● Last August, the Boston Consulting Group released a report on "Changes in the Cost of Global Manufacturing", and if the cost of manufacturing in the United States is 100, China is 96, which is only 4 points lower than that of the United States.
● Comparative advantage in my opinion is two, one is cost advantage, the other is uniqueness advantage.
● To let the bad news fly for a while, the bad news helps us to adjust prices. There has to be a group of people who don't think they're going to make it to tomorrow for prices to come down, to rebuild our price advantage, and to buy us time to build our uniqueness advantage.
As I was listening to several other gentlemen's reports just now, I thought of the EKG. How does a doctor read an EKG? No doctor says that EKG up is good and down is bad. An EKG is just up and down, up and down, and the worst EKG is a flat line.
Now we keep hearing that we need to stabilize growth, so is it good to stabilize it to a flat line? Economic activity is a human activity, people's own physiology is to have ups and downs, so economic growth is not necessarily up is good, down is bad. The key is to understand why the rise and why the fall.
China's cost advantage is losing
Recently, the government is busy with the 13th Five-Year Plan, I think of the time when I first went to Beijing to study, then it was the Sixth Five-Year Plan, the plan indicator at that time was to maintain four and increase five, GDP to maintain four growth points, and strive for five growth points, do not dare to think of more than six things. And then it could reach eleven, twelve, thirteen, and in 2007, the highest quarterly growth rate converted to adult rate was 15.1%! China's economy is very complex, you can look at different levels, you can look at a lot of different data, but if you have very limited time and you want to grasp the big picture, what do you look at? It's to look at the cost of China. I can build the same thing you can build, but my price is a whole lot lower than yours, and that's what the Chinese economy feeds on.
Why are costs low? Chinese people's wages are lower than in developed countries, and the prices of all factors of production are much lower than others. Then you as long as you are willing to do more than others, lower prices than others, the market is yours, demand will be tilted toward you, pull a hand on the pull up. I always say, high-income countries and low-income countries is the two sea level, in the past by artificial dams to stop, the dam is removed, high-altitude water will be poured in. The potential energy release of this gap has supported China's rapid growth over the years.
So what is the new problem today? Anyway, I didn't expect China's cost advantage to be gone so soon, not in a decade or so!
Last August the Boston Consulting Group released the "Global Manufacturing Cost Changes Report", if the cost of manufacturing in the United States as 100, then China is 96, only 4 points lower than the United States.
Some would say that workers' wages are rising too fast. But the cost of manufacturing in China is not entirely workers' wages, our comprehensive costs are also growing at a high rate, and a big piece of the puzzle here is not the cost growth formed by market supply and demand. Our comprehensive costs and developed economies are rapidly approaching, which is the most important reason for China's economic growth rate down.
The goal of transformation is to establish a uniqueness advantage
Costs go up, made in China is more expensive, things are a little more expensive, in a globalized market will be a big change. Why? Because China has not yet developed another comparative advantage.
The comparative advantage in my opinion is two, one is the cost advantage, the other is the uniqueness advantage. You always have other people can not come up with something, this is the uniqueness advantage, with this advantage, your things are a little more expensive or even a lot more expensive, it does not matter. For example, Apple's cell phone is so expensive and sells so well, selling 700 million units in 8 years!
Israel is not a big country, but there are a lot of unique advantages, this year I had the opportunity to go to a trip, stimulated. As an example, why can cell phones be made so thin? A key issue is to solve the heat dissipation, Moore's Law, chip function doubles every 18 months, the more powerful the function, the more heat released, the need for heat dissipation equipment heat dissipation space is bigger. But the Israelis solved this problem, the chip function to enhance, heat but down. This is how mobile communication can be realized, and cell phones can be made thinner and thinner.
This is a unique advantage, and I expect China will have this advantage in the future. But now China's economy as a whole is not relying on unique advantages to eat, China's high economic growth is made in China, manufacturing is the foundation of the prosperity of all of our industries, made in China by China price, you will make I will also make, but I am cheaper than you.
