As a 20-years-old senior college student, when it comes to Chinese Economy, it is still a very big topic for me. The reason why I want to talk about this because when I discuss with my foreign teacher about Chinese Economy last month, I found I couldn’t describe and analyze Chinese Economy with my own words very well, which made me feel ashamed of myself as a student who majored in Economy. And then I take this as the presentation topic for my English study group.
The central content in this article is about today’s great difficulties and risks that Chinese Economy faces.
China is an ancient civilization with five thousand years of excellent cultural wealth. We are so proud of our ancestor. We will not compare anything with same level or lower level countries. And now we have only one target, and that is United States of America.
Let China become most powerful and richest country in the world,and I think this is our real Chinese Dream. This is why we have to make penetrating study and analysis, judging Chinese Economy facing struggles and risks. And we hope we can find solutions to overcome these problems.
ECONOMIC DOWNTURN
Growth rate should be considered as the first difficulty. The pressure of growth rate and economic downturn continue to increase, and I think this is the basic judgment. In the first half of this year, the growth of private investment only 2.8%, and the growth of consumption has now shrunk to single digits. In addition, our export is negative growth, and global economic is also very depressed. And the best result that we can achieve is to keep slowly rather than sharp and rapid downward, which is the first judgment.
ASSET-PRICE
The second problem is about our asset-price, including stock, real estate, and other financial speculative assets. The asset-price is inflated by enormous currency and credit delivery instead of rigid or actual demand. Therefore, from last year, the house price of some Chinese cities is rampant, which shows unhealthy side of Chinese Economy Transformation.
Massive money and credit are not invested in real economy. On the contrary, they invest money and credit in stock market for a while, and then is real estate. Shortly afterwards, they want to invest in antique market. They invest these things again and again, and this is one of the top economic facing risks.
CAPITAL UTILIZATION
Besides, the capital utilization ratio also should be considered. McKinsey & Co, a well-known consultancy, reported 80% economic profit of China whole economic system was taken by bank and financial institution, while country’s enterprises only got 20%. Thus it can be seen how inefficient our capital utilization is.
According to the data, our state-owned business has taken 50% bank loan and social financing away. However, they only contribute 40% for GDP, 30% for fiscal revenue, and 20% for employment, which shows resources they get are not fits into what they contribute.
The root of condition is malformation of intellectual property right structure and economic growth strategies, which caused malformation of investing structure, credit structure and social cost structure. The scale of financial assets become larger, but the size of real economy is shrinking. This is very dangerous.
I think the long-term fundamental challenge we face is originality of technology innovation is grave insufficient. The whole state of our manufacturing industry is still in the low-end stage of global industry because of the low competitiveness and profitability. For instance, 90% iPhone is processed in China. The wholesale price of iPhone is $500. Apple Inc. will take $161 from it and $160 for distributors. Besides, it also should grant $17.25 to parts supplier. Therefore, the Chinese processors can only get processing charges of $6.5.
We have almost no key technologies to lead the global industry development. We are short of worldwide band and transnational company, and most of our enterprises just provide OEM for foreign companies.
GLOBAL INDUSTIAL CHAIN
From the perspective of global industrial chain, we are still in the third echelon that is low-end manufacturing. The first echelon refers to USA, UK and Israel. America is still ahead of the world in many fields. And UK is excellent in New Material, New Energy, Big Data, Automobile Engine, Aero motor and Financial Technology. As to Israel, their leading technologies include Information and Digital Security, High-tech Agriculture, Aerospace, Biopharmacy, Sewage Treatment, SeaWater Desalination and High-end Medical Equipment.
The second echelon is High-end Manufacturing leaded by EU and Japan. If you know history very well, you would know that big data and artificial intelligence start to sprout in foreign countries about 60 years ago.
ORIGINALITY
Therefore, the last point I want to say is China is still remains a serious lack of original thoughts and scientific invention that could really leading the world or human’s future. In the long run, original scientific thoughts are the most important competitiveness. The truly original thoughts must depend on us. The number of Chinese Nobel winners and Turing winners is out of all proportion to our country’s great-power status.
We should not pin our hopes on the short-term monetary expansion and credit capital. The only hope is original scientific and technological innovation.
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