Short 🧵 on China’s “new” strategy of focusing on manufacturing. I quoted before CHEN Li, chief economist at Soochow Securities, whose speech on this went viral. He had said China going Germany path vs. US. Here’s his evidence for saying so:
1. 2021 Central Political Bureau meeting, the government work report meeting, specifically proposed that the proportion of manufacturing in GDP will no longer decline.
2. In the past nine months, almost all occasions in China have eliminated the statement that "the proportion of service industry should be increased" and "stimulate the development of tertiary industry".
3. In 2021, manufacturing financing accounts for nearly three-quarters of the total size of A-share IPOs, a record high. (I don't think this is that compelling, but since China is an approval-based listing environment, it does say something about government objectives.)
4. Service industry is going 'from unregulated to regulated', 'from general regulation to strong regulation', and this is likely to be only the beginning. (This I absolutely agree with, the question is do we know exactly what "strong regulation" means?)
5. The total size of the labor force has been declining since 2017, and the total population size is set to peak in the next few years. Thus, there will be less need for the service sector to solve the problem of new employment, and instead the manufacturing sector will be needed
to solve the problem of rising labor costs due to labor shortages. (This is where folks get confused, it’s about *upgrading* mfg and advancing tech / increasing productivity bc in fact there are not enough laborers, not about creating jobs.)
Here’s his original comment. It’s just one side IMO, there are definitely other factors, but it seems to be a good sound bite that makes sense to people, and so I’ll paste it here again:
https://twitter.com/ruima/status/1420109129847214084
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