**Global Value Investing and the Times**
**I. The Perplexities of the Times**
**1. Domestic Aspects**
– The employment pressure is high, reflecting problems in the private economy. Private entrepreneurs face issues regarding property and personal safety.
– Consumer confidence is insufficient. The shrinkage of wealth assets such as real estate affects consumption confidence and future expectations.
– Economic policies are mainly focused on the supply side. However, the current problems mainly lie on the demand side, leading to deflation and a phenomenon of “intense competition”.
– The bureaucratic system lacks an effective incentive mechanism, resulting in a “lying flat” phenomenon that affects policy transmission and implementation.
– China’s manufacturing industry has high added value, but the consumption proportion is low. Half of the commodities need to be sold to developed countries or through re-export trade via Southeast Asia.
**2. International Aspects**
– The United States is questioning its role in the international community. It once played the role of an “anchor” and constructed the international system.
– The United States believes that China’s rise has taken a free ride on its order and poses a challenge, triggering changes in Sino-US and Sino-European relations and the evolution of the international order.
**II. Reflections on These Perplexities**
**1. Historical Patterns**
– All countries will enter an intermediate consolidation period after industrial takeoff and entering the middle-income stage. China is currently in this stage.
– The essence of modernization is economic growth brought about by the combination of market economy and modern technology. However, changes in social governance and other aspects are slow, creating a gap.
**2. Specific Examples**
– Concept of land: In the agricultural civilization era, land and population were important. In the era of modern technological civilization, the circulation of markets and production factors is more crucial. World War I and World War II were triggered by the obsession with land. After the defeat of Germany and Japan in the war, they achieved borderless economic growth.
– Distinction between real economy and virtual economy: Taking games, software, and Nvidia as examples, it shows that the boundary between the two is blurred, and old concepts affect the judgment of the economy.
– Government functions: At the domestic level, major economic decisions in a market economy should be made by entrepreneurs under full competition. At the international level, China’s government decisions affect the world. It should transform from a commanding and guiding type to a republican, consultative, supportive, and service-oriented type.
**III. On the Middle-Income Trap, the Leap of Middle-Income Countries, and Current International Relations**
**1. Characteristics of Economic Growth**
– The continuous growth of 3.0 economy stems from the full exchange and circulation of economic factors, bringing increments such as commodity, service, and ideological exchanges.
**2. China’s Current Situation and Challenges**
– In China, the proportion of personal consumption is low and the savings rate is high. The state-owned banking system finds it difficult to effectively allocate savings, and the capital market system is imperfect.
– Taking the development process of the modern financial system as an example, from Venice to the Netherlands and then to the United Kingdom, it expounds the importance of the capital market and credit system.
– China has a similar historical opportunity as the United Kingdom. That is, Hong Kong has the elements of a modern capital market but has not been fully utilized and faces some problems.
– To achieve Chinese-style modernization, China needs to maintain the commonalities of the market economy, respect individuality, test with practice, and promote spontaneous and sustainable economic growth. The key is to increase the proportion of personal consumption in GDP.
– Economic growth needs to find a breakthrough point. All nodes are interrelated, and any one of them can start a chain reaction. We need to reignite, activate, and connect all elements.
**IV. How Should Global Value Investors Respond to the Challenges of the Times?**
**1. Basic Attitudes**
– Accept the macro environment and make a difference at the micro level and in specific companies.
**2. The Essence of Wealth and Investment Goals**
– For example, land, cash, real estate, etc. are not lasting wealth. In modern society, wealth is the proportion of purchasing power in the economy.
– The purpose of investment is to preserve and increase purchasing power. For global value investors, it is necessary to find excellent companies in the most dynamic economies in the world and maintain and increase the proportion of purchasing power.
– Value investing can highlight its advantages in times of macroeconomic turmoil. For example, Graham, Keynes, Templeton, etc. achieved success in practicing value investing in difficult times.
– The concepts of value investing include six points: stocks represent company ownership, Mr. Market provides services, there must be a margin of safety, clearly define the circle of competence, fish where there
