2023-09-25 18:02:15
In an interview on the 15th, Jeon Byeong-seo, director of the China Economics and Finance Institute, who argues that the Chinese economy should be viewed from a ‘Chinese perspective,’ said, “It is a misunderstanding that China is a country growing through real estate, investment, and exports.” “The crisis has been exaggerated,” he said. Behind Director Jeon, data showing the size of the Chinese economy compared to the U.S. economy is displayed on the screen. /Reporter Nam Kang-ho
China implemented a full-fledged openness policy after Deng Xiaoping’s Nanshun Peace Talk in 1992. Over the next 30 years, rumors of a Chinese crisis were raised several times, including the Asian foreign exchange crisis in 1997, the global financial crisis in 2008, the US-China trade dispute in 2018, and the coronavirus lockdown in 2020, but there has never been an actual clear economic crisis. Recently, as anxiety over Chinese real estate has grown, the ‘China crisis theory’ has raised its head once again. Will it only end with rumors of a crisis this time? Also, will Chinese President Xi Jinping’s economic policy, ‘Seconomics’, be successful? On the 15th, I met with Jeon Byeong-seo, director of the China Economics and Finance Research Institute, to hear his story, who said that the Chinese economy should be viewed from a ‘Chinese perspective’ rather than a ‘Western perspective such as the United States’. Director Jeon said that the secret to understanding the Chinese perspective is that he still communicates with about 230 classmates he met while studying abroad for an MBA (Master of Business Administration) at Tsinghua University in the mid-2000s in a group chat room on the messenger Weixin.
– Called a Chinese optimist.
“I am not an optimist. I would like to be called a centralist who believes that in order to overcome China, you must first understand China. “If we compare China to the moon, many Koreans only look at the front side of the moon shown by the United States, but I think we should also look at the back side of the moon shown by China.”
◇ China has been looking into real estate for the third year.
– Let’s first consider the possibility of a real estate crisis in China.
“If you look at Chinese data, real estate accounts for only 12% of China’s GDP (gross domestic product). The 30% reported in Western foreign media is an exaggeration. Biguiyuan, China’s No. 1 real estate company, which was recently in danger of bankruptcy, has a market share of only 5.2% among the top 100 real estate companies. Even if you include Hengda, Wanda, and Biguiyuan, where problems have emerged so far, their market share is less than 7%. Moreover, most of China’s banks are state-owned, so unless the state goes bankrupt, there is no bank failure. “The real estate crisis has been exaggerated.”
Jeon Byeong-seo, director of the China Economics and Finance Research Institute, was interviewed by this paper on the 15th and talked about changes in the Chinese economic paradigm. In the background, there is a slide explaining Chinese President Xi Jinping’s economic policy agenda. /Reporter Nam Kang-ho
– Why is the real estate issue so loud in a socialist controlled economy?
“In China, all land is owned by the state. What this means is that if a real estate speculation bubble occurs, you can immediately put it out. To use a radical analogy, if housing prices in Gangnam, Seoul rise significantly, the Chinese government could turn Gangnam into a park. In the past, the period for the Chinese government to deflate the real estate market bubble was only about 9 to 16 months. However, this time, a problem arose as it continued for nearly three years after 2021. “Xi Jinping’s goal of achieving shared wealth (let’s live well together) is a phenomenon that arose as the political agenda was emphasized.”
-Why did real estate become a target?
“When it comes to shared wealth, fairness of distribution is most important. So, we decided to look into three industries that exclusively generate extremely high profits. These are real estate, platform companies, and private education industries. “The first thing I tackled was real estate, so I continued to pursue it.”
– Is there an alternative to China’s growth other than real estate and investment?
“It is a Western misconception that China is a country growing through real estate, investment, and exports. It has already shifted to a structure led by consumption and service industries. It is now a country of consumption, with consumption contributing as much as 77% to GDP. Additionally, the contribution of the manufacturing industry, which led the Chinese economy for 40 years, has shrunk to 30%, with the service industry accounting for 66%. “The share of exports to GDP also fell from its peak of 36% in 2006 to 21% last year.”
◇ Economic economics will succeed only if consumption is revived
– Can’t we ‘release money’ in the Keynesian way?
“During the 2008 global financial crisis, 4 trillion yuan, or 13% of GDP, was released. Some call it the Chinese version of Keynesianism. However, if you say that China is not releasing money right now, that is not the case. Last year, the money supply increased at a double-digit rate. However, as the real estate business was restructured for three years, the stock price went down for three years as a result. Since investment sentiment has died like this, even if money is released, it comes back to bank deposits. Deposits increased by 30 trillion yuan over the past year. It is now 25% of GDP. “If this money does not go to consumption and services, the Chinese economy will suffer.”
– Are economics doing its job?
