Let’s start with a true story, from a small and medium-sized business owner:
It’s the fourth day of the Lunar New Year, and I just received a call from the vice president. He was trapped. I can’t come back from Wuhan. As soon as I found out, it turned out that I was going to my wife’s house. Even if he comes back soon, he will have to self-isolate for 14 days before letting him go to work.
Our Factory B originally planned to start work on February 2nd. In the past two days, several bosses have been discussing, which day is the best day to start work?
Some shareholders proposed to postpone the work for a week and start construction on the 9th, just after the Lantern Festival, but I vetoed it.
The Lantern Festival is definitely the peak period of the outbreak. First of all, many people are on the way there, and potential people will definitely infect their fellow travelers;
Second, if one person breaks out after going to work normally, the entire factory may face the possibility of being closed for disinfection. According to the size of our factory with more than 500 people, it cannot withstand the torment.
First of all, with an expense of 4 million a month, a loss would normally occur in the first quarter, not to mention that there will be another quarantine and production shutdown?
Secondly, our customers are all large customers in the industry, and they place FCO orders for planned production. If production is stopped in the first quarter and the goods cannot be delivered, not only will compensation be required, but subsequent orders will be guaranteed. Can’t keep up. It is also impossible to get new customers.
Another major shareholder said abroad that he was so anxious that he couldn’t sleep every day, and there was a time difference with the country.
This epidemic is a matter of life and death for small and medium-sized enterprises like us. Unlike a company that is too small, it may be able to handle a small loss.
I am also anxious, but the national conditions are like this. What I can do is to ask the head of the production department to count the whereabouts of employees. Anyone who is heading to Hubei or has been to Hubei should not come to the factory to start work. Wait. Notification of the passing of the epidemic.
Everyone who enters the dormitory must go through various checks and confirmations before they dare to open the dormitory, and the wages of the suspended employees also need to be paid.
Several of my friends’ factories have notified that they will start operations on the 15th. During this time, everyone is discussing how to deal with the epidemic that may occur in the factory?
Needless to say, in 2020, you will definitely not be able to make money. This is already the mentality of everyone. If the epidemic is not fully controlled in February, many factories like ours may not be able to survive this year.
Moreover, after the outbreak of the epidemic, the upstream and downstream cooperation will also be affected, and there will be some bad cooperation with manufacturers to make a fuss. In the past ten years, we have experienced too many excuses to sacrifice others. The shopping mall is seeking the best interests for itself.
After doing some calculations, after the factory paid the year-end bonus years ago, the money in the account was only enough for two months of basic expenses. In the past, if we lost money in the first quarter, we would make even money in the second quarter. This possibility is gone this year.
In addition to the worries of being a boss, part-time workers are also worried that the boss will no longer make money and they will have to find a job again.
Each of our companies and every family must be attached to the country. If the skin is gone, how will the hair be attached?
As long as the epidemic is not lifted, our economy will remain frozen. This will naturally have a huge impact on our economy. But, how big is this impact?
(1) The impact of SARS on the economy
The severity of this epidemic is currently expected to exceed that of SARS. When SARS happened, it was 2003. At that time, we had just joined the WTO, were integrating into the world family, and were in the stage of economic take-off.
Although the occurrence of SARS caused a rare sharp drop in GDP growth in the second quarter of 2003, it did not change China’s overall rapid economic growth trend at that time.
In the second quarter of 2003, the GDP growth rate dropped from more than 11% to more than 9%. However, this growth rate is still very fast and quickly returns to the original growth level.
Although SARS severely damaged the tertiary industry, it did not change the rapid growth trend of China’s overall economy at that time. Statistics show that the growth rate of the tertiary industry in the second quarter of 2003 was only 0.8%, a 6.1% drop from the same period of the previous year. Among them, passenger transport, catering, social services, and tourism were particularly severely damaged, with passenger volume falling by 23.9%. Aviation dropped by nearly 50%
It can be seen that the SARS epidemic had a nearly devastating blow to the tertiary industry at that time, and even the entire retail industry suffered a cliff-like decline.
