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China has banned the Twitter-like Weibo account of Ren Zeping, an Internet celebrity, and a former economist in mainland China. Ren was also the chief economist for Evergrande China Group, one of China’s largest real estate developers, which is now mired in debt.

At the top of Ren’s Weibo account, the notice said he had “violated relevant laws and regulations.”

What had Ren posted on his Weibo account?

On January 10, 2022, Ren posted an article titled, “The Solution to Findings of Low Fertility — The China Fertility Report.” His article stated that the main reasons for low fertility are the high cost of raising children and high housing prices. Therefore to solve the low fertility rate, China must reduce the cost of raising children. Ren believes that establishing a fertility incentive fund may stabilize growth and boost domestic demand in the short term. It can improve the supply side, optimize the population structure, and help national rejuvenation in the long run.

In his post, Ren suggested that the central bank print 2 trillion yuan (US$314 billion) to support the birth of 50 million babies over the next ten years.

Why 2 trillion yuan? Ren explained that family social welfare expenditures related to childbirth incentives account for two to three percent of GDP in OECD countries OECD stands for the Organisation for Economic Co-operation and Development. It is is an international organisation that works to build better policies for better lives. China’s GDP is 110 trillion yuan, so Ren believes the incentive fund should be 2 trillion yuan.

Ren’s figure of 50 million childbirths for ten years is an estimate based on the assumption that 15 million babies are required annually to stabilize the population. There are about 10 million per year using the 2021 low fertility rate of 1.1 percent. So 5 million per year for ten years is 50 million in total.

Ren also urged the authorities to establish the fund as quickly as possible. “We must seize the time when we can still have children from those women born from 1975 to 1985 because they still believe that having more children is a blessing. He reminded that the post-90s and post-2000s generation would not want to discuss having a second or third child. Many people are not even willing to get married.

Why was he banned on Weibo? Some speculated that Ren might have hit a nerve with the authorities. The economic strategy proposed by Ren reflects an unspoken consensus among Chinese economists; that is, the regime’s economic model may have come to an end. The regime has tried to control the high housing prices. In the past, China’s inflation and debt risks were mainly absorbed by real estate. Printing money for more childbirths now would likely increase prices and be suicidal. It could push the Chinese economy further into a recession.

Source: sina.com, January 10, 2022
https://finance.sina.com.cn/zl/china/2022-01-10/zl-ikyakumx9364507.shtml

Mainland Chinese newspaper The Paper reported that there were 7,441 graduates from the country’s prestigious Tsinghua University class of 2021, a slight increase of more than 400 over the class of 2020. 3,669 of them signed a “tripartite employment agreement.” The tripartite employment agreement refers to the agreement signed by graduates, employers and schools to guarantee the rights and obligations of the student. Among those, 15.8 percent secured their first jobs in the Chinese Communist Party (CCP) and in government organizations, 30.3 percent found jobs in institutions such as universities and research units, and 23.8 percent in state-owned enterprises. In short, a total of nearly 70 percent entered the state related sector.

In comparison, in year 2019 and 2020 respectively 61.2 percent and 64.9 percent of Tsinghua graduates found their jobs in the state sector. The proportion in 2021 is not only higher, but also growing at an accelerated pace.

As a matter of fact, the high percentage of graduates from China’s top universities looking for government related jobs is no small number. For example, 50.05 percent of graduates from Shanghai Jiaotong University entered CCP and government organs, institutions, state-owned enterprises and the military, while the percentage from Xiamen University graduates was nearly 60 percent.

As the economy slows down, new graduates prefer the state sector, so they have stable jobs. This is a manifestation of people’s assessment on their prospects for the near future. According to China’s Ministry of Education, there will be 9.09 million college graduates in 2021, a year-over-year increase of 350,000, and another 10.76 million college graduates in 2022, an increase of 1.67 million. Tackling unemployment is a major challenge for the Chinese government.

Source: The Paper, January 3, 2022
https://www.thepaper.cn/newsDetail_forward_16131271

As China’s economy is plagued by sagging demand, the uncertainty of supplies and lower expectations, the government once again has

resorted to massive infrastructure projects to stimulate growth. After only 10 days into 2022, China has already started over 5,000 major infrastructure projects, with a total investment of more than 3 trillion yuan (US$ 0.47 trillion).

