The general environment of internal circulation is bound to strictly control the property market, a black hole of money, so the biggest impact on ordinary people may be the future direction of the property market. In recent months, there is a word on fire – “internal circulation”.
Since mid-May, the top level in the Politburo executive meeting, Lujiazui Forum, Entrepreneurs Symposium and other occasions repeatedly mentioned: “the formation of a major domestic cycle as the main body, the domestic and international double cycle to promote each other’s new development pattern. Especially on June 18, Liu He said these words after analyzing the domestic and international situation during the 12th Lujiazui Forum. And this phrase, in fact, was first said in the speech of the two sessions. What kind of economic pattern will be opened by this unexpected move of “internal circulation as the main”? Many people feel very confused, and we can even strongly feel the smart money in society are anxiously looking for the direction of the “inner circle”. Generally speaking, the internal circulation economy is found in large agricultural countries with weak economies, such as China before the reform and opening up, which is a self-production and self-selling internal circulation economy model.
But when the industrial age came, the internal circulation system collapsed. Why? In the beginning, the buns were made by hand, and because of the limited production, the town residents could eat as many buns as they wanted. But after the introduction of machine-based production, production skyrocketed and began to export to neighboring towns. With close trade between the towns and economic prosperity, the internal cycle of economy naturally ended. But the sky is unpredictable, and suddenly one day, conflicts arose between the towns over certain issues, and even fights and brawls. The towns decided to end the trade between the towns in order to protect the residents. A high fence was put up around the town, and there was no way in or out. The worst thing at this time is the barbecue store, facing the biggest problem is overcapacity, so much barbecue in the end sold to whom? The loan owed to the bank can not be repaid. In fact, the reason is so simple. Therefore, in order to truly realize the internal circulation of the economy, the core is to solve the problem of excess products and solve the problem of consumption. And there are only 2 ways to solve overcapacity. The way to solve consumption a handful of excess capacity exported to other countries. But we just need to look at the data a little bit to know the future of this road will be increasingly narrow. The key is that the current foreign epidemic has not been effectively controlled, as China’s main export market of the United States is increasingly serious epidemic.
So, what about China’s huge excess capacity? Therefore, in order to economic internal circulation, simply do not rely on exports is certainly not feasible. The solution to the consumption of method two to improve the purchasing power of consumers. Let small town residents have enough money and enough willingness to consume to actively consume all the high, medium and low-end production capacity produced by small town factories.In the first half of 2020, China’s total retail sales of consumer goods amounted to RMB 17.2 trillion, compared to RMB 19.5 trillion in the first half of 2019, shrinking by 11.8%. The domestic end-consumer market has actually been showing a shrinking trend for three years now, due to the fact that the real estate market has been eating up more than 100% of the residents’ balance of income and expenditure. In this case, it is necessary to limit the black hole of money that is real estate, so that residents’ consumption power can be transferred from real estate to other industrial goods in order to help promote the internal circulation. That is to say, to block the road of speculation in real estate, strict control of the siphoning effect of real estate on social capital, to release the people’s purchasing power, which is the key to the “inner circle” of a move. On the contrary, if consumption is sluggish, do not want to engage in the “inner circle”. Data show that from 2008 to 2018, China’s residential leverage ratio rose from 17.9% to 53.2%, and in the first quarter of 2019, it continued to rise to 54.3%, with personal housing loans accounting for more than 50% of total loans to the household sector.
Whereas 10 years ago we might have used 30% of our monthly income to make monthly payments, most households now use more than 50% of their income to pay their mortgage, minus a certain amount of savings, leaving only a handful of funds available for consumption. Therefore, the current Chinese residents have a lot of houses, but they are paper wealth, in fact, can be used to consume the liquidity, we know it well. In this way, the consumer market under the high pressure of housing prices, simply can not support the economic cycle. See here, you should understand, why after June 18, the real estate market will erupt so many suppression of real estate regulation policy. To sum up a sentence is: “the property market is not suppressed, consumption can not afford, the internal cycle of the economy is hopeless” but in the industrial era, “back” to start the internal cycle is by no means an easy task.
China has almost 45% of domestic sales of goods are exported abroad. If all these goods are exported to domestic sales in the domestic market, think about it, how many domestic enterprises to close down? And how many people would be unemployed? The future of the inner circle of all signs show that the current economic cycle in order to achieve, boost consumption will become the number one goal, the possibility of a big rise in housing prices in the future is almost zero, any city is unlikely to challenge the bottom line of “housing is not speculative”. But from the current measures, the central government does not want to completely send the property market into winter, is to allow the price of housing “rational rise”, the premise is to prohibit speculation, all driven by rigid demand.
For example, the Beijing market in the first half of 2020 is a good case in point. In 2017, three years after the adjustment of the “317” new policy, Beijing ushered in the highlight of the rebound of just demand for housing, with certain price increases, but without the atmosphere of speculation, and mainly in good locations and good properties. Next, under the big hand of central regulation, the property market will be exceptionally cruel, and the city has come to the time to really compete with the purchasing power of the bottom fresh demand. However, the purchasing power of the fresh demand is ultimately limited by the employment situation, and employment is limited by what? Limited by exports, consumption and investment. From the situation in the first half of this year, these three data are very average. The number of second-hand house listings in many cities has doubled so far this year. On the one hand, there is no purchasing power, on the other hand, the increase in the selling plate, the house is not going to be like Ma Yun said into the era of such as onion, we can judge.