“After Xi Jinping came to power in 2013, China talked about ‘New Normal’. This means reducing traditional industries and moving toward new growth industries. As the 4 trillion yuan raised during the global financial crisis went into SOC (social overhead capital) construction such as roads, railways, and factories, overproduction in traditional industries such as steel, chemicals, coal, copper, and shipbuilding became a problem. So, he said he would reduce the enormous oversupply of traditional industries through ‘supply-side reform.’ The method was to gather dozens of companies, leave only the top 5 companies in the world, and eliminate the rest. “After these supply-side reforms are over, we are talking about demand-side reforms starting in 2021.”
– Demand-side reforms seem powerless.
“On the surface, it seems to be because of the coronavirus. The strategy of driving the economy through demand-side reforms was frustrated when China locked the door in 2022 due to the spread of Omicron around the world. However, in my view, the more problematic thing is that the Chinese leadership, which is comprised of technocrats with engineering degrees, is weak in the service industry. For example, in the past, Deng Xiaoping studied automobile engineering in France, Jiang Zemin studied electrical engineering at Shanghai Jiaotong University, and Hu Jintao studied repair engineering at Tsinghua University. Xi Jinping graduated from the Department of Chemistry at Tsinghua University. Manufacturing is a command, but service is impressive. Science and technology can control the Chinese people’s hands, that is, their cell phones, but they cannot control their minds. I think the real reason the Chinese economy is currently struggling is because the government is unable to properly read the minds of Chinese people who are obsessed with services and making money. “This is evidenced by the recent worst consumer sentiment in China.”
– Could this be ‘Peak China’, when the Chinese economy begins to decline?
“American and Western economists say, ‘The Chinese economy is dead. Claims are pouring in that “China will experience 30 lost years like Japan.” However, although China’s role as the world’s factory will end, growth centered on consumption and domestic demand will continue. If China grows at 4-5% now, an economy the size of Korea will be created in two years. In the short term, 28 stimulus packages were released in August alone. We have been monitoring the Chinese economy since 2002, and we have never released so many policies in a single month. “If we change our psychology, it will be an opportunity for a rebound.”
◇ Are you deciding to break up with the United States?
– The United States uses a ‘de-risking’ strategy with China. Is it the same in China?
“China also seems to be deciding to break up with the United States. For example, since last June, the U.S. Secretary of State, Secretary of the Treasury, and Secretary of Commerce have all visited China one after another, but nothing has been achieved. China said that the United States only needs to solve semiconductors and AI (artificial intelligence), but it has confirmed that the United States has no intention of solving the problem.”
– Is it possible to blockade America’s cutting-edge technology?
“There may have been many variables when the United States left Japan stranded in the 1980s, but the secret is that the Republican Party was in power three times and maintained policy consistency for 12 years. I believe that technology blockade will only be possible if it continues for about 10 to 15 years. The Biden administration’s technology blockade is seen as a ‘act of God’, but it seems impossible to achieve the goal in 4 or 8 years. We must also look at the possibility of Trump coming back to power in the United States. “If Trump returns, I think there is a high possibility that he will put pressure on China with demands for financial opening rather than blockade of technology like Biden did.”
– China is shifting to focusing on domestic demand, so what strategy does Korea need?
“The domestic market is not something that China will give us, but it is a market that we must go and capture. To do this, Korean products must be competitive. Apart from competitiveness, a different perspective is also needed. First, we need to think about strategies to attract Chinese people to our country. It is said that one person spends 20 to 30 million won on medical tourism. It’s the price of one car. There is a structure that can generate more profits than tea exports. Solutions must be found in beauty, medicine, plastic surgery, performances, fashion, tourism, etc. Second, we need to think about making money through investment rather than trade. After the joint venture, we should consider listing the company on the Chinese stock market and then selling it. Third, the Korean brand must be planted. Nowadays, hundreds or thousands of small companies are entering the market, which is not possible in China. “We need to plant the Korean brand in China with electric vehicles and next-generation mobile phones that are hits in the U.S.”
Jeon Byeong-seo, director of the China Economics and Finance Research Institute, was interviewed by this paper on the 15th and talked about the path and future of economics, the economic policy of Chinese President Xi Jinping. /Reporter Nam Kang-ho
☞Xieconomics
It is a compound word of Chinese President Xi Jinping’s last name, Xi, and economics, meaning economics, and refers to Xi Jinping’s economic policies. The focus of policy changed from ‘Xinchangtai (新常態)’ at the beginning of his administration to ‘shared wealth’ after his third term in office.
☞Director Jeon Byeong-seo
He graduated from Kyungpook National University, received a master’s degree from Seoul National University, an MBA (Master of Business Administration) from Tsinghua University in China, and a doctorate from Fudan University. She worked as a semiconductor and IT analyst in the financial district of Yeouido for 17 years, and studied the Chinese economy and industry for 18 years after going to study in China in 2005. Her main areas of interest are China’s financial markets and growth industries. His books include ‘China’s Innovation Strategy in the Era of Technological Hegemony’, ‘China’s Financial Industry Map’, ‘The Birth of China as a Financial Powerhouse’, ‘China’s 100 Years of Dream, Korea’s 10 Years of Wealth’, ‘Korea’s New Wealth of the Nation, in China’, etc. There is this.
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