Understanding a Key Economic Signal Beyond Stock Market Hype

What policy trend is more worthy of attention than the stock market's heat?

The stock market and a series of policy trends associated with it can actually be seen as an intention of the country to stabilize and stabilize the economy from the perspective of the actual situation of the domestic economic fundamentals. Being rational, it is entirely possible to view it as an attempt to maintain the status quo, which will not fundamentally change economic development. However, there is a policy during the same period that, although it does not have much heat, needs to be paid attention to by the vast majority of ordinary individuals and families.

Undoubtedly, in the current domestic economic environment, the issue of employment is the top priority, and this is the core of the current economic problems.

On September 25, the country issued the "Opinions on Implementing the Employment Priority Strategy to Promote High-Quality and Full Employment," which deploys 24 measures to expand employment channels for college graduates and other young people and to ensure equal employment.

It is also referred to as the "Employment 24 Articles" in the public opinion environment.

The specific content is not repeated here, and it is recommended that everyone go to see the original text. Here, we will directly conduct an in-depth analysis and discussion:

Firstly, in terms of the expression of the document, it is stable and follows the rules. Objectively speaking, the official expression is full of meaning, and the vast majority of ordinary groups without political cultivation and management awareness find it difficult to see any clear signals that can directly relate to their own interests.

However, this document is not simple, nor is it what many people think it is, a model text or a formal text. Instead, it is China's national solution to the core domestic economic issues.

According to the current domestic economic reality, how to solve the employment problem in the most direct and efficient way?Everyone can take a close look at the content of the "24 Measures for Employment." Essentially, one can sense that the document is written for state-owned enterprises (SOEs), state-owned capital units, and the system.

This is quite telling of the state's stance, which is to have SOEs bear and absorb the current employment pressure that is no longer a taboo reality.

In simple terms, SOEs are expected to reduce salaries and expand their workforce, at least to narrow the pay gap between private and state-owned enterprises, and then recruit more to address employment issues, especially the employment of college graduates.

Private enterprises account for only 20% of the total social production but contribute to 80% of the employment positions.

Over the years, these SOEs have clearly not fulfilled their social responsibilities adequately. Now, with the economic downturn, when else should they take on more social responsibilities?

A more critical point is that having SOEs take on more social responsibilities is not just about employment issues; it is more importantly a manifestation of self-reform, equivalent to a redistribution of interests among the vested interests.

The signal sent by this latest policy trend is more valuable than just increasing the employment rate.

Secondly, from the fact that this document lists college graduates and migrant workers as key groups, one can catch a glimpse of the current employment situation, especially the severity of the youth employment situation.

Just a few days before this document was released, the Bureau of Statistics announced that the youth unemployment rate in August was as high as 18.8%, setting a new high for this year.

Specifically, the five highlights of these 24 employment measures are:Promote coordinated development of economic and social progress with employment promotion, and carry out job creation simultaneously when formulating major policies.

Focus on resolving structural employment contradictions by adjusting the setting of disciplines and specialties according to industrial demands.

Improve the employment support system for key groups, and prioritize migrant workers and college graduates in employment work.

Establish an accurate and efficient public employment service system.

Enhance the protection of workers' employment rights, and completely eliminate the household registration restrictions for insurance in the place of employment.

From these five measures, the intensity is indeed very strong; so much so that it was overshadowed by the widespread stock market rise. However, from a certain perspective, the importance of this promotion of employment is no less than the stimulation of the stock market.

After all, what ordinary people care about most is still employment.

From this document, it is clear that there is a desire to effectively address the current unemployment issues in the domestic job market, to break away from the concept that overvalues academic qualifications and undervalues skills, and to strengthen the connection between schools and the demands of the job market.

The real cause of youth employment difficulties is not a lack of labor supply, but an imbalance between supply and demand.

The number of college graduates each year is in the tens of millions, which is a very large figure. They have received higher education, so they prefer white-collar jobs in the job market. However, with the slowdown in macroeconomic growth in the past few years, white-collar positions have visibly decreased.Instead, flexible employment positions are increasing, such as food delivery, ride-hailing, and factory work. These types of job positions obviously cannot win the favor of college graduates, leading to the phenomenon of学历 devaluation.

White-collar jobs are becoming fewer, while the number of college graduates is increasing. For employers, they can only passively raise educational requirements, eliminating a group of job seekers. This, in turn, forces further internal competition in education. In some schools, there has even been a phenomenon of master's degrees being valued less than bachelor's degrees.

The employment situation is severe. In addition to consumption downgrading and structural issues on the employment side, there is also a keen interest in the system.

The employment issue is, in fact, a social issue.

Only when a person has a stable job and a stable source of income can society achieve the greatest stability.

From this perspective, employment has risen to the level of social stability.

The severity on the employment side is the result of a slowdown in macroeconomic growth and the result of consumption downgrading.

In the past year, China's real estate has continued to decline, foreign investment and credit data have also been very weak, and consumption has shown the same situation. At the end of September, we chose to introduce a package of economic stimulus measures, seemingly striving to achieve a 5% growth target for the whole year.

But isn't this also to save the severe employment issue?

Stimulating the economy is essentially creating more job positions and restoring weak consumption; only when consumption recovers and businesses are willing to invest and expand, will the job market warm up.Introducing 24 employment-stimulating measures at such a juncture is not only for the present but also for the imminent future.

Why has the country chosen the stock market as a tool for economic stimulation in 2024?

In fact, many people's understanding of the magical stock market trend in this round and the country's intentions is completely wrong.

Saying this now would definitely have a better effect than saying it during the restless phase of the market trend.

