I read two books by Huang Qifan. There are some points that left a deep impression on me; these are insights that someone who has only engaged in academia for years would not be able to propose.

Housing Prices

A family's annual income multiplied by seven is the amount that a family would need to save for seven years without spending to buy a house outright; this housing price is reasonable.

According to this standard, housing prices in first-tier cities in China are absurdly high. Some may argue that housing prices in London are more expensive than in Shanghai, but Londoners also earn more than those in Shanghai. Londoners can buy homes in London within ten years of their income.

Huang Qifan's analysis of housing prices is a model worth learning from; this model can be applied to analyze the prices of any real-world commodity.

Supply and Demand

First, the urbanization brought about by China's reform and opening up has driven many migrant workers to the cities, which creates demand. After they settle in the cities, their rural homesteads remain, which affects land supply. Second, many old houses allocated during the planned economy have become dilapidated, and many urban residents have a demand for improved living conditions.

Currently, urbanization in China is already quite high, and there will not be a large influx of migrant workers in the future. Those looking to improve their living conditions have largely done so. Therefore, from the perspective of supply and demand, housing prices are unlikely to rise significantly in the future.

Monetary Factors

Around 2005, the M2 money supply in China increased several times. Since our capital market is underdeveloped, asset price bubbles mainly manifest in housing prices, with a large amount of money entering the real estate market. Huang Qifan stated that it is precisely because money has entered real estate that the overall price level has not risen, thus not affecting the lives of ordinary people. Indeed, as an old party member, his insights are profound.

In recent years, the growth rate of M2 has been similar to that of GDP plus inflation. Therefore, from a monetary perspective, housing prices are unlikely to rise significantly in the future.

International Market

A few years ago, when GDP growth was rapid, foreign capital was very fond of Chinese real estate. When Evergrande encountered problems, foreign investors became anxious. They usually advocate for the invisible hand when they don't like being regulated, but when investments are at risk, they urge the Chinese government to intervene. Investment in real estate by foreign capital has also cooled in recent years; thus, from this perspective, housing prices are also unlikely to rise significantly in the future.

In summary, Huang Qifan's judgment is that overall, housing prices are unlikely to rise significantly and will remain in line with GDP growth.

Classical economics emphasizes supply and demand in price analysis, but in the real world, we must also consider monetary factors and the fluctuations of the international market.

The Essence of Finance

Three statements: First, finance is for the wealthy to manage their assets and for the poor to obtain financing. Second, the essence of finance is credit, leverage, and risk. With credit comes leverage, and with leverage comes risk. Third, finance must serve the real economy.

The One, Two, Three, Four, Five of Provincial Capitals

In the end, the development of a provincial capital often relates to the entire province in a "one, two, three, four, five" relationship. That is, the provincial capital occupies 10% of the area, 20% of the population, 30% of GDP, and 40% of the service industry share of the province.

Calculating according to this rule for my hometown Nanchang: the total population of Jiangxi Province is 45 million, and Nanchang currently has a population of 6 million. This means that Nanchang will never become a megacity with a population exceeding 10 million.

U.S. Debt

The debt reported by the U.S. is federal debt and does not include the debts of local administrations at various levels. The interest on U.S. national debt is about to exceed the federal government's annual tax revenue. This poses a significant risk. Historically, the U.S. would never allow such a situation to occur. Externally, the U.S. will find ways to seize wealth, and internally, it can print more money; thus, the Federal Reserve has a strong incentive to over-issue currency.

What is Innovation?

Huang Qifan's description of innovation is very concise: innovation is about using new supply to stimulate new demand. This is well said. I have also thought about this issue for quite some time and will write an article about it when I have the chance.