Development Opportunities and Policy Orientation in China's "13th Five-Year Plan"

Abstract Introduction: From April 7th to 9th, the information exchange of the national abrasives industry in the spring of 2016 and the 63rd China Corundum Silicon Carbide Fair were held in Ningbo, Zhejiang. Chief Economist and Director of the National Information Center, Professor of Economics, Renmin University of China...
Introduction: From April 7th to 9th, the information exchange of the national abrasives industry in the spring of 2016 and the 63rd China Corundum Silicon Carbide Fair were held in Ningbo, Zhejiang. Fan Jianping, chief economist and director of the National Information Center and professor of the Department of Economics of Renmin University of China, made a wonderful report on the theme of “Thirteenth Five-Year Development Opportunities and Policy Orientation”. The following contents were compiled according to the live recordings of the conference.

Fan Jianping, Chief Economist and Director of the National Information Center and Professor of the Department of Economics of Renmin University of China
        In recent years, everyone’s deceleration of China’s economy has been impressive. Because of the 4 trillion policy stimulus, China’s GDP growth rate reached double digits in 2010, or 10.6%, and has experienced six consecutive years of economic slowdown. In 2015, only 6.9%, such a long-term and large-scale slowdown, for the first time since the reform and opening up, has caused many people to doubt the goal of achieving an average GDP growth rate of 6.5% during the 13th Five-Year Plan period. . The main reason for this slowdown is that there are many analyses at home and abroad. The most pertinent point of view is that China’s economic aggregate is already very large. As the economic aggregate increases, GDP growth slows down. This is a natural phenomenon. Although last year's GDP was the lowest growth rate in 25 years, last year's GDP was one percentage point higher than 2.6 percentage points a decade ago, so the 6.9% gold content is very high, as China's economy is growing. It is impossible to go back to the growth rate of the past two digits, the era when companies make money easily. The other is that China's economic growth rate is not low. Although China is slower than itself, it is still relatively fast compared with the world economy. In the three years since the 18th National Congress, China's GDP has increased by an average of 7.3%. The world's average growth rate is only 2.4%. We are higher than other countries every year. This makes China's GDP share in the world economy increase year by year. Compared with 2012, it has increased by 4 percentage points. Now China's GDP The total amount has already accounted for 15.5% of the world, and it is the world's first increase every year. In the past two years, GDP growth has accounted for a quarter of the total global growth.
        The real problem in the Chinese economy now is the issue of efficiency, which is the problem of falling returns on investment. In the past, we enjoyed the dividend of reform and opening up, and also enjoyed the demographic dividend brought about by family planning. Such policies and demographic dividends have made China's return on investment high. In 1993, Deng Xiaoping’s southern tour, our return on investment reached 15.67%. After joining the WTO, China’s return on investment was always at 8-10%, much higher than that of the US, Europe and Japan. But after 2008, we made a large-scale investment, and the rate of return has dropped. In 2014, the renminbi began to depreciate, mainly because the return on investment was as low as 2.7%. This level is lower than that of the United States and Japan. It is similar to Europe. In the past, because of the high return on investment, foreign capital has flowed into China, causing The rapid appreciation of the renminbi. Now that the capital is low, there will naturally be an outflow of capital.
        At the same time, the decline in the rate of return on investment has caused funds to start fleeing the real economy. In recent years, a large amount of funds are willing to engage in real estate and financial speculation, garlic, Pu'er tea, green onions, mung beans, etc., and many things in China have been speculative. The funds are not willing to do well. The fundamental problem behind us is our return on investment. The rate is too low. Therefore, in the 13th Five-Year Plan period, from the perspective of the central government policy, it is not necessary to pull the speed up. If we want to do this, the Chinese government still has policy space, but in the short-term, the return on investment will only be lower. Therefore, the government is determined to solve the difficulties of the real economy through supply-side reform and structural adjustment to improve the return on investment.
