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the market has undergone dramatic changes in the past week.

the top leaders have introduced the strongest economic stimulus policy in history, and they are firing multiple arrows at once.

suddenly, big a defended from 2700 and approached 3100 again within a few days.

various internal and external voices began to change from wait-and-see and doubt to optimism, excitement, and some even started to feel a little annoyed.

various jokes about the stock market that have disappeared for a long time have also reappeared.

however, can the introduction of these policies and monetary tools turn china's economy around and put it on a positive cycle?

in the past two days, i have also read a lot of relevant information. in this regard, i can share some personal immature thoughts.

ps: i am not an expert in economics. i will mainly talk about the logic i understand, and try to use the simplest and easiest-to-understand logic. the purpose of this summary is mainly to find the key context for understanding many issues, and to better learn and communicate. .

if some of the statements are unprofessional or obviously biased, please correct me.

（1）

let’s talk about the stock market first.

what happened in the past few days actually shows one thing.

there is actually no shortage of money in the chinese market, and the savings rate of our residents is very high. the chinese market just lacks confidence and a suitable timing + point.

we have a huge amount of m2 that is idling and has not entered the market. if it enters the market, it will be enough to support a bull market.

the new deal was introduced on september 24, and the official government used a strong posture of "providing unlimited liquidity" to boost the stock market, which is equivalent to "the national team is telling you to come off the field and speculate in the stock market." as a result, a large amount of money was reinvested. enter the stock market.

however, the thing about confidence is still a bit subtle. the performance of the stock market and the real status of the real economy still have a causal relationship with each other. everyone knows how difficult it is to experience the performance of the real economy and the first-line experience in recent years.

if this sharp rise is just a fireworks display in the stock market, but in the end the fundamentals and performance of the real economy have not substantially improved, then the stock market performance will easily return to a "weak confidence" situation soon.

on the contrary, if a positive cycle can be formed between the performance of the stock market, capital liquidity and economic development, it will bring about substantial changes, and will also bring about changes in "confidence" in the long term and at the bottom.

so, how do we understand the problems facing china’s economy and what might happen after this round of new deal?

（2）

china's economic development has two cycles, one is the external cycle and the other is the internal cycle.

behind the two cycles, we can also understand and analyze them through four basic elements——

policy tools, financial/capital markets, industrial structure/supply-side status, and demand-side status.

to put it simply, regardless of external circulation or internal circulation, economic development can embark on a positive cycle when the policies are actively supportive and the guidance is clear, the capital market is active and liquidity is positive, the industrial structure is reasonable, and the demand side is still strong. .

after experiencing rapid development in the past few decades, today, the problem of china's internal economic cycle is the increase in debt ratio + overcapacity caused by the past model. at the same time, the increment of economic development has disappeared, resulting in demand-side shrinkage.

the essence of china's economic external circulation problem is that the game between great powers and the increase in geopolitical instability have led to the continued reshuffling of the global foreign trade market, and it will take time for a new stable order to be formed.

both are basically "structural adjustments."

（3）

to go further, the main problems faced by china’s economy in the past few years are as follows:

1) the original policy tools are invalid;

2) a large amount of foreign capital flows out, and capital market activity + liquidity decreases;

3) there is widespread overcapacity in various industries, resulting in "involution competition";

4) demand shrinks.

on a global scale, economic development is also a game.

because, with the policy adjustments in different countries around the world, money will choose to flow into different places independently.

how to choose when to let money in and when to flow out, how to not affect the free mobility of money, maintain the attractiveness to investors, and prevent the inflow and outflow of money from causing harm to the local financial and economic markets, is a special test for governance. +things at the policy level.

（4）

therefore, for china to promote structural adjustment, it is especially necessary to clearly understand the game situation, grasp the key game opportunities and nodes, and first win a stage of time window for itself.

on this basis, we must first stabilize the fundamentals and then accelerate various structural reforms.

september this year may be a "critical opportunity" of strategic significance that our senior leaders have been waiting for for a long time.

because there are already strong expectations around the world for the federal reserve to cut interest rates.

once the interest rate cut starts, it will start a new cycle. this means that the risk of global economic recession has increased, but it will also bring benefits to emerging economies around the world.

after the interest rate cut begins, the massive amounts of dollars printed by the united states during the epidemic will leave the united states and flow into emerging economies as interest rates decrease.

therefore, we have to wait for this window to absorb a large amount of global funds.

the essence of the fed's interest rate cut may be a time window for a new round of global asset reallocation.

from china's standpoint, we must seize this time window, let the money come in, and let it stay. only in this way can we truly win more time windows for ourselves in terms of "structural adjustment."

