Raw materials soared! Downstream production in large areas! Where is the road?

Coking coal price increase of 200%,

Glass prices rose by 40%,

Plastics price increases by 30%,

Aluminum prices rose by 30%,

The freight price increased by 33.6%.

Industrial paper can't be bought with money...

In the most serious paper, packaging and printing industry, paper prices have skyrocketed, and individual paper prices have risen three times in ten days, but there are still cases where money can't be bought, which has led to a large number of companies stopping orders.

The ecological environment of China's real economy is in a state of turmoil, and a large number of enterprises are caught in the whirlpool of crazy price hikes, struggling and dying.

The price surge is triggered by a series of liquidation crises, long-term distortions in price mechanisms and sudden events. Due to excessive accumulation of contradictions, opaque information, and people's panic, the prices of industrial manufactured goods have fallen into a state of control in a short period of time.

1

Liquidation crisis

▌1, the amount of money printed in the face of liquidation

The Chinese economy has been very successful, and Chinese farmers are willing to suffer hardships, discipline, and work hard. But the second step is not going well. After the accumulation of funds in the manufacturing industry, it has run out of energy through the 4 trillion yuan.

In 2008, China's M2 was 47.5 trillion, and the 2016 M2 data was 149 trillion.

In the past few years, the government has tried to establish two currency pools, the property market and the stock market, to lock up the super-currency currency. However, the stock market has been disabled by a wave of artificial bull markets, and the pressure cooker of the property market has been forcibly covered by the government, resulting in a flood of liquidity. In the past few years, China’s foreign exchange reserves have been reduced by one trillion US dollars, but the corresponding ratio of RMB has not been recovered, which has aggravated the flood of liquidity.

The serious consequence of this is that a large number of homeowners feel that the wealth has doubled, but the price is very low, so they are desperately consuming. Anyway, if they do nothing, they can earn more than they have earned a lifetime.

On the one hand, this kind of false prosperity has greatly reduced the number of people who create wealth. On the other hand, a large amount of real wealth has been excessively consumed, which has intensified the bubble of the renminbi. In other words, the extent of future inflation may be much more serious than imagined.

Nowadays, the moment when the amount of M2 is liquidated is coming, and the government faces the fatal test of either piercing the housing bubble or suffering from intense inflation.

▌ 2, the property market bubble entered the liquidation period

The Great Leap Forward in 2008 has brought unprecedented prosperity to China's coal, cement, ceramics, bathroom, furniture, home appliances, lighting, hardware, packaging, printing and other industries, and has created an unprecedented crisis. The production capacity of these industries has been amplified by several times. Nowadays, with the serious surplus of housing in China and the sharp decline of young people, these industries are facing a liquidation crisis.

On the one hand, the elimination of production capacity in real estate-related industries will be very cruel. On the other hand, the bursting of the real estate bubble will in turn affect household consumption, resulting in further overcapacity.

Sadly, these industries have accumulated a large number of employed people. For example, coal and other industries have maintained the jobs of hundreds of thousands of people. In the case of high debts and shrinking markets, they can only survive through price increases.

▌3, environmental pollution is difficult to return

In the past 30 years since the opening of China's economy, although many foreign experts have pointed out that sacrificing environmental development is not sustainable, it is not worth the loss. However, under the various "conspiracy theory", the government has repeatedly fallen to the bottom line of environmental supervision, and the ubiquitous corruption has connived. A large number of companies have stolen.

Finally, the smog that once plagued Britain and North America once again shrouded the northern land, and the area quickly spread from 560,000 square kilometers last year to 1 million square kilometers.

Very unfortunately, in 2016, it caught up with the liquidation crisis brought about by environmental pollution. Under the constant production and production limits and the multiplication of sewage charges, the raw materials necessary for the industrial sector began to skyrocket.

2

The retaliatory rebound under the long-term distortion of the price mechanism

After the economic stimulus in 2008, China’s private investment and state investment were in a state of enthusiasm. Since 2012, severe overcapacity has caused market price mechanisms to begin to distort. During this period, China experienced a continuous decline in the PPI for four years, and it also appeared in the case of labor costs such as labor, factory rent, and logistics.

Now, with the soaring prices of raw materials, the PPI has started to turn from negative to positive, but prices seem to have retaliatory rebound. The four-year low price of life has become a smoky future, and the future will be a painful period of debt repayment.

At the same time, the long-term low price in the past has led to unprofitable recycling of waste products. As no one is willing to work on waste recycling, waste paper boxes, plastic bottles, scrap iron, etc. are thrown away. Once the exchange rate fell, the cost of imported raw materials rose sharply, and the paper industry even experienced extreme phenomena of raw material supply.