        On the one hand, the decline in the rate of return on investment is due to the overall rise in various costs such as labor, environmental protection, social security, taxes and fees; on the other hand, we have excess capacity. The price of industrial products has been declining for 48 consecutive months. Last year, the ex-factory price of industrial products was the worst in the four months, down 5.9% year-on-year. As a result, the price dropped and the cost rose. The two companies squeezed the profits of industrial products very little, so many The human body is very discouraged. Therefore, we should solve the problem on the one hand, we must do everything possible to reduce costs, on the other hand, we must go through capacity, limit production and insured, and our industrial products prices can no longer fall.
        The supply-side reform proposed by the central government has a lot of rich content. The central government hopes to restrict the government's rights through reforms to give enterprises a more relaxed business environment, including many investment approvals without government approval. Specifically, during the “Thirteenth Five-Year Plan” period, the supply-side reform will do five major things, the first to go to production capacity, which is for traditional industries; the second to destock, which is for real estate; the third is to de-leverage, which is Our financial institutions; the fourth is to reduce costs; the fifth is to fill the short board. January-February 2016 may be the lowest point of this round of economic downturn, and economic data looks set to improve in March. In the second quarter, there will be a marked improvement. After five or six years of downturn, the Chinese economy will enter the L-shaped adjustment period. In 2016, we can see that the economy is stabilizing at the bottom. The bottoming signal is becoming more and more obvious. It is necessary to remind everyone that L The bottom of the type just won't slip, but how far it will go at the bottom, waiting for the international situation and future efforts. We have had too many negative news in the past two years. This year we finally saw the dawn of dawn.
        Specifically, the first is the issue of cost reduction. First, the labor cost. China’s labor costs have risen very fast in the past two years. Some people have targeted the labor law. In fact, the labor contract law is only aggravating. The real reason is that the relationship between supply and demand of our population and labor has changed. In history, the largest number of ten years is our Post-80s, with 228 million people. Later, because of family planning, it was particularly determined. After 90, there were only 175 million. People, after 00, reduced to 145 million people, which means that after the 90s, it will be reduced by 23.24% compared with the 80s, and after 00, it will be 36% less than the 80s, more than one-third. This young labor force has fallen sharply to China. Economic and labor costs have too much impact. The so-called demographic dividend, we refer to the proportion of labor to the total population. In 2011, the peak reached 74.5%, but we fell very fast. By the end of last year, it has dropped to 66.3%, which means that the proportion of our labor force in the total population is declining now, and the proportion of the elderly to the total population is rising. Before 2011, we had more than 16 laborers per year than retired people. The total labor force could increase by several million people every year. However, by 2012, the total labor force began to reverse historically, and the labor force decreased. 2.15 million, a decrease of 2.44 million in 13 years, a decrease of 3.71 million in 14 years, 4.87 million in 15 years, and we have reduced the population of Australia in four years. Especially in 2015, the number of migrants has decreased by 5.68 million for the first time in history. Many people think that how much labor can be transferred to cities in rural areas? Nothing! There has been a reverse flow, and many older migrant workers have begun to return home to support their old age. This also explains why the first two years of real estate supply is in short supply, and now why can't sell it. After 90, the number of people who bought a wedding house was nearly a quarter less than that of the 80s. The ten years after the 80-year-old marriage was the hottest decade of real estate. When we prepared the steel cement for so many people in the 80s. Such large production capacity, such as abrasives, suddenly young people are gone, real estate capacity is over, and began to pass to the entire industry chain. In the past, it was the main contradiction to find a job. Nowadays, it is difficult to recruit workers. The reason is that the industrial upgrading has not yet been completed. The most difficult job recruiters are migrant workers, nannies and carers. One unit in Beijing said that it plans to recruit 3,000 migrant workers. The migrant workers came to see that they were very angry. They said that 3,000 people wanted to recruit migrant workers, and recruiting a college student was almost the same. We are now graduating 7 million college students a year, and college students are not looking for a job. In the past, China’s long-term labor cost was lower than GDP, but in the past few years, after the financial crisis, our urban workers’ wages rose by 13.2%, and migrant workers rose by 13.5%. In the same period, each of our labor productivity increased by only 11.1% per year. The wages rose faster than the growth rate of labor productivity. This part of the company ate the profits of enterprises. Now it is really distressing for enterprises. Now the profits are always falling. However, if you recruit for work every year, if you don’t raise your salary, you won’t be able to recruit.
