Some economic fundamentals will affect the country's economic growth potential and economic structure, and then affect the performance of the capital market. These factors may have no obvious effect in the short term, but in the long run, they play an important role in forecasting trends. How to identify these factors is an important work of economics.
For long-term investors, identifying these factors should be the first priority, just like setting them in a picture background in your mind, because they determine the big cycle and trend.
From the results of country studies, which simple and effective economic indicators should be chosen to judge the differences of economic growth potential among countries? I think we should choose three factors: financial sustainability, demographic structure and innovation ability.
Influencing factors 1: financial sustainability
The sustainability of finance is simply whether the proportion of government debt to GDP is controlled below the warning line, whether it is stable or declining. From the international comparison, the proportion of debt to GDP is the highest in many OECD countries. The proportion of national debt in GDP of Japan, the United States and some European countries is extremely high or close to 100%. The lowest among big countries is Russia, which is lower than 19%, and China, according to official data, is about 20%.
Some economic fundamental factors will affect the country's economic growth potential and economic structure, and affect the capital market. These factors play an important role in trend prediction. How to identify these factors is an important work of economics.
When the debt is too high, generally speaking, the prospect of economic growth is not good. Highly indebted countries have overdrawn their future growth potential in the past growth, and these countries will eventually need to tighten their finances, which will curb aggregate demand and economic growth. Because if the fiscal deficit continues to be too high and the debt continues to be too high, the country will eventually face a financial crisis, just like the current European debt crisis. Once there is a debt crisis, or interest rates soar, or the domestic currency depreciates, economic growth will suddenly stop or even reverse. Therefore, debt is a very important factor to judge a country's growth potential. Other things being equal, countries with low debt to GDP usually have strong growth potential.
Influencing factor 2: the degree of population aging
Demographic structure is also an important factor.
First, you can look at the population map of Japan. Figure 10. 1 shows the proportion of population groups in the total population. Just like a big fat man, just like a middle-aged and elderly person. It can be seen that the proportion of middle-aged and elderly people aged 40 to 60 in Japan is very high.
In India (figure 10.2), the population structure is very young. Judging from the proportion of its population of all ages to the national population, it looks like a pyramid, most of which are 0 to 20 years old. Now it is a huge population of 0 to 10 years old, and will grow into 20 or 30 years old in 10, which will provide a very sufficient young and strong labor force.
Debt is a very important factor to judge a country's growth potential. Other things being equal, countries with a low proportion of debt to GDP generally have strong growth potential.
In the case of a large supply of labor, the labor cost will be low, the international competitiveness will be strong, and many orders from the global manufacturing industry will be taken away, so that the economic growth will be fast. This is similar to the development pattern of China in the past 20 years. India, in my opinion, has begun to enter this stage of greatly enhancing its competitiveness.
Another important factor for India is the process of urbanization. Because most of India's population is still in the countryside, it is necessary to gradually enter the city. If a large number of people enter cities from rural areas, the process itself will increase supply and demand.
From the perspective of supply, people as labor force are incremental; At the same time, from rural areas to cities, a large number of people have become an increase in demand, because these people want to buy a house, a car and enjoy public transportation, which will stimulate demand.
In Japan, the process of population promoting economic development has ended, and the process of urbanization has also ended, so the current impact of population factors on economic growth is negative.
Influencing factor 3: innovation ability
The third important factor that affects the economic growth potential is innovation ability.
A few years ago, I wrote an article entitled "Why did China's growth potential slow down to 7%", and one of the indicators analyzed was the country's innovation ability. I chose the number of patents per capita in a country as a quantitative index to describe innovation ability, and the difference of this index in different countries is very obvious.
South Korea is the best example, and the number of patents per capita is 16 times of the world average. Looking back at China, it is 0.6 times of the world average. Brazil, once caught in the trap of a medium country, has a per capita patent number of 0.2 times of the world average.
Three factors affect 60% of the economic growth potential.
How much explanatory power these three factors have in national economic growth differences needs to be judged by empirical methods. Our regression analysis shows that these three indicators can explain 60% of the long-term growth difference in dozens of countries, and many other factors can explain part of the remaining 40%. Among the three most important indicators that determine a country's growth potential, one is population structure.
Let's discuss in detail the changes of China's population factors and their impacts on economic growth, structure and capital market.
Trends of fertility rate and population structure in China.
China's aging population and the decline in the proportion of working-age population are both due to the decline of female fertility rate.
At present, China's female fertility rate is generally recognized by academic circles as 65438+ 0.6 children per woman. Almost one in the city and two in the countryside, with an average of about 1.6.
