How long can a middle-class family survive in the epidemic?

There is a paragraph about the Spring Festival-Linda, Vivian and Julia in the office building. After the Spring Festival, they turned back to the emerald flowers, little red and girl eggs in the village.

This paragraph, which has been repeatedly used for recreation, is because those English names that seem to give people a feeling of middle class, although we have no clear definition of “middle class” so far, although we actually believe that government officials, Business owners, foreign company executives, and urban white-collar workers are the standard middle class.

What is the “middle class” after the outbreak of new crown pneumonia in the Spring Festival? Will Cuihua, Xiaohong and Yadan turn into Linda, Vivian and Julia again? This requires us to have a new understanding.

From lobster to instant noodles
Middle-class parents used to send their children abroad to participate in winter camps during the winter vacation. Two weeks later, the children who returned home would tell a story of a happy campfire or meet new friends from other countries.

“But now we cancel this plan.” Standing opposite the reporter of “Southwindow” was a construction material supplier and the father of two children.

The cancellation of the plan, in addition to safety concerns, has to do with the fact that their home’s cash flow has become crumpled. The father invested in several stores in 2019, but did not expect that the arrival of the epidemic not only failed to achieve the expected booming business, but also increased the pressure to repay loans.

“But I still bought a Switch in Haitao and let the children play” Fitness Ring Adventure “at home to make up for the feeling that they can’t go abroad.” The father added.

Some thousands of yuan of electronic equipment were used to replace a winter camp of tens of thousands of yuan. Some people said that the epidemic had escalated the consumption of the whole country and brought back consumption downgrade.

The statistics of Ali big data is a cross section. Data show that during the epidemic period, the e-commerce consumption performance of the 30-35 age group was the worst, with the consumption amount shrinking by about 20% compared with the past. .

The sentiment of consumption degradation also spread to the family’s three meals a day.

Lobsters and salmon, which are frequented by friends, are very popular “hard vegetables”. During the epidemic, there was a backlog of markets. For this reason, most commercial supermarkets not only have to discount promotions, but also simply ask consumers to “help out” in advertising.

In contrast to the unattended lobster, instant noodles are sold out. In early February, Suning’s big data showed that instant noodle sales surged about 350% from the previous month. Fast food is popular, in addition to their convenience and speed in use, but also because they symbolize a certain sense of security.

Lack of security is not unique to China. When the epidemic suddenly came, Costco of the United States launched “Canned Doomsday” in early March. As the name suggests, it was hoarding grain, and there was nothing to worry about when the holy day came.

As a result, the “doomsday package” is selling well. Everyday Americans who are pursuing fresh, organic fruits and vegetables and regard canned food as unhealthy food, this time they are scrambling to move home hundreds of super canned foods that can be used by 4 people a year and have a shelf life of 25 years.

From cancelling travel to competing for fast food, a series of behavioral changes during the epidemic can be considered to a certain extent-in order to hedge the cash flow “looted” brought by the epidemic, countless families have chosen to “spend”.

Support, the word accurately conveys the anxiety that most families are currently experiencing with cash flow depletion-the obvious anxiety.

Provide housing, cars and taxes every month, let children receive a good education every semester, provide maintenance for the elderly every year, and set aside some money for medical treatment to deal with a sudden serious illness or an accident and many more.

For many Chinese families, almost every day they open their eyes, it is necessary to know exactly what the monthly or even annual expenditure is at least. To safeguard an absolutely stable and long-term source of funding, no one dares to slack off.

When the “black swan” of the new coronavirus flaps its wings, the main concern of most families is wage income. In the case of inability to start or in the near future, wage income will definitely decrease. But most of the overhead is rigid and it is difficult to reduce demand.

Like education. Social competition has intensified, and the idea instilled in everyone is that no matter how poor, education cannot be poor. Ask yourself to get a certificate, or send your children to an interest class of piano, chess, calligraphy, painting and calligraphy, and spend thousands of them at any time.