        How to solve this problem, there are only two directions in the future, one is to find ways to maximize the demographic dividend, and the other is to do everything possible to improve the quality of the population. At the end of last year, the central government announced the implementation of a comprehensive second-child policy. The policy is very good. Unfortunately, it was late. When we started the one-child policy in 1977, we will do 25 years and should end in 2003. However, the Family Planning Commission has to continue to engage in more than 13 years. This 13-year period is the fastest thirteen-year housing price increase. If it is released, it is much more willing to have a second child than it is now. Many people now I am hesitant to look at high prices. Beijing Shanghai people say that they have a child. If it is a daughter, it is China Merchants Bank. The boy is a construction bank. If you want to have another son, it is HSBC, and it will be mad. The Family Planning Commission is always too high for the birth of the population. In the past, it was said that only the two children were born only to have a second child. It was found that there were not many births. In 2013, it was changed to only one child, and it was born. Ten thousand children, by the end of 2014, only 470,000 more. 2015 was even worse, and it was 340,000 fewer than in 14 years. Therefore, the central government decided to fully open the second child policy. However, at present, no country can rebound after the decline in fertility rate. Do not say that opening a second child, even if you turn it backwards, it is difficult to achieve a trend of recovery. There is also a postponement of the retirement age. When the founding country set the retirement age standard, the average life expectancy of the Chinese is only 60. Now China’s life expectancy is 75.8 years old. It is generally retired after the age of 65. From the perspective of life expectancy, we already have Such conditions. If we still insist that women are 55 years old and men are 60 years old, then the number of labor reductions per year in China from 2020 to 2030 is not 2 to 3 million per year, but 7 to 8 million per year. Now it is reduced by two or three hundred a year. 10,000, wages have risen so fast, if you dare to reduce seven or eight million a year, wages have not risen to the sky, the real economy must be killed. Therefore, it is necessary to extend the retirement age. In addition, there are pension problems. In particular, women are retired earlier than men, and their life expectancy is longer than that of men. The time spent paying pensions is less than the time they receive, and the pension system must collapse. Next year, the state will officially announce the delayed retirement plan, giving everyone a five-year psychological preparation period. It will be postponed formally in 2022, and will be retired after half a year. After 2030, men and women will have to receive pensions after 65 years. It is good for our country to ease the contradiction between labor supply and demand.