The new challenge now is that this cheap advantage is rapidly disappearing. The cost advantage is no longer obvious, what's the next step? The cost of manufacturing in the United States is only four points higher than that of China, and he still has a unique advantage in his hands, so how can China compete with him?
So you see now the main tone is transformation, innovation. The problem is that innovation, transformation is not so fast. You say innovation, this word is good to say, do not so easy. Israelis to solve the chip cooling problem, the most critical is the beginning of that idea, why everyone is a hundred pounds of people, we do not have this idea?
The process will be very long if we pursue it. This time I went to Israel with a group of entrepreneurs, a rabbi came to tell us about the contribution of Israeli education to innovation. A rabbi is a priest, and rabbis have a higher status among the Jewish people than the average priest in a religious country. The rabbi told us one thing, in Israeli families, when children come back from school, their mothers will not ask how many points they got on the test, what the teacher taught them, and whether they learned anything, but they will ask their children, "Did you ask any questions today? Did you ask good questions? We traveled thirty or forty people are stimulated, this trip is the most stimulation is this thing. We went back and started asking our kids, "Did you ask a question today? That counts as a seed planted, right, but will that seed be harvested? Maybe the child asked a question today, but tomorrow it may be "strangled", different from what the teacher said, and the test scores will not work. And how long would it take to turn the whole system around and replace it with one that dares to have ideas and keep generating good ones?
So, it is not that the Prime Minister said to innovate, newspaper headlines to innovate, there are immediately a lot of new ideas good ideas, this has to come day by day, is a very long process.
To wring out the cost of the system to win the transition period
So what to do now? Only by studying from experience can we find a way.
For example, why is the restaurant industry good? Eight provisions are not allowed to eat and drink, who looks after the catering industry at the beginning of the year? A lot of upscale restaurants are really closed, but the low-end catering industry up. Beijing's Financial Street so expensive location, high-end stores closed, Grandma's opened in, eat to queue. Why? The price is low and the demand is high.
Then why did the e-commerce get up? Because the Internet to buy things at low prices. It's not that the labor is low, the labor is low to build things, but the other aspects of the cost is not there, there are not so many messy fees and middlemen. The same thing is cheaper, and demand is pulled up.
But why isn't American-Japanese e-commerce so hot? Because their convenience stores boutiques are not so expensive, there is no such and such costs added to the head. So China's offline business sparse, a large part of the offline costs, including unreasonable costs are too high, too many indiscriminate fees.
So what next? Adjust the price down, the market is up. Qianhai Free Trade Zone, Shanghai Free Trade Zone, why so hot? Companies like to do business there. Because free trade zones bring down systemic costs.
I went to Qianhai to see a car business, called parallel trade. Why were imported cars so expensive in China in the past? Tariffs are one problem, and the monopolization of import channels is another. The same car models, the same configuration, the price difference between domestic and foreign will be more than 100,000, more than 200,000. This parallel trade reduces this price difference, so people waiting in line to buy a car. Give a certain quality, price a little lower, the market will come back.
So from an economic point of view, how to deal with the crisis? It is to adjust prices, by reducing the price of government services, by screwing off the system cost to get China price back. Otherwise, prices can not come down, and can not provide unique products, how can the economy have a way out? I think of Liu Chuanzhi when the "towel wringing water" theory, the cost is like a towel in the water, seems to be dry, wringing hard can always wring out water. China, whether it is enterprises or the government, or the entire national economy, there is no possibility in the short term to wring down the inflated costs, so as to win a transition period to support innovation and transformation, to support a higher level of openness?
This is a big test for us. The host just said "tomorrow will be better", I agree, when the situation is bad, we do need to think better about the future, but I suggest not to say it out loud. To let the bad news fly for a while, bad news to help us adjust prices. Without bad news, no one will recognize it. There has to be a group of people who don't think they can make it to tomorrow for prices to come down, to rebuild our price advantage, to buy us time to build our uniqueness advantage.