Transcription
Hello everyone, audience. Welcome to watch "Stock Market C Insights." This episode, besides Mr. Shi, we are very honored to invite Professor Lei Dingming to come and accept our interview. Hello Professor Lei. Hello everyone.
Professor Lei, since you are here, let's start by talking about China's economy. Let's talk about economic issues. Both of you, the National Bureau of Statistics just announced that the first quarter GDP for 2026 grew by 5% year-on-year. This exceeded market expectations. Actually, based on the current macro situation of the country, do both of you think this figure is high or low? And does it differ from your views? Professor, what do you think?
5% growth, I don't think it's beyond expectations. It depends on whose expectations. Everyone's expected figures are very different. If you are purely talking about its productivity or its production potential, I think China still has over 6% growth in the next one or two decades. But in reality, it's very difficult to achieve such a high figure, because it also depends on demand. Global environmental factors might suppress it. So I don't think 5% growth is very surprising. And China's current economic performance will be affected by a whole host of positive and negative factors. Let's not talk about the war in Iran for now. But China is actually more influenced by technology. And you see that in high-tech industries, after several years of development, some accumulation has begun, and then it has burst forth. The profits of some industries have risen sharply. For example, high-tech manufacturing rose by 47.4%. That is, the profit for the first quarter of this year compared to last year. Also, fiber optic manufacturing, he explained that because of AI's help, it actually rose by 336%. These are not slight increases; they are increases by multiples. Of course, there are also some industries that are not doing well. For example, the construction industry is still falling by 3.8%. The real estate industry is still falling by 0.1%. In other words, I believe China's economy is currently undergoing an economic transformation. Some traditional industries may slowly stagnate or even decline. But on the other hand, resources are being allocated to high-tech areas. The future engine of economic growth should be driven by high-tech. The data you see now all reflects this. One aspect that many people who study economics are concerned about is consumption. Domestic consumption in mainland China seems not to have grown very brightly for a period of time. Will there be some improvement during this period, or has the government done something to help make the situation different?
Some people hope to stimulate consumption and increase spending. I don't quite agree with this view. Because China's growth over the past few decades has relied heavily on high savings. High savings, just saving money, is not enough. The money needs to be used. But when used, it's not necessarily for consumption. He uses it for investment. But investment is all for improving future productivity. China's savings rate is over forty percent of GDP, which is very high. But the investment rate is also very high. In recent years, the growth rate of investment has decreased. He has also shifted back to some consumption-related things. I think the current approach is acceptable. I once calculated that China's investment rate accounts for about 40% of GDP. It is appropriate today, but not always appropriate. If productivity improves quickly, the higher the savings rate, the better. If technology and science progress slowly, then don't save so much money; it's better to spend it. Similar to a leverage situation. Actually, looking at the proportion of consumption in GDP, it's almost appropriate. Increasing a little consumption should also be correct, but there's no need to increase it a lot.
The professor just mentioned that high-tech growth is quite significant this year. Mr. Shi, do you think the shift of manufacturing to high-tech growth will still be a major engine contributing to China's economy in the future? The professor just mentioned that real estate and related construction expenditures are relatively low. Are you worried that this situation will drag down China's economy? Perhaps people are influenced by their own environment. I originally had some concerns about the Chinese economy. Because I work in real estate. Real estate, almost after Evergrande's collapse in 2021, all private enterprise developers, I believe the vast majority were wiped out, all had problems. It affected many related industries: construction, furniture and home appliances, advertising, real estate agencies. The impact was not slight, but rather the loss of more than half of their business. So initially, I was worried about it spreading out, affecting the entire market, affecting people's investment willingness and consumption capacity. But the actual situation is better than I imagined. Because the Chinese government, during that period, took a more proactive approach to make some investments. It's called "new quality productive forces." In fact, these are non-traditional, with higher technological content, and meet environmental requirements. In the West, perhaps in a capitalist society where profit is paramount, they are relatively, with strategic considerations, made certain deployments. So when real estate was not doing well, the professor just gave many examples, many sectors did not grow by 20-30%, but by 200-300%. This has a certain supplementary effect on the decline in real estate. So overall, although the market is indeed slower in terms of consumption or fixed asset investment, but because of the supplement from new quality productive forces, overall it's considered acceptable. That is, there has been no severe deflation, no economic recession; there are other areas providing supplements. These supplements are now perceived to actually have a certain effect.
Now there's war in the Middle East, an oil crisis. But we are doing quite well in terms of green energy. Initially, people all thought solar energy, wind energy, all relied on subsidies. But without subsidies, they wouldn't even be done. China did it. In the process of doing it, experience was summarized, and there were technological breakthroughs. Now, basically, China's green energy is profitable without government subsidies. Besides using it domestically, it can also be exported. So this time, with the oil crisis, there isn't much panic in mainland China. I just chatted with a local driver while on a business trip in Guangzhou. I asked how much the oil price had increased. He said it increased within 10%. Recently, there was a slight price reduction. So in these aspects, I believe that in the future, under the international macro environment, although Trump now says the climate warming issue is fake, it's a lie, the whole world sees it, it's just him pretending not to see. So I believe China's progress and breakthroughs in this area can also contribute to the world in the future.