        But in the long run, improving the quality of the labor force is the key to solving the problem. Everyone must have heard a word called "middle income trap", which means that after a country reaches the middle-up income stage, its labor costs begin to increase. If its industrial structure cannot be further upgraded, the quality of labor cannot be further improved. This country will become weaker because of cost issues. At present, China's labor cost has no advantage over Vietnam and Cambodia. Because the industrial structure has not been upgraded, the products produced have no advantage over the developed countries. Finally, the economic growth rate slows down and eventually falls into a trap. Therefore, the "Thirteenth Five-Year Plan" is to prevent China from falling into the trap of middle income. By accelerating the upgrading of industrial structure and promoting the improvement of the quality of our labor force, Vietnam and Cambodia are far behind and strive to compete with developed countries. From the current situation of the quality of our labor force, we are still very favorable. Although China is a developing country, the average length of education for the labor force has reached the advanced level of developed countries. Our college gross acceptance rate has reached 37.5%. This acceptance rate It is higher than many developed countries such as France, Switzerland and Norway. Supplying more than 7 million college students a year, a large number of high-tech companies have begun to benefit. For example, Apple Inc. in the United States employs nearly 1 million people in China. Among them, 160,000 college students are doing technical support. The US government hopes that Apple will let the manufacturing industry return to the United States. Apple has categorically rejected it because of the salary costs of college students of the same grade. Only one-fifth of the United States. Our country hopes that junior high school students will go to the technical colleges after graduating in the past few years. It is because the equipment purchased by enterprises is all CNC equipment. We hope that the new labor force will be young technicians and can be directly trained. Siemens once went to Huawei Group to investigate that Huawei engineers always work overtime, 2750 hours a year, Siemens 1300-1400 hours, Siemens' hourly salary is 12 times that of Huawei. From here, we can see that we compare with developed countries. The labor cost advantage is still very large. We want the wage increase to be based on the improvement of labor productivity and the improvement of the technical level of products, which is a benign increase in wage costs. The industrial structure has been upgraded. Compared with developed countries, our human capital advantage is still very obvious. During the “Thirteenth Five-Year Plan” period, we will form a virtuous cycle through the upgrading of industrial structure hardware and the improvement of labor quality.
        At the same time, the financing costs of Chinese companies are also high. In 2014, China’s non-financial enterprises, with an average of 100 yuan of their own capital, have reached 123.1 yuan. Chinese companies have such a high debt burden rate, which is related to China's financing channels. US companies are directly financing. If they are short of money, they will go directly to the stock market to issue stocks. The funds that are integrated through the stock market are the denominators of the debt ratio of the company. The more the integration, the lower the debt ratio of the enterprise; China is looking for bank loans, and the funds are entered into the molecule. The more loans, the higher the debt ratio of the enterprise. Over the years, the indirect financing model based on bank financing has led to the world's first debt ratio in our enterprises. Banks in China mainly issue mortgage loans. In the strict sense, modern commercial banks should issue credit loans. Mortgage loans are things that pawnshops do. However, in the past, there were too many scammers in China, and banks could not afford mortgages. In the era of big industry, heavy-asset companies can use large equipment or factory buildings as collateral for loans, and this model runs without problems. However, in 2013, China's tertiary industry became the industry with the highest proportion of China's GDP. On the one hand, the secondary industry had overcapacity. Banks wanted to lend to enterprises. Enterprises did not want to invest because they did not make money. On the other hand, the most needed funds in the tertiary industry. Light-asset enterprises, because of the lack of mortgaged property, banks do not want to lend to them, companies that need money can not lose blood, traditional enterprises because of the debt ratio is too heavy to breathe, and even individual companies have difficulty even the interest of loans Not yet, in order to avoid bad debts, the bank lends funds to companies to pay interest, and deceives themselves. In 2015, 70% of the money released by banks returned to the bank in the form of interest. This model is no longer sustainable. To solve this problem, the government lowered the benchmark interest rate on the one hand, and on the other hand, the bank unreasonably charged the loan. But the fundamental way out is to slowly transition to direct financing. However, we have a good hand and have been broken by several scams of the Securities and Futures Commission. It has caused a stock market crash, which may cause the transition to slow down, but the big direction will not change.
        How to reduce the financing cost in this case is the problem we have to solve in 2016. For outstanding enterprises that have temporary difficulties, the government has prepared a debt-to-equity swap of 1 trillion yuan. Recently, a private shipbuilding enterprise has negotiated with 11 creditor units. After the full name evaluation, the original debt was converted into equity. Bank of China Now it has become the largest shareholder of this enterprise. After the debt-for-equity swap, there is no interest to pay back. You can breathe a sigh of relief and cannot let these high-quality enterprises die in the darkness before dawn. The other is that large-scale enterprises with conditions can raise funds by issuing bonds. This cost is lower than bank loans, and even consider issuing bonds to pay off high-interest bank loans. Of course, we also have some enterprises that can't save in the production capacity. There are only two ways out. First, let other companies give you mergers and acquisitions. Second, bankruptcy and liquidation. For China's debt problems, the recent US Standard & Poor's and Moody's to China. The future outlook of the sovereign credit rating has been adjusted from stable to negative, and a warning signal has been issued. In fact, it is totally unnecessary. From the perspective of China’s current financial system, although informal financial institutions such as eBay have recently started to act, However, the total size of the economy involved is still small, and it is a regional and local risk. The possibility of breaking out systemic financial risks is not very large.