（5）

in addition, the structural adjustment of our country's economy requires to a large extent to find a new "engine" and the key hub between planning and the market.

china's economic system is half planned economy and half market economy. the planned economic system is mainly driven by the government and banks, while the market economic system is mainly driven by foreign capital and private enterprises.

the core of the engine and economic development hub in the past few decades has been real estate and foreign trade (but most of the previous foreign trade was medium and low value-added).

in the past few decades, the planning system has injected money into the market system through infrastructure investment, industrial park investment promotion, etc., and the market system has flowed the profits earned back to the planning system through real estate, foreign trade, etc., and created many job opportunities in the process. this forms a cycle.

but the current situation is that we have put a lot of effort into forcibly stripping the entire economic system of its dependence on real estate, and also completed the adjustment of the economic structure from virtual reality to reality.

but in the process, the original engine of real estate was wiped out, and many new problems emerged.

under the old model, as long as the economy fails, all problems can be solved by releasing water.

now, under the new model, in the face of economic problems, the more water is released, the easier it is to expand the deflation crisis.

in the past, companies saw demand but were short of money; people's incomes were growing, but they also spent more money on things, and some things were quite expensive.

now, it has become: it is easier for many companies to borrow money, but the demand and market are invisible; it is cheaper for ordinary people to buy things, but a large number of ordinary people have no money.

so the top brass needs to drive the new engine.

the new engines that the top management should drive may be: biotechnology and elderly care, as well as high value-added foreign trade.

from a problem-solving point of view, the short-term problem is to use new engines, seize the time window, stabilize the market, avoid continued turbulence, and avoid a deflation crisis.

the mid- to long-term issue is to truly complete the gear shift and structural adjustment, especially the emergence of various new demands, so that economic development and people's livelihood can be positively interdependent.

（6）

therefore, if you pay attention, the high-level actions are actually comprehensive, and the layout started a few months ago.

if we only fall back to the key actions in september——

in july, the third plenary session of the cpc central committee was held;

in august, the first regular meeting of the state council after the third plenary session of the central committee of the communist party of china was held. for the first time in the past two years, it aimed at the "external", with "open trade" and "foreign investment" as its core themes;

in early september, the national development and reform commission announced the negative list for foreign investment access in 2024, and the negative list for the manufacturing industry was completely cleared. at the same time, the ministry of commerce issued a notice to open the fields of biotechnology and wholly-owned hospitals to foreign investment.

then, on september 19, the federal reserve officially cut interest rates.

on september 24, at an extraordinary meeting of the state council information office, three financial tycoons took action and released a series of policies that blinded our eyes.

therefore, we have been waiting for the day when the federal reserve starts to cut interest rates for a long time.

the appearance of this signal is the signal for the beginning of the "general attack" at this stage.

（7）

ideally, at this stage, by attracting a large amount of capital and stably retaining it, and through a series of policies such as reducing mortgage loans, promoting consumption, and maintaining employment, we can get out of the "deflation crisis" and truly have a time window to stabilize the market. .

then, the next issue becomes a mid- to long-term issue, which requires continued rapid advancement to complete structural reforms.

however, the key to structural reform may lie in: seizing the demand side.

（8）

let’s go back to the “outer loop + inner loop” mentioned at the beginning.

assuming that both external and internal circulation can now be stabilized in terms of policy tools and financial/capital markets, but the problem of overcapacity + involution competition still exists, then at this time, the key to solving the problem is to complete the demand-side reforms.

in a traditional concept, economic development is only about production and distribution.

under this logic, if a country's economy wants to grow, it must produce as many goods as possible, sell them to other countries, and share the money with everyone.

the goods to be produced must also be products that have mature benchmarks on the market. we use lower costs and higher efficiency to produce, so that we can win the recognition of others.

this has been the logic of our country over the past few decades.

during the development period, this logic is correct.

but the problem is that if you continue to adhere to this logic, it will eventually lead to an "involution trend". everyone will work harder and harder, but the profits will become thinner and thinner.

how to break the situation?

one is: let the core technology and barriers be in your own hands, and let your products be driven by innovation and cutting-edge technology, so you can continue to export your core products to the world and still get a premium.

whether apple, microsoft or tesla, this is the logic.

therefore, we have paid special attention to high-end manufacturing and cutting-edge technological innovation in recent years. i also particularly hope that there will be a few more byds and a few more companies like huawei in the country.

another way to break the situation is to understand that in economic development, there is another logic: demand drives the economy.

therefore, if the original needs of users in the market will inevitably lead to involution, then users must be given space to generate new demands that can make everyone less involuntarily involved.

this must mention the service industry.