At an Economic Work Conference in December 2021, the central government proposed to “deploy infrastructure investments ahead of the time,” implying an increase in infrastructure investments in 2022. At the time, the Ministry of Finance issued an added quota of 1.46 trillion yuan (US$ 0.23 trillion) for the special debts in 2022.

At the beginning of the year, several provinces disclosed plans to issue local government bonds in the first quarter, on the scale of about 800 billion yuan (US$125 billion), including over 550 billion yuan (US$86.3 billion) in new special bonds. Other financing tools are also being promoted, including real estate investment trusts (REITs) in the infrastructure sector, the green government-social capital cooperation (or Public-Private Partnership PPP) projects.

The Securities Times, a mainland based financial news outlet, reported that as of January 10, at least 11 provinces have held project start-up activities, involving more than 5,000 major projects with a total scale of investment of more than 3 trillion yuan (US$0.47 trillion). This compares to the level of 1.2 trillion yuan (US$0.19 trillion) from January of 2021. The key areas of investment include 5G network, industrial Internet, Internet of Things, artificial intelligence, and big data center.

Source: Securities Times, January 11, 2022
https://www.stcn.com/stock/djjd/202201/t20220111_4058632.html

China has issued updated guidance for businesses that wish to close their doors. In 2021, for the first time in twenty years, small business closures exceeded new openings .

On December 29, 2021, five state agencies jointly issued the “Guidelines for Enterprise Deregistration (Revised in 2021).” The five state agencies are the State Administration for Market Regulation, the Ministry of Human Resources and Social Security, the Ministry of Commerce, the General Administration of Customs, and the State Administration of Taxation.

Before a business officially terminates, the Guideline requires the company must declare its dissolution, establish a liquidation team, liquidate its property, pay taxes, clear up debts, and pay employee wages and social insurance. After the liquidation, the business can deregister and ceases to exist.

The authorities updated the deregistration guideline after the time when many small businesses folded in 2021.

According to the South China Morning Post, in the first 11 months of 2021, about 4.37 million Chinese small and micro businesses closed their doors. That was more than three times the number of small and micro enterprises that opened in the same period.

On average, more than 390,000 small and micro businesses deregistered each month in 2021, compared to 370,000 in 2020. The deregistration in 2021 also outnumbered new registration for the first time in 20 years.

It is predicted that the 2021 annual deregistration is likely to exceed the all-time high of 4.45 million in 2020. The 2020 number almost doubled that of 2019, and the 2019 number was about ten times that of 2018.

Small and micro businesses are an important foundation of China’s national economy, accounting for half of China’s tax revenue, 60 percent of GDP, and 80 percent of urban employment.

Sources:

China Central TV, December 29, 2021
https://news.cctv.com/2021/12/29/ARTIl4ZXOwvvYGcfrkqwHLUp211229.shtml

Zaobao.com, December 31, 2021
https://www.kzaobao.com/shiju/20211231/107661.htmlthe

Shanghai-based Chinese financial news site East Money recently reported that, at the 2021-2022 China Economics Annual Conference held on December 11, Ning Jizhe, deputy director of the National Development and Reform Commission and director of the National Bureau of Statistics, once again set the tone and emphasized “real estate is a pillar industry.” The Last time the same policy tone was set was in 2017. Based on the Central Economic Work Conference’s requirement on economic stability in 2022, this new signal is clear: economic stability requires real estate market stability. Analysts also pointed out that, as the pillar industry of the domestic economy, real estate needs to continue playing the role of the economic stabilizer. The reason is that real estate industry accounts for a relatively high proportion of the national economy and there are many related industries. Objectively speaking, real estate must develop stably and healthily. Otherwise it will have a greater impact on the industrial economy, the national economy, and macroeconomics. Usually after such tone-setting, it is expected that a series of local policies supporting real estate will be introduced.

Source: East Money, December 20, 2021
https://caifuhao.eastmoney.com/news/20211220183703403330760