        In terms of reducing the burden on enterprises, the central government said this year to reduce electricity bills, and the toll standards for highways should also be reduced. However, the biggest burden is the cost of taxes and social security. This year the government has certain tax cuts. Now the camp has started to increase. In the manufacturing sector, our government has focused its limited funds on high-tech enterprises. This year, there is still a certain amount of tax cuts for innovative high-tech companies. The central government is studying the issue of lowering the manufacturing VAT rate. At present, the 17% tax rate is indeed too high. In the future, our VAT will have a declining time. When is it uncertain? At the same time, some of the social security departments have also begun to reduce the proportion of contributions. The central government has reduced costs as one of the five major tasks of supply-side reform, indicating that the government attaches great importance to it.
        In terms of capacity, at present, 22 of China's 49 industrial industries have serious overcapacity. The central government only manages the two industries of steel and coal. All others rely on the market to adjust itself. This is mainly based on the comparison of market-to-capacity sequelae. less. For example, in the textile industry, the profit of industrial enterprises in the country increased by 2% last year. The profit of the textile industry increased by 5.1% in this situation. The textile industry is the hardest hit area for labor costs. Why didn’t there be a loss last year? I asked the leaders of the textile industry. The other party replied: Not only last year, there was no loss for more than a decade, because since 1997, the government has not managed the textile industry any more, and the government is not in the hands of it. Is there no overcapacity in the textile industry? Yes, but it will be eliminated by the market every year. At present, 90% of the textile industry is a private enterprise. Without state subsidies, you will not do it without earning money. At the same time, the technological progress of the remaining companies is very fast. I also asked him if not many textile companies have moved to Vietnam and Cambodia. The other party said that this is right. Now you buy the low-end Nike Adi, which is the place where you buy the high-end Armani suits. Produced in China. China has shifted the high-end and low-end, isn't this a supply-side reform? After listening to it, I feel that people have been engaged in supply-side reform for more than a decade. There is no sequelae and no government care. As for steel and coal, it is because the proportion of state-owned enterprises is too large, and the local government is too tight. The central government has to take the shots. For these two industries, the government has prepared 100 billion yuan to subsidize laid-off workers. 22 industries are required. The central government, where is the money.
        In terms of destocking, real estate began to adjust moderately in 2014, and the central government recognized it. However, in the first two months of 2015, the sales area decreased by 16.3% and the sales amount decreased by 15.8%. The decline of these two figures has made the relevant departments attach great importance to it. Falling with a series of upstream companies followed by double-digit decline, the Chinese economy should not say that it is guaranteed, and it will be good to live up to growth. So on March 30 last year, real estate began a new round of stimulus policies. From the perspective of results, there were two unexpected ones. One was that the sales were not stimulated. The sales amount in January and February last year was -15.8%. In December, it has become a positive 14.4%. Another place to go to stocks is unexpected. The third- and fourth-tier cities that we want to go to stock are not removed. The first- and second-tier cities are booming. After the two sessions this year, some first-tier cities have to The market introduced a suppression policy.