In 2003, our country’s economic structure was like this of: the primary industry contribution rate is 3.1%; the secondary industry contribution rate is 57.9%; the tertiary industry contribution rate is 39%.
It can be seen that the secondary industry contributed the most to economic growth at that time, accounting for 57.9%. However, the secondary industry was relatively less affected by SARS. This was mainly because the SARS outbreak was not the first to respond.Yuan.
The total GDP in the first quarter of 2019 was 21.34 trillion. Originally, in the first quarter of 2020, if the expected growth rate was 6%, the GDP in the first quarter of 2020 would be The total should increase to 22.62 trillion, and the growth rate is almost 1.28 trillion.
If we say that because of this epidemic, the GDP in the first quarter of 2020 will directly lose 1 trillion. Compared with the first quarter of 2019, there may even be 0 growth.
Because the tertiary industry currently accounts for a large proportion of our country’s economy, and it is also the main engine source of our country’s current economic growth. This will directly cause the economic engine in the first quarter of 2020 to suddenly stall.
But that’s not the worst problem. A sudden engine stall may cause cardiac shock, making this epidemic the straw that breaks the camel’s back.
(4) The last straw that broke the camel’s back
In the two years starting from January 2018, our country is in the most critical period of economic transformation.
Because the growth rate of the entire economy has dropped sharply, there has been great downward pressure on the economy. This directly led to a problem: corporate bond default rates began to rise.
As can be clearly seen from the above figure, starting from 2015, my country’s bond defaults began to break out frequently and reached a peak in 2018. , and in 2019, the defaulting entities, the number of defaults, and the amount of defaults were basically the same as last year.
This means that the phenomenon of corporate bond defaults in our country is no longer just a short-term phenomenon, but has become a continuous phenomenon.
This is a very dangerous signal!
From 2014 to 2016, our country had a concentrated water release. Many entrepreneurs blindly embark on projects, borrow money to invest, make acquisitions in the stock market, and then raise funds to draw blood. Many of these investments were lost in the following years due to the pressure of China’s economic transformation.
From 2018 to 2020, we have also entered the peak period of debt repayment. The investment failed, too much money was borrowed, and the capital chain suddenly became tense. In this case, there are many private enterprises that have taken too big a step and the entire enterprise collapsed.
There are two types of default rate calculations here. One is to divide the bonds that defaulted this year by the total existence of the entire bond market, which roughly means that bonds that have not yet matured for repayment in the future are also included.
Including bonds that have not yet been repaid when due, the default rate of private enterprises is as high as 12.5%. In other words, 1 out of every 8 private enterprise bonds due this year is in default. This ratio is terrifying.
Originally, 2020 was the peak period for corporate defaults.
In this case, some private enterprises that are already strapped for funds may be hit by the epidemic and become the straw that breaks the camel’s back.
We need to know that the modern economy is basically driven by consumption. Consumption → Corporate profits → Expand production → Stimulate consumption! This will form a cycle of economic growth.
But the problem is that due to the outbreak of the epidemic, people across the country can only stay at home, which has reduced their desire to consume. In this case, the revenue and profits of most companies will be affected.
And if this happens to coincide with the company’s peak debt repayment period, the company’s capital turnover is likely to have problems.
If some companies go bankrupt because of the rupture of their capital chain, then employees will lose their jobs or overall income will decrease, which will further reduce people’s desire to consume. In this case, the reduced consumption Desire will further reduce the company’s revenue and profits, which becomes a vicious cycle.
This is directly reflected in the capital market. Although A-shares are not currently open, there are overseas A50 futures indexes that track A-shares, which gives a more realistic reflection of the possible opening of the stock market after the holidays.
After the A shares closed on January 23, A50 had fallen by more than 7% in 3 days.
If the epidemic cannot be effectively improved before February 3, A-shares may even experience a tragic opening drop of more than 6% on the opening day of February 3. This is an intuitive reflection of the current stock market’s concerns about an expected economic growth.
In other words, it is very likely that the originally benign economic growth cycle will suddenly go into shock due to the short-term economic freeze caused by the epidemic, thus breaking the benign cycle. The economic growth cycle has turned into a vicious economic cycle.
This may lead to a result – a world economic crisis.
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