Demographers have come to the conclusion that only if the fertility rate is kept at 2. 1 can the long-term stability of a country's population be guaranteed. Our fertility rate is far below 2. 1. If the fertility rate of 1.6 remains unchanged, the total population will inevitably decline in the future and the population will accelerate its aging.
What kind of country has a low fertility rate? Mainly some developed countries, including Europe and Japan. Interestingly, the fertility rate in the United States is 2.0, which is higher than that in China. This has enabled the United States to maintain a relatively young population structure. Among developing China countries, Indian and Pakistani fertility rates are much higher.
According to China's current fertility rate, by 2050, China's population structure will be more aging than Japanese.
An important indicator to describe the population structure is the dependency ratio. At present, the total dependency ratio in China (the sum of the dependency ratio of the elderly and the dependency ratio of children; Including the ratio of the elderly population over 60 to the working-age population, and the ratio of children under 20 to the working-age population are all 63%, that is, nearly two working-age people support one non-working population. After 38 years, the total dependency ratio will become 1 14%. Basically, less than one person who has a job will support one who has no job. This increase in dependency ratio is mainly the result of the increase in dependency ratio of the elderly.
How does China's population structure rank among countries in the world? According to the ranking of the old-age support rate (the ratio of the old-age population to the working-age population), we find that China is still at the world average level, about 20%, but it is growing rapidly. It will catch up with many developed countries in 20 years.
The Influence of Population Factors on Economic Growth, Structure and Reform
The Influence of Demographic Dividend on Economic Growth
First of all, look at the impact of population factors on economic growth. Scholars have done a lot of research, and the basic knowledge is that the aging population will reduce the potential of economic growth. During the 30 years from 198 1 to 20 1 1, the influence of population factors on China's economic growth was positive. From the perspective of wages, due to the increasing labor population in China at that time, the wage growth rate in China was much lower than the nominal GDP growth rate, and the wage growth rate was also lower than the labor productivity growth rate. In this way, China's export products are very cheap, which continuously enhances the competitiveness of China's exports and drives economic growth. However, the working-age population in China has been declining since 20 1 1, and the shortage of labor force leads to wage growth exceeding labor productivity, so the international competitiveness of China products will inevitably decline, and the economic growth will also decline.
The influence mechanism of population factors on economic growth potential can also be seen from the perspective of per capita output. As we all know, the economic growth rate consists of two factors: the growth of per capita output (per capita GDP) and population growth. The national per capita output is equal to the product of the per capita output rate of the working-age population and the proportion of the working-age population to the total population. Other things being equal, if the dependency ratio increases, the proportion of working-age population to the total population will inevitably decrease, which will lead to the decline of national per capita output. The relationship between the increase of dependency ratio and the decrease of economic growth rate has also been confirmed by the international empirical research of econometrics.
The Influence of Population Structure on Economic Structure
Let's look at the impact of demographic changes on the economic structure.
We use computable general equilibrium (CGE) model and simulate it in two cases. The baseline scenario is that the population structure will remain unchanged in the next 10 year, and the second scenario is that the population structure will change in the next 10 year according to our forecast. By comparing the consumption, investment, export and import of China under these two scenarios, we can know how the economic structure has changed.
Our research finds that the change of population structure will lead to several directional changes of economic structure. The first scenario is that consumption is above the benchmark, the second scenario is that investment is below the benchmark, the third scenario is that exports are below the benchmark, and the fourth scenario is that imports are above the benchmark.
The change of export is the easiest to explain. Why? Because after the decline of China's labor force, the wages of China's labor force will increase rapidly, which will reduce China's export competitiveness.
Why is there an upward trend in consumption? There are many reasons, one of which is aging. Analyzing the proportion of consumption income of an old man, you will find that in fact, the old man basically does not "earn money". Although there is income every month, the main part of income is pension and child support, which belongs to the secondary distribution of social income, not the income in the sense of primary distribution. Judging from the national economic accounts, the elderly basically do not "create" income, and the role of the elderly is consumers. Therefore, the real consumption rate of the elderly (the proportion of consumption to production income) is very high, or the real savings rate of the elderly (= 100%- consumption/production income) is very low.
Because the real savings rate of the elderly is very low (or the real consumption rate is very high), the greater the proportion of the elderly in the population, the higher the consumption rate of the whole country.