        Although real estate sales have improved, the investment situation of real estate is still grim. In 2015, it only increased by 1%. In January and February of this year, it was thought that it would have negative growth, but because some regions were hot, it increased by 3%. Our abrasives industry has little to do with selling houses. The relationship with building houses is relatively large. In 2016, real estate development investment may not be higher than 10%. It may be better than last year, but it will not be hot. For the developers, the demand is reduced first, and the inventory is too large. The house that can not be sold with the sales license now has 710 million square meters. Now, one square meter is not started, and 7.35 billion square meters are already under construction. The two together have 8.06 billion square meters. According to the sales rate last year, the digestion time of so many real estate inventories is 6.3 years, of which the residence is 5 years. In this case, there is concern about further opening the union. Although the government has introduced a series of stimulus policies, in the long history, it is only a small wave. The trend of real estate will still be determined by the laws of the market. This law is summarized in two words: differentiation, strong Very strong, weak is weak.
        Our urbanization has an ideal model. We always strictly control big cities and vigorously develop small and medium-sized cities. We want to achieve balanced development in cities. Our control of big cities is all-or-nothing. For example, in order to control the population within 28 million in 2020, Beijing will provide less land and less housing. The result is that land prices have soared. The price of a piece of land in Beijing’s five ring roads last year. How much is the house made by 70,000 square meters? I want to use the high housing prices to drive the low-end population to Hebei. Now there are many sleeping cities around Beijing. The people living here are working in Beijing during the day and sleeping in Hebei at night. The taxes are paid to Beijing, and the children can’t go to Beijing. When demographics are not included in the population of Beijing, Beijing has deceived people to control the 28 million people. In fact, this is not the case at all. In essence, the population of large cities is rising because the positive effects have not yet been fully released. Metropolitanization is a double-edged sword. If you do not manage well, you will have urban diseases. If you manage well, the agglomeration and division of labor of big cities will change. With a higher return on investment, entrepreneurs and investors are willing to go to first- and second-tier cities, and talents will inevitably concentrate on this. We originally had a population of 1.3 billion. We have to apply a foreign model. The population of more than 30 million people is no longer enough. The population of Tokyo accounts for half of Japan’s total population. There is no such thing. It is not acceptable to admit this rule. In the future, the development of urban agglomerations centered on the provincial capital will be completely different from the past.
        In 2016, we implemented an appropriate stimulus policy for real estate. At the same time, the government began to increase the construction of infrastructure. Some people have suggested that you are starting to flood the water again. You can’t see it this way. Our high-speed rail in China is the four trillion period. Who built the high-speed rail now, who said it is not good? We must avoid inefficient supply, ineffective stimulation, increase quality supply, high-quality investment, and infrastructure construction as long as it is really needed for national economic development, that is, the goal of supply-side reform. The investment rate of new fixed-income projects this year will be very high. Fast, see if there is any stamina in the economy of a country. The key is whether you have invested in new projects, and everyone does not invest. Where is the country’s economic development? The central government boosted investment in new construction projects by increasing a series of policy support efforts, and the growth rate reached 5.5% at the end of last year. However, it is not enough. Since January and February this year, the total investment growth rate has increased by 41.1% year-on-year.
        This year is the first year of the "Thirteenth Five-Year Plan". The government has prepared 800 billion investment in railway construction, and may even reach 1 trillion, setting a new high. The road also has 1.6 trillion this year, which is also the highest in history. At the same time, 20 major water conservancy projects will start, and the construction of a large number of infrastructure projects such as nuclear power projects, high-voltage transmission, smart grid, oil and gas management, urban rail transit, and urban underground pipe network will drive our economic improvement in March. In the first two months of this year, our economic growth rate fell to the lowest point since 1990, but in March we are improving from the data we are currently in, and our economy will continue to rise along this momentum in the second quarter. There has been a stabilizing trend, and 2016 may be the worst year for the “Thirteenth Five-Year Plan” period. During the “Thirteenth Five-Year Plan” period, we will stabilize the economic situation and rely on high-end manufacturing and modern service industries. Waiting for new economic growth points, the Chinese economy will move toward a new stage of economic growth on the basis of structural upgrading.

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