing, industries are returning, and trade relations are being reshaped. I just returned from Singapore a few days ago.