（9）

the following is a short excerpt from hao jingfang's statement in "casually talking about china's economy" -

“the pricing mechanisms for industrial goods and services are different.

the pricing mechanism for industrial products is basically a global one price.

this means that if conventional industrial product income is used as the main source of income, then the per capita income of various countries will not be much different. the selling price of a bottle of shampoo is not much different around the world, so the income of shampoo producers in various countries is also not much different.

therefore, the difference in per capita income between countries mainly comes from the prices of things unique to a country (such as a country's special resources, unique monopoly patents, or a country's domestic service industry).

for generally developed countries, it is mainly due to price differences in the service industry.

in china, a marriage counselor may charge 200 yuan per hour; in the united states, a marriage counselor may charge 200 us dollars per hour. this brings about a 7 times income gap. here, service sector pricing (especially relative to industrial product prices) is key.

if a country's professors, singers, designers, consultants, scientific research engineers, writers, psychological counselors, lawyers, doctors, photographers, star chefs, investment managers, painters... can all get very high service prices, then this the country can become a high-income country.

the higher the price of these services is compared with the price of industrial goods, the easier it is for the country to become a high-income country.

contrary to the traditional economic concept: it is not the money earned from industrial products that supports the service industry. instead, industrial products only provide basic income, and the service industry can support the overall high income. "

in short, looking at developed countries with relatively high per capita gdp in the world, many countries do not have as strong and complete supply chains and manufacturing industries as china.

but their per capita income is higher and their per capita gdp is also higher.

how is this done?

（10）

the key to the answer may lie in the "service industry."

in these countries, everyone is willing to pay a high premium for the "service industry". therefore, many people are doing jobs with fewer average working hours and less involvement (such as independent photographers and psychological consultants). teachers, travel planners, etc.) can earn high incomes.

in fact, this kind of consumption has become a habit.

i remember that i once studied china’s gdp structure ratio and discovered an interesting phenomenon.

comparing the gdp in 2021, china is about 6 trillion u.s. dollars less than the united states. however, in terms of the proportion of gdp in trade, investment, and consumption of common daily necessities, china is not much less than the united states.

so, where is the difference of $6 trillion?

the answer is: in the proportion of the u.s. gdp structure, there is an item called "service consumption expenditure." this item is about 5 trillion u.s. dollars in the united states, while china only has a pitiful few hundred billion u.s. dollars. (i can’t remember the details, but that’s probably what it means)

back in china, there is no doubt that we have come from poverty in the past 100 years. everyone is accustomed to living frugally and enduring hardships (this is also in the chinese people's bones). the market has not yet formed a people willing to pay for high-premium services. habit.

but it is true that in the long run, the service industry is the field that has a greater chance of allowing people to create more premium income with shorter working hours.

moreover, in the service industry, your leisure and relaxation time is other people’s income.

therefore, in the long run, perhaps our "structural reform" also has two parts: "national economy" and "people's livelihood".

as for the national economy, the core is to break through bottlenecks and upgrade some core industrial chains + a new round of overseas expansion.

returning to people's livelihood, perhaps one of the directions for the next reform is to allow everyone on the demand side to have more leisure time, learn to relax a little, and have a richer spiritual and cultural life.

in this way, it may be able to catalyze more diversified consumer demands and increase happiness at the "people's livelihood" level.

otherwise, if it continues for a long time, it will still be difficult to solve problems such as the fertility rate and marriage rate.

after all, chinese people on the whole still don’t know much about resting, nor are they very good at playing.

（11）

therefore, if the economic structure is wrong or the economic flow is wrong, printing a large amount of money will not only fail to bring about a virtuous economic cycle, but will also cause high inflation.

under my country's current economic structure, if the central government directly prints a large amount of money and increases the "first pot of gold" invested in the economy, will it bring about economic growth and an increase in everyone's income?

the answer is probably no.

but the current general attack and rally call may be able to solve the problem of stabilizing the market in the short term.

as for the long term, there is still a lot of work and trials to be done.

（12）

looking at it this way, this year's three plenary sessions actually set a relatively clear future plan. (i also read out the decision of the third plenary session of the central committee of the communist party of china yesterday. interested students also suggest that you go back and read it again)

and this year's q4, after the first shot of the "general attack" was fired, is critical again.

under very optimistic circumstances, a series of supporting reform measures may begin to be implemented at an accelerated pace. the work of high-level officials and governments is actually not easy.

how well the results of the third plenary session of the 20th central committee of the communist party of china can be implemented, and whether the basic trend can be reversed at the "confidence" level in one fell swoop, depends largely on the first few shots this year.

the above are some immature thoughts.

everyone is welcome to actively communicate and make corrections.