**Preface** Recently, the macroeconomic data for our country in August has been released.

First, the CPI (Consumer Price Index) and PPI (Producer Price Index) both fell short of expectations compared to the previous period.

Secondly, the PMI (Purchasing Managers' Index) has been below the boom-or-bust line for several consecutive months.

Up to now, although the data on the growth rate of social financing has not been released, the social financing situation in our country last month, that is, in July, was not ideal: Although the broad money supply (M2) has narrowed, the social money circulation (M1) has also declined, and even fell to a negative value for two consecutive months, the lowest in more than 40 years of statistical data.

In addition, the gap between M2 and M1 continues to widen, indicating that the willingness of enterprises to invest and produce continues to decrease, and the income and profits of various sectors of society have declined.

As the three major engines driving macroeconomic growth, the current development momentum is not optimistic: In the real estate market, the sales data of second-hand houses are far from expectations, and the sales volume of the top 100 real estate companies has been on a downward trend for more than 20 months, with a significant reduction in the area of new construction and completion, the price of new houses in 70 cities nationwide has decreased by 30% year-on-year, and the price of second-hand houses has decreased by nearly 50%, in a state of being halved.

Advertisement

In terms of investment, private investment has long been extinguished, and administrative investment has turned its course, causing infrastructure and real estate investment to also be extinguished; the expenditure of residents and enterprises has shrunk, and they have fallen into the quagmire of the balance sheet recession, and the entire society has fallen into a shortage of investment targets.

As for consumption, the consumption of bulk commodities has been on a downward trend for several consecutive months, and the retail field of daily consumer goods, which performed well in previous years, has also shown a rare downturn in the second half of this year, with a decrease in the number of tourists and travelers in various places.

The above is a factual judgment based on past economic data.

Recently, there have been three major important signals, indicating that the macroeconomy is about to launch an active defense battle, and these three signals are: increasing U.S. debt, reducing mortgage loans, and boosting consumption.

Recently, the central bank has increased its holdings of U.S. debt by more than 10 billion, ending a trend of selling U.S. debt for more than ten months.

Why is this?

I think: First, this move is to cope with the upcoming interest rate cuts in the United States, causing up to 200 billion U.S. dollars of stranded funds overseas to be exchanged and flow into the country.

The central bank needs to increase its holdings of U.S. debt to carry out foreign exchange sales, thereby replenishing foreign exchange reserves.

In addition, due to the long-term reduction of U.S. dollar assets such as U.S. debt, the net outflow of foreign exchange reserves has led to this approach to make up for the fault and prevent risks.

Second, as the world's largest producer and exporter, its sovereign currency is not the main settlement currency of the economic and trade globalization system, and it still needs to provide transaction credit through the U.S. dollar as an intermediary.

Since this is an objective fact, increasing holdings of U.S. debt to enhance the transaction value of the sovereign currency is still the most effective and direct operation method.

Third, to expand the intensity of high-quality opening up, and to restore the confidence of foreign investment in China and business operations, and to stabilize the value of domestic assets, the holdings of U.S. debt are increased.

At this stage, whether our country continues to sell U.S. debt, that is, "de-dollarization," is feasible?

I think this approach is not feasible, and the specific reasons are as follows: First, our country is in the transition period from an export-oriented type to a domestic demand-driven type, and the export of low-end manufacturing products is still an important industry or field to support the growth of our country's macroeconomy.

It is undeniable that the demand market that can digest the huge capacity of the world's factory is only a few developed countries or regions such as Europe, America, and Japan.

Since demand determines supply and consumption determines production, we can only embed in the commercial and trade system constructed by the demand side, such as pricing and settlement rights can only be controlled by the other party, not only can't sell a large amount of U.S. debt, but also have to use the interest it generates, that is, the U.S. dollar, to go to the system to settle our labor results.

Second, at least so far, our country's sovereign credit, currency, and its assets cannot "de-dollarize" because the social concept of the market economy and capital transactions is not keeping pace with the times and updating, and all aspects of society are relatively closed.

Third, "de-dollarization" means "cutting the mat" with various globalization orders or international multilateral systems dominated by the other side of the ocean, and at this stage, we do not have the strength to establish a new system that is more in line with the operation of the market economy than the system dominated by the U.S. dollar.

Not only can't "de-dollarize," but also make full use of the globalization system dominated by the U.S. dollar, and support it to bring us the maximum benefits.

Fourth, the so-called "de-dollarization," that is, selling U.S. debt, no matter how much it is reduced, it cannot change the objective fact that it is always the most high-quality asset target in the world.

How to judge U.S. debt as a high-quality asset?

First, according to the willingness of market investors to hold, the market recognizes its transactions; second, the turnover rate is always high, and the price tends to be stable, and it also has a long-term upward trend; third, its price-earnings ratio and price-to-book ratio are stable within a certain range, and the growth expectation of the outside world, that is, the valuation is always within a reasonable range; fourth, the associated entities anchored to it are sufficient to form a sustainable investment net return, which supports its valuation to show a long-term upward trend.

Of course, the above four aspects are only for a single asset judgment, and in addition, it is necessary to judge whether the asset transaction is restricted or the asset pricing is reasonable according to the market capital system norms and whether there are regulatory measures for transaction volume or trading methods and other restrictions on transaction circulation.

By using the above practical methodology and mathematical logical thinking to judge whether U.S. debt is a high-quality asset, as long as you abandon the so-called standpoint of the team, I believe that anyone can draw a conclusion that conforms to the objective facts.