During the epidemic, e-commerce consumers in the 30-35 age group performed the worst, with the consumption amount shrinking by about 20% compared with the past. Sales of so-called high-end skin care products, high-end wines and other products that the so-called “new middle class” usually enjoyed plummeted.
In addition to wages, property income is not optimistic, for example, the return on investment will also decline. This is indeed the case with the current market response. Since the epidemic, we have not only witnessed a sharp drop in the stock market, the US dollar index has fluctuated sharply, and traditional safe-haven asset gold has fallen by more than 3% on the last trading day of February.

The “basket” of real estate
The reasons for “consumption degradation” in people all over the world are almost the same, such as lack of money. However, because the national conditions of different countries are different, the matching structure of household assets is very different, so the methods of raising money are different.

From a macro perspective, this epidemic is a big test for China and a big test for the whole world. On the micro level, it can be understood as a big test for the family, such as family asset allocation. Let’s first look at the asset structure of Chinese households.

In the 1980s and 1990s, Chinese families did not have much wealth at all, and people’s attention was focused on making money, without the challenges of financial management and the desire to invest. However, in recent years, especially in most cities that started around 2016, housing prices have jumped, instantly subverting the wealth outlook of most Chinese people, and the assets of homeowners have swelled like a balloon.

A new question is also coming up-how to allocate the investment portfolio so as to maximize the preservation and appreciation and minimize the risk? The “Chinese Family Wealth Survey Report” gives an answer: continue to buy a house. Data show that in 2019, the proportion of households’ per capita property growth from the net value of real estate reached 91%. And this value was not low in 2016, it was 68.8%.

The report used the expression “crowding effect of real estate” to highlight the phenomenon of maladjusted household asset allocation in China. This also corresponds to the frequent news of some people applying for delayed repayment in this epidemic.

Notable are two sets of data.

The first set of data: In January of this year, the transaction volume of second-hand housing in key 18 cities decreased sharply, down 38% month-on-month and 27.3% year-on-year, indicating that the impact of the epidemic on real estate was obvious. History has long been forewarned. In the first peak period of the H1N1 outbreak in the United States in 2009, the industries most affected were real estate, with a capital withdrawal rate of 12.72%.

The second set of data: SARS in 2003, nearly 8 million people were registered as unemployed. Imagine if a person carrying a huge mortgage had lost his job and lost his income in this epidemic with a larger area of ​​influence, then it might be a family that was changed.

During the epidemic, a mother who worked in the education industry recommended her best-selling book, Rich Dad and Poor Dad, to her daughter who was in junior high school. The mother told the reporter of “Southwindow” that the author Robert Kiyosaki said that the house is a liability rather than an asset, which has been ridiculed by many people in the past 20 years. now what?

It can be seen that household assets will be affected in this outbreak due to the excessive concentration of real estate allocation. That’s why economists always repeat the old saying: Don’t put eggs in a basket.

This is why recently, we have frequently seen different financial institutions “make up lessons” for our wealth management, and guide families in the short, medium and long-term how to make more reasonable cash flow planning. In any case, there must be alternative repayment plans. The epidemic situation has awakened the sense of risk protection of Chinese families to some extent.

So, in addition to the impact of tangible assets such as real estate, financial assets? Looking back on the outbreak of the new crown pneumonia epidemic, you will find a very interesting phenomenon. The stock market has experienced a sharp decline and a sharp rise.

The reason lies in the “external shock” factor of the epidemic. In the early stage of the epidemic, the capital market was aware of it later, and when it suddenly became aware of the severity of the epidemic, it was easy to overreact and panic selling. But this kind of panic can be eliminated in a short time, so the repair market will open and often rebound.

This phenomenon also explains to Chinese families from another angle why they should invest in diversification instead of exposing too much to several stocks, one asset area or one asset class.