If the consumption rate becomes higher, the proportion of other components of GDP will shrink. For example, the proportion of investment in GDP will decline. A specific reason for the decline in the proportion of investment is also related to aging, that is, the decline in the working population means the slowdown in the demand for residential real estate, which will reduce the growth of investment. Finally, because part of consumption is imported consumption, the increase of consumption rate will also promote the increase of imports.
By raising the retirement age and allocating state-owned shares to make up for the pension gap.
If we measure the changes of pension in the next 38 years (from now to 2050), we will find that there are two factors that will lead to a large gap between pension income and expenditure: First, the transition cost. The so-called transition cost refers to the financing gap in the process of changing from the previous pay-as-you-go system to the partial fund accumulation system combining social pooling and individual accounts, because part of the payment from the pooling account is diverted to the individual account, but the promised pension still has to be paid to the elderly and middle-aged pensioners. Second, due to the increase of dependency ratio, the ratio of payers to pensioners has decreased, resulting in a gap in pension income and expenditure. Our research shows that in the first half of the next 38 years, the gap between income and expenditure of pension mainly comes from the transition cost; In the second half of the year, the main reason for the income and expenditure gap is aging. At present, about three working-age people will pay the pension to raise an old man, and by 2050, about 1 working-age people will pay the pension to raise an old man. There will definitely be a big gap in maintaining the 35% pension replacement rate promised at present. We estimate that under the condition that the current pension policy remains unchanged and no other assets are injected into the pension system, the present value of the accumulated pension income and expenditure gap in the next 38 years (with the nominal GDP growth rate as the discount rate) can reach 75% of GDP.
How should we reform in the next 30 years? In a recent study on the national balance sheet, we put forward two suggestions: first, we need to raise the retirement age, that is, between 2020 and 2050, the average retirement age will be raised by 7 years; The second is to transfer 80% shares of state-owned enterprises to the social security system. Through these two reforms, the pension gap can basically be made up.
The influence of the decline of working-age population on manufacturing industry
Labor-intensive industries will shrink
What I said earlier is the influence of population factors on economic growth and economic structure. Let's talk about the influence of population factors on some major industries from a more quantitative point of view.
From the distribution of the working-age population, if the population aged 20 to 59 is defined as the working population, the working-age population will reach its peak at 20 1 1, and it is estimated that the working-age population will decrease by about 200 million in the next 38 years. Due to the decline of working-age population and the relative shortage of labor supply, China will maintain a high wage growth rate for quite some time.
Japan's experience is that in the process of rapidly rising labor costs, the industrial structure has rapidly changed from labor-intensive to equipment-intensive. The data from 196 1 to 1977 show that in Japan's export structure, some machinery and equipment industries related to automation have the fastest growth. The proportion of machinery industry in exports rose from about 30% in the early 1960s to about 70% in 1977. In the same period, the proportion of labor-intensive textile industry in total exports decreased from about 17% to almost zero.
This is very similar to the current trend of economic structure changes in China. Some time ago, Hon Hai announced the purchase of 65,438+0,000 robots to gradually replace the labor force, which is a typical case. In addition, many entrepreneurs in Guangdong told me that some of their labor-intensive enterprises, such as toys, shoes, hats and textiles, have closed down, and some are moving to places with cheaper labor, such as Vietnam and Bangladesh. An entrepreneur told me that the cost of the workers she hired in Bangladesh was 65,438+0.5 of the domestic cost.
High-end manufacturing will develop rapidly.
In the process of transforming from labor-intensive to high-end equipment manufacturing, China will certainly occupy a larger market share in the world. In fact, in the past ten years, the proportion of China's mechanical products exports to global exports has been rising, while the Japanese share has been declining. I think this trend will last for 10 years. Because China's economic aggregate is so large and its competitiveness is improving rapidly, the proportion of China's equipment manufacturing industry in global exports will not stop at 10%, but may rise to 30%.
What exactly does high-end manufacturing include? I made a list. These industries at least include shipbuilding, power equipment, telecommunications equipment, construction machinery, coal mining machinery, high-speed railways and so on. In the next 10 year, China has a great chance to become the first in the global market share in these fields.
For other countries, a positive change is that China's labor-intensive industries will be transferred out, such as to Viet Nam. By observing the difference of container transportation growth rate between China and Vietnam, we can see that before 2006, China has been higher than Vietnam, which shows that China's labor-intensive exports are still competitive. After 2007, the growth rate of China began to be lower than that of Vietnam, indicating that China's market share is shifting to Vietnam. This trend is a long-term positive for other low-cost countries in Asia.
The influence of aging on consumption
Our forecast of the future aging shows that the total number of elderly people in China will increase by about 1.60% in the next 38 years, reaching almost 300 million. For industry analysts, an important task is to find out what the elderly in China need and consume in the future.
