Abstract The same thing, you can make it for me, but my price is much lower than you. The Chinese economy relies on this meal. But now that the cost is up, madeinChina is expensive, something is a bit expensive, and it will change a lot in a global market...
The same thing, you can make me can also make, but my price is much lower than you, the Chinese economy is relying on this meal. But now that the cost is up, it's expensive to make in China. It's a bit more expensive, and it will change a lot in a global market. why? Because China has not yet formed another comparative advantage. I didn’t expect that China’s cost advantage would be so fast.
Recently, the government is busy with the 13th Five-Year Plan. I just wanted to go to Beijing to study. At that time, it was the 6th Five-Year Plan. At that time, the planned indicator was to increase the number of four, and the GDP would save four growth points and strive for five growth points. I think about six or more things.
Then why can I go to the eleven, twelve, and thirteen growth points? In 2007, the highest quarterly growth rate was 15.1%! The Chinese economy is very complicated. You can look at different levels and you can look at a lot of different data. But if time is very limited and you want to grasp the general trend, what do you look at? It is to look at the cost of China. The same thing, you can make it for me, but my price is much lower than you. The Chinese economy relies on this meal.
Why is the cost low? You have closed the door for so many years, the people's wages are several times lower than others, and all the factor prices are much lower than others. You only need to do it better than others, the price is lower than others, the market is yours, the demand will tilt to you, pull it and pull it up. I always say that high-income countries and low-income countries are two sea levels. In the past, they were built by artificial dams, and the dams were removed. High-altitude water was poured in. The release of this potential has supported China's rapid growth over the years.
So what is the new problem today? Anyway, I didn’t expect that China’s cost advantage would be so fast, and it would be gone for more than a decade!
In August last year, the Boston Consulting Group released the Global Manufacturing Cost Change Report. If the cost of manufacturing in the US is 100, then China is 96, only 4 points lower than the US.
Some people will say that workers’ wages are rising too fast. But the cost of manufacturing in China is not entirely the wages of workers, and our comprehensive cost is also growing at a high speed. The big one here is not the cost increase formed by market supply and demand. Our comprehensive cost is too close to the developed economies and is rapidly approaching, which is the main reason for China's economic growth rate.
China’s economy will depend on its unique advantage in the future.
When the cost goes up, it is expensive to make in China. It is a bit expensive, and it will change a lot in a global market. why? Because China has not yet formed another comparative advantage. The comparative advantage is two in my opinion, one is the cost advantage and the other is the unique advantage. You have something that others can't make. This is the unique advantage. With this advantage, it doesn't matter if your stuff is expensive or even expensive. For example, Apple's mobile phone, so expensive, sold so well, sold 700 million in 8 years!
The country of Israel is not big, but there are many unique advantages. This year I have the opportunity to go and be stimulated. For example, why can a mobile phone be so thin? A key issue is to solve the heat dissipation, Moore's Law, the chip function doubles every 18 months, the more powerful the function, the more heat is released, and the heat dissipation space required for the heat sink is larger. But the Israelis solved this problem, the chip function improved, and the heat declined. In this way, mobile communication can be realized, and the mobile phone can be made thinner and thinner.
This is a unique advantage, and we hope that China will have this advantage in the future. But now China's economy as a whole does not rely on unique advantages to eat. China's high economic growth depends on made in China. Manufacturing is the foundation for the prosperity of all our industries. Made in China depends on China price, you will make me too. Made, but I am cheaper than you.
The new challenge now is that this cheap advantage is quickly disappearing. The cost advantage is not obvious, what should we do next? The manufacturing cost of the United States is only four points higher than China. He has a unique advantage in his hand. How does China compete with him?
Innovation and transformation still have a long way to go
So you see that the main theme is transformation and innovation. The problem is that innovation and transformation are not so fast. You say innovation, this is a good word, it is not so easy to do. The most important thing for the Israelis to solve the heat dissipation problem of the chip is the idea at the beginning. Why do we have a hundred pounds? We don’t have this idea?
After the questioning, the process will be very long. This time I went to Israel with a group of entrepreneurs, and a rabbi came to tell us about the contribution of Israeli education to innovation. Rabbi is the pastor, and Rabbi’s position in the Jewish nation is higher than that of the pastor of the general religious state.
Rabbi spoke of one thing. In the Israeli family, when the child comes back from school, the mother will not ask you to take a few points. What the teacher taught, you learn not, but will ask the child. Have you asked the question today? Have you asked a good question?
The thirty or forty people in our company are all stimulated, and the biggest thing that is so exciting is this. Go back and ask the child, have you asked the question today? This is the seed buried, but can this seed be harvested? Maybe the child will ask questions today, and tomorrow may be killed, not the same as the teacher, the test results will not work. And how long does it take to transfer the entire system to a system that dares to have ideas and constantly generate good ideas? Therefore, it is not that the Prime Minister has said that he wants to innovate. If the headlines of the newspapers are to be innovated, there will be many new ideas and good ideas at once. This is a long process.
So what do you do now? Only by studying from experience can we find a way.
For example, why is the restaurant industry good? Eight regulations are not allowed to eat and drink. Who is optimistic about the restaurant industry at the beginning of the year? Many high-end food and beverage outlets are really closed, but the low-end and mid-range catering industry is up. The expensive location of Beijing Financial Street, the high-end stores are closed, the grandmother's house has entered, and the food is queued. What do you mean? The low price demand is large.
For example, why is e-commerce getting up? Because the price of shopping on the Internet is low. It is not that the labor is low, the artificial low is not able to make things, but the expenses of other aspects are gone, there are not so many charges and intermediate costs. The same thing, the price is cheap, the demand is pulling. Of course, the quality of goods on the Internet has always been a problem.
But why are American and Japanese e-commerce not so hot? Because their convenience store boutiques are not so expensive, there is no such cost to them. Therefore, China's offline business is rampant, largely to the cost of offline, including unreasonable costs are too high, and the fees charged are too much.
So what should I do next? When the price is adjusted, the market will get up. Why is the fire in the Qianhai Free Trade Zone and the Shanghai Free Trade Zone? Companies like to go there to do business. Because the free trade zone has reduced institutional costs.
I went to Qianhai to see a car business called parallel trade. Why are Chinese imported cars so expensive in the past? Tariffs are a problem, and the monopoly of import channels is another issue. The same car models, the same configuration, the price at home and abroad will be more than 100,000, 200,000. This parallel trade lowered the spread, so the people who bought the cars waited in line to buy. Give a certain quality, lower prices, the market will come back.
So from an economic point of view, how can the crisis be dealt with? It is to adjust the price, relying on lowering the price of government services, and relying on the cost of the system to get China price back. Otherwise, the price will not fall, and it will not be able to provide unique products. How can the economy have a way out? I think of Liu Chuanzhi's theory of "towel-squeezing water". The cost is like the water in the towel. It seems to be dry, and the screw can always be screwed out. Whether China is a business or a government, or the entire national economy, is it possible to unscrew the high cost in the short term and win a transition period to support innovation and transformation and support a higher level of openness?
This is a big test for us. The moderator just said, "Tomorrow will be better." I agree that when the situation is bad, I really want to think about the future better, but I suggest not to say it. Let the bad news fly for a while, bad news helps us adjust the price. No bad news, no one will recognize it. It is necessary for a group of people to think that tomorrow will not be able to come down, and the price will come down to rebuild our price advantage, in order to win time for us to build our unique advantage. (The author of this article: Professor, Ph.D., Dean of the National Development Research Institute of Peking University.)
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