For example, if you have over-invested in industries such as catering and tourism that were affected by the epidemic in the early stage, instead of investing in industries such as medical care and online entertainment, then the ability to hedge risks is obviously not high in the face of the epidemic.

Objects and methods of rescue
One of the data that we have overlooked is that the mortality rate of new coronavirus is 2%, and the mortality rate of starvation is 100%. So to a certain extent, the real challenge is just beginning—stop the economic downturn and ensure that every family has money in their pockets.

At the beginning of the outbreak, there were media reports that a pregnant woman in Huanggang was infected with the virus. She spent 200,000 yuan borrowed from relatives and friends and did not see improvement, and eventually had to give up treatment.

In order to avoid the recurrence of such abandonment of the doctor, the central government has made it clear that the medical expenses of both confirmed and suspected cases should be financed.

The introduction of the state payment policy is a great relief to the millions of Chinese families under the haze of this cold winter epidemic.

The pace of defending household cash flow has never stopped, and a major move is the central bank’s monetary policy.

In order to “maintain reasonable and adequate liquidity of the banking system and the stable operation of the currency market during special periods of epidemic prevention and control,” on February 2, the central bank invested 1.2 trillion yuan in a single-day reverse repo operation in the open market. Two days later, 500 billion yuan was invested again.

In layman’s terms, this is to give the market a “centering pill” that injects huge amounts of money, and there are more currencies in the market that can flow freely and trade freely.

However, not all easing is productive. For reference, the financial crisis of 2008-after entering the 21st century, major global economies have adopted long-term, large-scale loose monetary policies to stimulate economic development.

For the rescue of enterprises and individuals, most of them follow the basic principles of limited scale, targeting vulnerable groups and respecting the laws of the market.
It seems that this “good money” society is coming, but its essence may have created a larger bubble to hold up the original bubble. It destroys ordinary people’s savings.

In the short-term, the chain reaction is: the destabilization of funds to the false. Hot money will flow into the property market, stock market, etc., rather than physical enterprises. Enterprises without money cannot invest, produce, and make profits, which leads to the company’s employees not receiving high salaries.

At this time, it was found that the cash flow of the family was a positive relationship with the real economy. In other words, to protect the cash flow of the family, to revitalize the physical enterprise, to have enough space for entrepreneurship and employment is the focus of current work. Policy makers clearly see this. The People’s Bank of China and other financial regulators have jointly issued 30 policies and measures to support enterprises severely affected by the epidemic, especially small and micro enterprises, private enterprises and manufacturing.

In terms of restoring production and post-disaster reconstruction, the experience of other countries is worth learning from. For example, for the rescue of enterprises and individuals, most of them follow the basic principles of limited scale, targeting vulnerable groups and respecting market laws.

In 2011, Japan was devastated by the magnitude 9.0 earthquake and the tsunami and nuclear leaks that followed. The Japanese government characterized it as the biggest crisis in the 60 years since the war.

Affected directly or indirectly by the disaster, in 2011 alone, 12,734 companies in Japan closed down. It can be seen that not only the suffering of the affected people is unbearable, but also the entire Japanese economy has been hit hard.

In addition to increasing market liquidity, the government’s main rescue measure is to provide limited credit guarantees to SMEs on a limited scale, and to provide Japanese with vocational training and opportunities to interface with SMEs.

At the same time, attention is paid to assistance for individuals and families. The Japanese method is to establish a family property earthquake insurance system that is jointly operated by private insurance companies and the government.

In this system, all commercial insurance companies are responsible for claims with an amount of less than 75 billion yen. For claims between 75 billion and 810 billion yen, half will be borne by each commercial insurance company and the government. Between 810 billion yen and 400 billion yen, the government is responsible for 95%, and various commercial insurance companies are responsible for 5%.

This “tiered technology” of claims is essentially a risk sharing, which can minimize the moral hazard of the aided enterprises and institutions, and it is worth learning for those economies with strong “rescue resources” but low efficiency.