Many detailed data in Japan can help us to study the differences in per capita consumption of various products between the elderly and ordinary people. First of all, the per capita nutritional consumption of the elderly is far greater than the national average; Secondly, the maintenance service, the elderly may not climb the ladder, you need to ask someone to repair the house; And old people eat more fish and seaweed than ordinary people, and so on. These are all very interesting information. In the process of population aging, the products or industries mentioned above will grow faster.
For the elderly, the biggest consumption is medical care. We have collected data from South Korea and Japan, and we can see that aging has a great stimulus to medical expenditure. The example of Japan is the most extreme. Proportionally, the average 75-year-old people in Japan spend eight times as much on medical care as those aged 5 to 39. In South Korea, the ratio is four times.
The medical industry has great growth potential.
That is, taking the Korean proportion as a reference, it is inconceivable to boost the whole medical industry if the aging population of China is 300 million and the average medical expenditure increases by four times. Partly based on this factor, we estimate that the growth of medical expenditure in China can be maintained at 20% every year, which is much higher than the average growth rate of nominal GDP.
If we make a detailed analysis of medical expenditure, we can find that it has three driving forces: First, the income factor. Generally speaking, income growth itself will promote the growth of medical expenditure; The second is the aging factor, that is, the per capita medical consumption of the elderly mentioned above is much higher than that of other people; Third, the "opportunity" factor. In the past, many rural areas in China did not have enough medical facilities, and even if they were sick, they had no place to see them. If medical conditions improve, every village will have a medical station, which will also increase medical expenses. Together, these three factors can support the annual growth rate of China's medical expenditure of 20% in the future 10.
Aging promotes the development of insurance industry.
Another industry affected by aging is the insurance industry. Our data show that people aged 45 to 65 are the most active people to buy insurance, because they will be the main beneficiaries of 10 insurance products. Interestingly, in the next 10 year, the growth rate of this population will be higher than any other population. This is very positive for the demand of the insurance industry in the next 10 year.
Aging will lead to a slowdown in the real estate industry.
A major industry negatively affected by demographic changes is residential real estate, mainly because demographic changes will slow down the demand for real estate and eventually decline. First, the working-age population will decline. Generally speaking, the working-age population is the population looking for a job, getting married in a few years, having children and buying a house, so the decline of the working-age population means the slowdown or even decline of housing demand. The second is aging. 300 million people will become old people. What do old people in America do? He will sell the house or mortgage it to the bank and take out the money and spend it slowly before he dies. After that, China gradually developed similar financial services, and some old people sold their houses in various ways before they died. Therefore, the increase of the elderly population also means the increase of housing supply. Therefore, the change of population structure will lead to a slowdown in demand on the one hand and an increase in supply on the other, both of which are unfavorable to housing.
But this does not mean that the absolute level of housing demand will definitely decline in the short term. What I said earlier is the impact of demographic changes on real estate when other factors remain unchanged. In addition to population, there are naturally other factors that will promote the growth of housing demand, such as urbanization and improved demand. However, it can be said that due to the change of population factors, the housing growth rate of 10 in the future will definitely be much lower than that of 10 in the past. This conclusion has also been proved by the experience of dozens of countries. If we compare the labor force population and housing prices in these countries, we can find that there is an obvious positive correlation, that is, in the process of rising labor force, the price increase in this country is generally relatively high; If the working population declines, the price increase in this country is generally low, and even the price level will fall.
Compared with Japan
Let's take a look at the performance of the Japanese stock market in the process of population aging. 1983 The period from 2002 to 2002 was a period of rapid aging in Japan. Which sectors are performing well and which sectors are performing poorly at this stage? The worst performers are banks, construction, shipping and steel. Shipping basically serves the transport of labor-intensive exports. Under the background of decreasing working population and accelerating wage growth, shipping will be depressed. The depression of the construction industry is related to the negative impact of demographic changes on the real estate industry mentioned above. The performance of the steel industry is also very poor, partly because steel is the input of the construction industry. Banks have also been negatively affected, which is related to the slowdown in investment. All these factors are related to the change of population structure to some extent.
The best performing industries are medicine and insurance. These must be the beneficiaries of aging. Transportation, retail, service and other industries also performed well, partly because of some positive effects of demographic changes. Generally speaking, the performance of different industries in the Japanese stock market is very consistent with the influence of population factors on the economic structure we analyzed earlier, which is worth learning from those who make long-term investments in China.