According to domestic media exposure, our country is about to implement two reductions in the interest rates of personal housing loans in stock, and it is adjusted and reduced immediately, without waiting for the next year, the owners of existing housing loans can enjoy this treatment.

Why did the above choose to reduce the interest rates of existing housing loans at this moment?

First, the group of existing housing loan owners is huge, and the interest rate difference between existing housing loans and incremental housing loans has been substantial for a long time, which has been damaging the interests of existing housing loan owners, and this move is a disguised subsidy for new homebuyers.

Secondly, in the face of the current macroeconomic situation, that is, income is decreasing, and savings cannot keep up with inflation, this group still needs to maintain the rigid expenditure of the principal and interest of high-interest existing housing loans, which will eventually lead to them being unable to make ends meet, unable to support themselves, and unable to repay their debts.

People who want or have the ability to maintain personal or family credit choose to repay the loan in advance to end the pressure of debt brought by high-interest positions as soon as possible, that is, to repair the balance sheet as much as possible.

And those who do not have the ability to maintain credit or cannot be in the debt repayment stage for a long time can only choose to default, and financial institutions confiscate their properties as law-auctioned houses.

However, the surge in law-auctioned houses leads to an increase in the mortgage default rate of financial institutions, and the non-performing loan ratio of related assets also rises, which is undoubtedly a blow to financial institutions in the environment where the net interest margin is continuously shrinking.

Therefore, at this time, there is only one way to alleviate the pressure of the surge in negative assets of banks and other financial institutions, and to reduce the probability of early repayment and default, that is, to reduce the interest rates of existing personal housing loans.

Next, the interest rate of existing housing loans is really too high compared to incremental housing loans, and the burden on ordinary families and the residential sector is too heavy.

In addition to early repayment and default, it has already had a certain negative impact on them and even the entire society, such as the retail of daily consumer goods and bulk commodity consumption has been declining for several consecutive months, leading to insufficient actual purchasing power of various social strata, and then there is insufficient domestic demand, sluggish consumption, and overcapacity, which continuously worsens the development of the real economy and the basic situation of the social system.

To a certain extent, reducing the interest rates of existing housing loans can reduce the pressure of family departments to repay debts, and release consumption demand or create new supply in a short time, thereby driving the purchasing power of residents to rise.

By giving up the profit of the financial supply side, it gives a subsidy to the family department's mortgage loans.

But I personally think that reducing the interest rates of existing housing loans is a means of monetary policy, which is subject to the transmission mechanism of the financial system itself's basic currency issuance credit, and its effect is not as good as directly taking fiscal expenditure, giving the relevant interests of the existing housing loan family department, or cash subsidies to be greater and faster.

Recently, in our country's first-tier cities such as Beijing, Shanghai, and Shenzhen, the turnover of the real economy fields such as catering has been significantly narrowed year-on-year, and the retail of social consumer goods and bulk commodity consumption has fallen back year-on-year.

So, the above has introduced large-scale consumption promotion activities, such as Shanghai issuing hundreds of millions of yuan in consumption coupons, major e-commerce platforms offering home appliance subsidies and other promotional activities, and updating and transforming large-scale production equipment and infrastructure for the entire society, and implementing the old-for-new activity for 100 million vehicles, etc., with the purpose of boosting consumption and expanding domestic demand, including the aforementioned reduction of existing housing loan interest rates, one of the purposes is also to boost consumption.

But I think, all the above consumption promotion measures are all symptomatic methods, and they cannot truly solve the problems of insufficient domestic demand and sluggish consumption in the long term and effectively.

For example, consumption coupons and purchase subsidies require consumers to advance or overdraft savings, which is essentially the same as the consumption advance method such as down payment or deposit.

This move is a short-sighted behavior that accelerates the poverty of people with a higher consumption marginal tendency, and this is also one of the drawbacks of consumerism.

As for the updating and transformation of the entire society's production equipment and infrastructure, and the old-for-new activities of the new quality of productivity industry, I think it is not suitable to use them as a means of policy to boost consumption, domestic demand, and even the economic basic situation at this time.Here is the translation of the provided text into English: "Only because our country has recently experienced the 'era of large-scale infrastructure construction,' the vast majority of manufacturing production equipment and infrastructure have not yet reached a state of disrepair.

Therefore, to carry out large-scale updates, renovations, or replacement activities would be a sheer waste of social resources and ultimately not worth the cost.

So, how can we stimulate consumption and expand domestic demand?

I believe that the key lies in truly creating new supply driven by new technologies from the supply side, thereby increasing the actual demand of the entire society and forming a virtuous cycle in the economic operation system.

As for the demand side, a comprehensive fiscal investment-type social welfare security system should be established, implementing bottom-line actions in four key areas: healthcare, education, elderly care, and housing.

For the operation of the business sector, direct tax reforms should be adopted to truly reduce taxes and fees, thereby increasing the input-output ratio of enterprises, the investment return rate of the entire society, and total factor productivity.

In conclusion, the current macroeconomic signals of our country include increasing holdings of U.S. Treasury bonds, reducing mortgage loans, and stimulating consumption, which show the determination to stabilize the economy and promote growth.

In short, in the face of our country's proactive economic actions against the backdrop of a global economic depression, what we need to do is to give positive expectations and sufficient confidence to the actions taken to stabilize the economic fundamentals."

Please note that the translation aims to maintain the meaning and tone of the original text while ensuring that it is clear and coherent in English.