Huawei warning
According to Cailianshe, it was learned from multiple sources that Huawei's internal forum launched an article titled "The entire company's business policy should shift from pursuing scale to pursuing profit and cash flow" on the afternoon of the 22nd. The article mentioned that global economy will face this recession and decline in consumption capacity. Huawei should change its thinking and business policy, shift from pursuing scale to pursuing profit and cash flow to ensure that it survives the crisis in the next three years.
As a world-leading enterprise, Huawei is a world-leading enterprise, and as an entrepreneur with a top strategic vision, the information it can access is far beyond the reach of people. Since Huawei mentioned that "the global economy has been in a long-term recession, survival needs to be regarded as the main program, marginal businesses will shrink and close, and pass the cold to everyone." I believe everyone can understand the pessimism and seriousness between the lines, so that we ordinary people should pay more attention to it in order to make corresponding preparations.
In fact, we have written many articles that remind the risks of global economic recession, one of which is "Crisis! The global economic recession is coming, crude oil, copper, etc. plummet, don’t quit and save more money. Today, we will update the current situation of the European and American economy based on Ren Zhengfei’s judgment.
Historically, a round of central bank may follow a round of economic recession after a round of . The reason is simple. The central bank's unlimited quantitative easing is likely to lead to large inflation, and large inflation must be curbed through interest rate hikes . In mature economies in Europe and the United States, hikes will seriously inhibit investment and consumption and lead to economic recession.
Take the United States as an example. From a historical perspective, the US economic recession was basically accompanied by Fed rate hike before the recession. After a big rise, it was followed by a big stagnation, especially when stagflation has a high viscosity, forming a spiral inflation of wage-price, and inflation must be curbed at the cost of an economic recession.
This round of European and American central banks began in 2019. After the epidemic in 2020, the gates opened sharply. Federal Reserve balance sheet size doubled within one year, from $4 trillion to $8 trillion, and the European Central Bank balance sheet size also doubled in two years.
The unprecedented surge in floods has led to a surge in stock market bubble, Bitcoin bubble and crude oil. Under the pressure of high inflation, the Federal Reserve was forced to start hikes in February, and the European Central Bank also raised 50 basis points in July.
European and American economic recession
Originally, this round of European and American central banks' easing may not lead to such high inflation, and the balance sheet contraction cycle may not lead to economic recession. It can be said that this exceeded the Federal Reserve's expectations. Because no one expected that there would be a conflict between Russia and Ukraine this year and a high temperature that was rare in history.
After the Russian-Ukrainian conflict, European energy prices have soared rapidly, Brent crude oil prices soared to nearly $140, and TTF natural gas prices also soared. Afterwards, as the conflict between Russia and Ukraine became long-term, the market was digested, and crude oil and natural gas prices fell.
But after the summer began, unfortunately, abnormal high temperatures occurred around the world this year. According to ECMWF data, the world is experiencing its hottest summer, with June 2022 being approximately 0.32°C higher than the average temperatures from 1991 to 2020, and temperature growth in China, Japan and the United States is higher than the global average. In Europe, Spain, France, Italy and other areas have experienced extreme weather, with the highest temperature soaring even above 40°C. Among them, many areas such as Biarritz in France and San Sebastian in Spain have broken the high temperature records in June.
Due to abnormal high temperatures, Europe's demand for energy has increased significantly, especially the price of natural gas. Compared with the highest points of natural gas and oil prices in Europe, Europe rose by more than 250%/160% respectively.
European energy crisis is intensifying. On Monday (August 22), European natural gas and electricity prices soared, and fear of Russia's "defying gas" once overshadowed the market again. European benchmark natural gas prices rose by 21% at one point. German electricity prices broke through the 700 euro mark for the first time, reaching a record 710 euros/megawatt-hour.
Facing the rising prices of crude oil, natural gas and electricity, not only residents suffer, but even enterprises are forced to stop work and production. This week, two large metal smelters in Europe have planned to temporarily suspend production, and the risk of production suspension of European chemical companies is also increasing in the face of energy shortage.
It can be said that Europe is facing unprecedented difficulties and the economic recession has basically become a foregone conclusion. According to data released today: France's initial manufacturing PMI in August recorded 49, a 27-month low; Germany's initial manufacturing PMI in manufacturing was 49.8, a two-month high, the service PMI recorded an 18-month low, and the comprehensive PMI recorded a 26-month low; the UK's manufacturing PMI in August was 46, which was significantly lower than the expected value of 51.1, a new low since May 2020.
Due to the weakness of the European economy and the Fed's aggressive interest rate hike, the euro against the US dollar fell below 1 again.
Of course, the United States is not much better. The United States has grown negatively for two consecutive quarters and has entered a technical recession. Inflation in the United States remains high and has strong stickiness. Only by the cost of recession can inflation be controlled.
Back to Ren Zhengfei's judgment, the global economy has been in a long-term recession, and survival needs to be regarded as the main program, marginal businesses will shrink and close, and pass the cold to everyone. As an important pole on the global demand side, Europe and the United States will inevitably have a huge impact on the global economy, and my country's exports are no exception.
For ordinary people, the same thing is still the case - don't quit your job and borrow less, keep a healthy family balance sheet . For investors, those high-end manufacturing industries with high export growth in the past two years should consider the risks of economic recession in Europe and the United States and should not be overly optimistic.