Mr. Shi seems not too worried about the Middle East issue causing oil prices to surge and then affecting China's economy. We just talked about the first quarter GDP figures. The Middle East conflict started not long ago. Are you worried that the second quarter figures will also be dragged down? Because oil prices have not risen much. Also, China's current energy structure is very different from before. For example, in the 1970s, the whole world was greatly affected by the oil crisis. But look at China today. First, there is a lot of electricity. Electricity generation is estimated to be three times that of the United States by the end of this year. China doesn't have much oil; it relies on imports. But its electricity capacity is very strong. Moreover, the growth engine is slowly shifting to high-tech. Of course, high-tech, such as manufacturing chips or AI, requires electricity. China has sufficient electricity. Now cars are also continuously shifting to electric vehicles. So I think the impact may not be too great. Moreover, China has pre-saved almost enough reserve oil for 100 days. For these 100 days, the reserve oil is not all used up at once. Reserve oil is only used when there isn't enough. About 20% of the oil supplied to China through the Strait of Hormuz comes to China via the Strait of Hormuz. If we calculate, if China's reserves are enough for 100 days, actually, with imports from other places plus its own production, it should be able to last 500 days. Actually, 500 days is also very long. So what Mr. Shi just said, currently China's oil price increased within 10%. I have also seen this figure; it is actually much lower than in the United States. The United States is 20-30%. It's not to say there's no impact on China. Nobody likes price increases. But she can hold on.
In addition, Mr. Shi just mentioned the "new quality productive forces." This concept is actually relatively new. I hadn't heard of it before. It was originally a military term, borrowed. But this matter is actually very important. Because for China's economy to continue growing, there's a problem, which is: people save a lot of money. What do they do with the money they've saved? They need to invest. But it seems there aren't many good opportunities. You need to find profitable opportunities to invest. How can you create more profitable opportunities? Actually, it relies on those new quality productive forces. For example, let's say the internet. The internet is not new today. Decades ago, it was new. If there were no internet, many industries would not exist; they wouldn't appear. After having such things, people will create new investments. For example, low-altitude economy. This technology didn't exist before, but now it does. It can truly help people find new opportunities. So China has embarked on this path. How it will continue to develop in the future, and what its potential is, I think it can go a very long way.
The objective environment also seems good, but there is still a hidden concern. That is, the political factors from the US side that have been troubling us for the past few years. Mr. Shi just mentioned that our energy competitiveness is quite strong. In fact, according to the latest figures, exports are 54.1 billion, a 60% year-on-year increase. Are both of you worried that Western countries, especially the United States, often accuse China of dumping or subsidies? With such strong exports in new energy, will there be new sanctions or further tariffs imposed on us in the future? Mr. Shi, are you worried about this?
I was worried at first. But now it's not the first time "getting into a fight." That is, after so many "fights," I think many of the things the United States does hurt itself more. It's just that she seems to be very imposing. And says she will increase tariffs on others, by how many percentage points. But in reality, after the increase, its own consumers bear most of the tariffs. In addition, now, for example, with war, most of its things have to go to supply the battlefield. I believe its demand for China's cost-effective products will definitely grow larger and larger. Before, they talked about decoupling, about cutting ties. Now I believe even Trump knows there's no cutting ties. If they cut ties, why would he constantly say he wants to meet President Xi Jinping? Some things can only be resolved by talking with China. So I believe that the inability to cut ties with China has already become a consensus among the US political establishment. That is, I recently did some student dormitory development. I came into contact with many overseas funds. Previously, they tried to avoid investments in China and Hong Kong as much as possible. Fearing that they didn't know when Trump would list their investment targets on some entity list, which is actually a blacklist. They would then have to withdraw. Now he knows there's no cutting ties; in fact, he wants to find an opportunity to return to mainland China. For example, in AI, American AI companies hire the most Chinese people. I used to hear some arguments from people in high-tech, especially those in AI. He said that in terms of language, the ability of Latin to be technologized is greater than Chinese characters. But now it's very strange, I don't understand why. Why in reality, most of the people developing large language systems are Chinese. So now he sees China as a concentration of AI talent. He comes to China to find talent, and developing in China might actually get more support than in Silicon Valley. So I personally believe that the US suppression of China, as it recognizes reality, it knows it cannot be done. So I believe that going forward, his previous approach, at least, cannot be used to lord it over China, thinking it's very effective. He can't even handle Iran. So people have a question mark over how much actual capability he has.
Professor, what do you think? Will the United States continue to target China? His so-called sanctions, he always talks about them. But you see that he keeps backing down on many things. For example, he used to say he wouldn't sell many advanced chips to China. Then a few months ago, Congress made a big fuss and said they would sell H200 chips to China. Who knew that now China says it won't buy them because China can produce them itself. The US ended up losing a lot of business. He used to be terrified you'd steal his technology. Now people don't want him. Before, he started a trade war, imposing tariffs. You can tell by looking at the numbers. From Trump's first term, when he started the tariff war, until now, China's trade surplus has increased by 70-80%. Not just a little increase. Last year, 1.2 trillion US dollars. And the US trade deficit has increased again. So the tariff issue, economists knew long ago. Not just me, many people in the industry knew long ago. That relying on tariffs is useless. 7 or 8 years ago when I spoke out, others thought I was speaking based on a stance. Actually, no, I was speaking based on equations. Now the data is out, proving that economic laws are not wrong. So although Trump is erratic, he cannot be considered completely ignorant. Many people around him tell him that doing these things has little effect. So he has to talk to China. Just like the war in Iran, he said he won, but in the end, he still had to talk to Iran. Some logic has been inverted. Now, do you think what he says is very logical, or do you still think that? I think that person also needs to have his brain checked.
We wonder what views all our audience members have on China's economic growth in the first quarter. Welcome to leave comments in the comment section. Our first segment of the program ends here. Next time, we will talk about other issues concerning Hong Kong and China's economies. We'll see you in the next segment.