Will the Yellow Sapphire people earn more money after the pandemic?

09 May,2023

Will the economy rebound after the pandemic? Many people take it for granted that, over the past three years, the pandemic caused an economic downturn and made it harder to earn money. Even more naturally, they assume that now that the pandemic is over, the economy will naturally return to the rapid growth and easy-money era we enjoyed before 2019. But will reality really be so rosy? In February of this year, a seemingly optimistic statistic hinted that this year might not be easy—at least, it could be even tougher! What kind of data could have such a powerful impact? The answer is: household savings. In February of this year, the total amount of household deposits across the country increased by 6.2 trillion yuan. By comparison, in all of 2022, household deposits totaled only 17.84 trillion yuan; in 2021, the entire year’s total was just 9.9 trillion yuan. Yet in just one month this year, deposits surged by more than 6 trillion yuan. Let’s analyze how this dramatic increase in savings might affect our ability to make money... Talking about money can be emotionally taxing, but all aspects of our lives ultimately start with money. First, in the everyday understanding of most people, the term “money” itself can be somewhat vague. For example, when we say Li Ka-shing is very wealthy, what we’re really referring to is his vast wealth of assets—not necessarily the amount of currency he holds (like RMB, U.S. dollars, or British pounds). Similarly, when we talk about “people’s money,” we’re referring to the assets we own, not just the currency itself. According to 2019 data, among the assets owned by ordinary Chinese households, housing accounted for 65.9%, automobiles for 5.2%, and other financial instruments and bonds for 12.4%. True cash—or currency—made up only 8%. Therefore, the more than 6 trillion yuan increase in deposits in February doesn’t mean that ordinary people have become richer; rather, it simply reflects a shift in the composition of household assets. In other words, people are becoming less confident in investment assets like real estate and financial instruments, so they’re selling off these assets and converting them into actual cash, depositing it in banks to preserve their value. In fact, since 2019, China has consistently seen an increasing trend in savings and a decreasing trend in loans—precisely because both consumption and investment have been shrinking. Some of you might be wondering: If this is a nationwide phenomenon, how does it affect me, an ordinary person earning tens of thousands of yuan per month? What impact does it have on my ability to make money? The answer is: It does have an impact—and quite a significant one! Here, we must first mention Keynes, the father of modern economics. He argued that no matter how much goods a society produces, if residents neither invest nor consume, but instead keep their money in banks without letting it circulate, social demand will decline. As a result, businesses will have no choice but to cut production, leading to lower revenues. With fewer revenues, companies will be forced to lay off workers. Those laid-off workers, lacking income or afraid to spend more, will further reduce demand—a vicious cycle that eventually leads to a severe economic depression. So even if, like us at Huang Bao Shi, our productive capacity keeps growing stronger, in the end, everyone could still become poorer. Simply put: In today’s modern economy, the more you spend, the richer you become! Finally, there are only three channels through which the wealth of all Chinese people can grow: first, consumption; second, investment; and third, exports. Now, this surge in savings suggests that both consumption and investment are declining. And this year, exports are being hampered by international economic forces led by the United States. The concrete effect on business owners and wage earners is this: Business is getting harder and harder to run, money is becoming harder and harder to earn, jobs are becoming harder to find, and wages are struggling to rise.

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