If it were you, how would you solve China's current economic difficulties?

China’s current economic challenges:

1 - Debt: 30 trillion yuan from the central government + 40 trillion yuan from local governments + 50-60 trillion yuan in hidden debt, about 120-130 trillion yuan in total, about 100%~110% of GDP, about the same as the United States (120% in the United States)

2 - Housing prices: The current average rental-to-sale ratio return is 2%, and the 10-year treasury bond yield is 2.16%. International comparisons of rental-to-sale ratios are difficult because there are two different factors, one is property tax, and the other is income growth expectations. I assume that a 3% rental-to-sale ratio in China should be more attractive, which means there is about 30% room for decline. At a 10% annual price decline, the bottom will be reached around 2027.

3- Consumption: The main constraint on consumption at present is the wealth effect brought about by falling housing prices, not the lack of money.

4 - Local finance: Because the income from land transfer fees has been greatly reduced, local fiscal revenue has also been reduced, which will not only affect GDP-added items such as infrastructure, but will also affect civil servants' income, and further affect housing, etc...

The good:

- The competitiveness of the manufacturing industry has gradually increased, especially in areas such as automobiles.

- The government controls a large amount of state-owned assets, and the government's net assets are positive

Solution:

The monetization of state-owned assets will be used to eliminate part of the debt and increase local government revenue, which requires the stock market valuation to a reasonable level.

To put it bluntly, in the past, land finance was supported by housing prices, but now it is state-owned asset finance that is supported by stock prices, shifting from land to state-owned assets (local state-owned enterprises).

This is not a bad thing. In the process, it is also equivalent to privatization progress.

If the stock market can be well managed and form a long-term bull market, then it can be said that all the above problems in China will be solved. Because 1/ you have the wealth effect 2/ the government has money, the above negative cycle will instantly become a positive cycle.

The question is: do you believe in pan or vitalik? 😂