Since September 24th, the A-share market, which has been low for three years, has experienced a shock. Under the policy level's stimulation of the stock market far beyond expectations, the A-share market ended the third quarter with a surge before the National Day, and on September 30th alone, the Shanghai and Shenzhen markets set a historical record with a transaction volume of 2.61 trillion yuan; after the opening on October 8th, the three major A-share stock indexes all surged, with nearly a thousand stocks bidding to rise to the limit. However, starting from October 9th, the stock market fell back after rising, with violent fluctuations.

A round of surge and plummet, ups and downs of the market, should also let many people see the reality and know that they need to rationally look at some essential issues.

Why did the country choose to stimulate the stock market this time, instead of directly stimulating consumption?

On the one hand, of course, the basic situation is really too bad, and all the data is public, and it has reached a point where it cannot be stimulated;

On the other hand, to stimulate consumption, it is necessary to let residents have money in hand. Besides giving out money, what is the fastest method?Indeed, it's the logic of the casino.

In the early stages to attract customers, the payout rate is increased so that gamblers can make as much money as possible.

Once everyone has made money, they will naturally go out to spend it. As consumption picks up, production follows suit, and then income and employment will naturally bottom out and rebound.

This logic seems very clever, but in reality, China has already used the same trick twice, the first time was the bull market in 2007, and the second time was the bull market in 2015.

Then it drove the largest consumption in China - real estate, followed by various infrastructure and investments centered around real estate, so China ushered in more than ten years of rapid development.

However, this model has two major hidden dangers:

First, the funds that drive the rise are all borrowed, that is, leverage. Since it's borrowed money, it must be repaid. So who will repay it? Based on the experience of the previous two times, the result is also self-evident.

Second, because of the overdraft of the previous two times, whether it is residents, enterprises, or local governments, the leverage ratio is already very high. Even if the stock market is artificially pulled up this time, it does not mean that gamblers are willing to spend money on consumption. They will be more inclined to reduce debt and leverage, such as repaying mortgages in advance.

In a word, it is difficult to change the current economic situation by just pulling up the stock market, after all, the ice is three feet thick and not a day's cold.

Some people compare this round of market to the "519" market in 1999. Indeed, macroscopically, they are very similar, with both internal and external troubles coexisting. Look at social financing, M2, and unemployment rates, all proving the power of deflation; and what Jack Ma said about house prices being like onions and the previous "houses are for living, not for speculation" are all vividly remembered like past clouds, delaying property tax and delaying retirement also explain the severity of the situation.Just as was the case during the 519 market boom, the industrial upgrade was not yet complete, the Asian financial crisis had already arrived in 1998, and the restructuring of state-owned enterprises was still struggling at the time. Banks in Guangdong and Hainan were mired in difficulties due to real estate speculation.

Amid internal and external troubles, the entire society was permeated with an atmosphere of resignation. At this time, bringing out the stock market as a chamber pot to stimulate everyone's illusory dreams of sudden wealth could be considered a way to boost confidence.

Of course, this logic is limited to the domestic financial market and economic environment. Considering that the country also has to face the competition of great powers, the global struggle for capital and pricing power, the best, most cost-effective, and fastest choice is naturally the stock market.

However, to break the dilemma and problems of the domestic economic environment, it is still necessary to address them in terms of employment and residents' income.

Trend analysis: Under the current thinking of using the stock market to stimulate the economy, can it solve the core issues of the domestic economy at present?

Looking at the key issues raised at the beginning: What is the biggest dilemma or problem in China's domestic economic environment at present?

Is it that the real estate economy, the pillar of the country, is no longer viable.

There's no need to be embarrassed about this, right?

Taking history as a mirror, after the subprime mortgage collapse, it took the United States 6 years to barely stabilize the real estate market. Japan also took 6-7 years to stabilize and recover after the 1990s. At present, in China, with policy efforts, being able to stop the decline and stabilize can already be considered as completing a phased task.It is quite clear that the issues with the real estate market and the housing economy cannot be resolved by simply stimulating the stock market.

The stability of the real estate market is most directly indicated by the number of social job postings and the compensation offered for those positions.

Jobs and compensation correspond to social employment.

At its front end is corporate profitability, and at its back end is the level of residents' income.

Casinos can only attract gamblers, while the real estate market is the truly effective tool that can work with a debt-driven economic growth model, allowing ordinary people to willingly overdraw their income for 30 years and bind their credit to stable jobs.

Looking at the October 12th meeting of the Ministry of Finance, the mainstream opinion is that it is related to the stock market, and the related analysis also revolves around its impact on the stock market, which is actually a big mistake.

Regarding debt resolution, the meeting frankly stated that the scale of this debt resolution is "the largest in recent years," which is an expression that violates advertising laws.

The most distinctive feature of China's fiscal and tax system is the tax-sharing system.

After the implementation of the tax-sharing system, the majority of the funds were collected and remitted, and local governments relied on land sales to operate;

Now that the central government is providing financial support, local governments can have a safety net even without land sales.In a nutshell: Real estate has fulfilled its historical mission, and local development will gradually detach from real estate.

This is the important signal that should be seen from the content of the October 12th press conference, and this is the key to seeing the essence through the appearance.

Based on this analysis, the logic of the next economic environment trend is: The country will leverage to help localities deleverage (the core goal of the Ministry of Finance's leverage), to deleverage the household sector (reduce the interest rates on existing mortgages), to carry out internal system and state-owned asset reforms and demands, to create a slow bull market in the stock market, to solve employment and income distribution issues, and then to guide the release of domestic demand, to focus on consumption and the real economy, and to unblock the bottlenecks in the internal circulation.

The era of real estate playing a leading role in China's domestic economic environment has officially ended.

This logical closed-loop analysis is a bit complex and is worth everyone's careful reading and repeated understanding.

Governing a large country is like cooking small delicacies, which is vividly demonstrated in this matter. It is worth savoring.