This is one of the reasons why raw material prices have skyrocketed.

3

Incidental events lead to price increases

In addition, the growth of social security contributions, the decline of the RMB exchange rate, highway governance, real estate regulation, civil servants and military and police processing resources have all had a significant impact on the price increase. In particular, the fall in the exchange rate has caused some paper giants to dare to purchase waste paper and pulp from overseas, causing paper prices to skyrocket and even hard to find.

However, the price increase is not terrible. The most frightening thing is the weakness and prospects of the consumer market.

Despite the rise in industrial manufactured goods, overcapacity and sluggish consumption have forced end-consumer manufacturers to cut prices. At present, fruits, pork, vegetables, dairy products, paper products and daily chemicals in many places are being discounted. The madness of the double 11 is likely to indicate that everyone has no money, and choose to buy discounted products online.

Then a more serious problem will come. When inflation is transmitted to the end consumer goods sector, it will definitely lead to a weaker domestic demand, resulting in a new wave of overcapacity. With such a vicious circle, the consequences are unimaginable.

After scrutinizing the current economic situation in China, exports, domestic demand, and investment in three carriages are all in the same place. Technological innovation has not yet formed new kinetic energy. Entrepreneurship in the whole country has only delayed the employment crisis. However, we still have an opportunity to survive - to reduce the burden on the people who create jobs, and to reduce the burden on the people who are behind the "four mountains."

There is not much time left for the Chinese real industry. Will the burden reduction really come?

4

Who is China’s real economy being beaten?

In the past, the author has paid attention to the tax burden of Chinese SMEs and China's macro tax burden. In previous articles, I have mentioned many times that many SMEs in China are basically dependent on tax evasion. China's macro tax burden is as high as 38%. Far more than many emerging market countries, even more than the United States, the United Kingdom and other developed countries.

In terms of tax burden, if the tax burden index of Chinese enterprises is the first, no one dares to say the second.

For example, financing difficulties, the financing of SMEs has become a dominant issue in the academic world since the beginning of the reform. However, today, this issue remains at the appeal stage.

In the past 40 years, 80% of China's credit resources have flowed to state-owned sectors that contribute less than 40% of GDP, contributing non-public enterprises with more than 60% of GDP, and less than 20% of credit resources from mainstream credit institutions. 80% of China's small and medium-sized enterprises rely on private lending to live, relying on illegal financial institutions to provide funds for blood.

If we say that the collapse of China's real economy is not because of these emotional summaries, what is the real crux? China's real economy and manufacturing have reached the crossroads today, this is a fate and reincarnation.

Take the manufacturing industry as an example. In the past, China's manufacturing industry was able to stand out from the crowd. The key lies in the low cost of labor. Therefore, China chose the lowest-end processing and manufacturing of the global industrial chain in industrial policy, which is the mode of working for the world. More precisely, China is not a "world factory" but a "world factory."

This model has not only made China's past success, but it is also the main reason why China's manufacturing and the real economy are in trouble and dilemma today. To be more thorough, the biggest experience of China's development model in the past is the cheap labor and the low end of the global industrial chain.

All our systems, all our mechanisms are prepared for such a model. Under the period of demographic dividend, this kind of gameplay can survive even if the tax burden is heavy and financing is difficult, once the demographic dividend ends, this Various drawbacks of the pattern will be displayed.

Therefore, the tax burden is also good, or the labor costs such as social security are rising, and financing is difficult, which is not the reason why the Chinese real economy is being beaten. The fundamental reason for China’s real economy to come today is to make our past successful economic system, and the economic model has lost its competitiveness.

China's tax burden is heavy, corporate financing is difficult, and the government's reliance on real estate makes the entire real economy in an awkward position, but this is not the key to the problem. The crux of the matter is that we are unaware that the model we have relied on for success has been unsustainable. After we became a behemoth, our entire country, not individual companies, entered a completely different zone from the past. This area needs more innovation, requires a new business model, and needs a new institutional ecosystem to create new competitiveness. Otherwise, you will not be able to leave the no-man's land that you are not saying. You must die.

Now is the key moment for China to rebuild its competitiveness model. The key to reshaping the competitiveness model is to persist in the reform and opening up line. Regardless of China's manufacturing industry, the success of the Chinese economy over the past 40 years is nothing more than the words "reform, openness, and tolerance", making money to earn money and recognizing the status of entrepreneurs in society. These six words can interpret China's past and determine China's future.

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