What should the company do in the face of the more difficult 2016?

Recently, Yao Yang, Dean of the National Development Research Institute of Peking University, delivered a speech at the “Learning China Forum”. This article is organized according to the content of the speech.
Looking forward to 2016, I am afraid it will not be too good. I think the current economic downturn is probably caused by the superposition of three reasons:
First, after the economic crisis, the entire economy of the world is shrinking. World trade is actually shrinking. China is also shrinking because China is now the world's largest trading nation. If the world's trade is shrinking, China's trade is also shrinking. This has caused a huge (transition) in the Chinese economy. In the past two decades, the contribution of foreign trade to economic growth has been one-third. Now that this one-third has basically disappeared, it has begun to become negative. This is an important external factor in our economic slowdown.
Second, from the inside, the national economy has developed into a structural transformation. Our industrialization has been going on for two or three decades, and by 2010 and 2012, it has basically reached its peak. A law in economics, when your industrialization reaches its peak, financial resources will shift to a lower productivity sector. Our industrial sector is the most productive sector, but we are now seeing a lot of manpower and resources turning to the service industry. The labor value of the service industry is not high, which will slow down our economic growth.
Third, the most important one is the law of the economic cycle itself. No country can avoid this economic cycle, but your economic fluctuations can be bigger and smaller. China's economic fluctuations should still be quite dramatic. Since Deng Xiaoping’s southern tour in 1992, we have basically experienced four major cycles, rising twice and falling twice. The first rise was in 1992-1997, and our economy rose very quickly. Our economy was in a downturn from 1997 to 2003 and it was a state of deflation. If everyone has memories, that period of time is also a very difficult period for our national economy. The period from 2004 to 2012 is the time for our rapid economic development. It is the fastest growing economy in our history. Thanks to the improvement of external conditions, we have benefited from our industrialization. So at that time, we had a saying that "even if the pig is standing on the wind, it will fly." Because the wind was so big, everyone flew very high. But since 2012, our entire economy has begun to decline, and the fuse is of course a crisis in Europe, spreading to the whole world. Now it seems that the only place that has a bright spot is the US economy. This is why the US dollar is rising. The currencies of all countries are worse than the US dollar. China is no exception and will follow suit. But will our devaluation be over 7? I think it is unlikely. If there is such a crisis of depreciation, the central bank must intervene, especially a psychological barrier.
The past cycle is basically a large caliber, which is counted every seven years, so that from 2012 onwards, our next cycle is just beginning. Therefore, in 2016, everyone has to prepare a hard time, which may be the most difficult year for this round of economic adjustment.

What will happen this year?
I think first, there will be many companies that will be merged and will be reorganized, and some companies may have to declare bankruptcy.
The news from the Central Economic Work Conference is also an important year of adjustment next year. The Central Economic Work Conference proposed five major tasks: de-capacity, de-stocking, de-leveraging, cost reduction, and short-boarding .
The first three tasks are actually not good news for us. First of all, we will “go to capacity”. Our industries with excess capacity, such as steel, cement and coal, must go to capacity. Some industries related to this should follow Contracting capacity, the country has set such a goal. How big is the intensity of de-capacity? Judging from the spirit of the Central Economic Work Conference, it may be that this strength will be very large, and everyone should be prepared for this mentality.
The second is to go to stocks, our first-line houses are skyrocketing, especially Shenzhen housing prices skyrocketing, which shows that investment opportunities are now less. Everyone has money, the Chinese still have money, and you have to invest in a few places. Shenzhen is seen by investors as “value squatting” and rushed up. However, the inventory in the vast second, third and fourth tier cities is very, very large, and it is extremely difficult to digest. Now the Central Economic Work Conference has proposed to speed up the peasants entering the city and hope that the peasants will digest excess stocks.
I personally recommend that the government issue bonds, and the government will collect these surplus houses. Now this is an excellent opportunity. The developers have realized that the next day is very sad. The government takes the house and hits 40% off. The developers don’t sell it. Many developers are willing to cash out as soon as possible. What if I have these listings? They can be distributed to these peasants who have entered the city. Premier Li Keqiang said that he has to solve the housing problem of three hundred million people. The 100 million people who have already entered the city, the 100 million people who have been converted into shantytowns, and the 100 million people who have entered the city. Housing is a great opportunity.
The third aspect is deleveraging. De-leveraging is not to say that we want to lower our M2. It is unlikely that M2 will come down unless your central bank shrinks on a large scale. The purpose of de-leveraging is to make us clear in the economy that the triangular debts are cleaned up. The task is very arduous and will have a great impact on our company. We must be psychologically prepared.
Good news is the last two sentences, cost reduction, there will be some structural tax cuts. This time, it is a good news to propose a tax cut in our traditional field and even to reduce the value-added tax. Although the specific policy has not come out, the direction has been determined.
The last compensatory board is to make up some of our supply side shortboards. Some traditional supplies are not enough, we have to make up the short board.
Another good news is that the Central Economic Work Conference has proposed to moderately expand the fiscal deficit. This has never been proposed. Because our country has always regarded the fiscal deficit not exceeding 2% of GDP as a barrier. It is possible to break through next year. Breakthrough is a good news, which means that the government will promote investment with greater intensity, especially the investment of local governments, which will be a great news for the economy.
Another good news is the stock market. Shanghai's strategic emerging board will definitely open in 2016, and the new board's transfer rules may come out, which is good news for everyone. I hope that the registration system reform can be launched as soon as possible, otherwise it will be like a 2015. It would have been a good slow cow to become a mad cow. Only when the market becomes deeper can the stock market become a slow cow. .

In this case, what should our company do next year?
In the cold winter, what is the first priority of doing business? Keep your cash flow , you don't let your cash flow break, investment must be cautious, even if the stock market next year has a big rise, I hope everyone must guarantee their cash flow. Especially for small and medium-sized enterprises, don't think that the stock market's money is good, I also earn a hand. There is cash and blood before it will fall.
The second step is to practice internal strength , and the economy will always stabilize. The economic cycle is the most crucial year next year, and it is also the bottom. The economy may gradually pick up. In 2017, we are going to open the "Nineteenth National Congress." Usually in our political cycle, when you want to open a party congress, the economy will go up.
It is expected that by 2017, our economy will start to pick up. If you are not ready when you are warming up, you will not be able to catch up with the next wave. It is to train the internal strength, so that our company will stand on the wind when the next gust of wind arrives, then our business can continue.

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