Dialogue with Zhang Wenkui: How to stabilize the economic market

In order to push the economy back to a normal track, ensure that the economy operates within a reasonable range. Since May, stabilizing the economy has become an important task for governments at all levels. On May 23, the executive meeting of the State Council issued the “Package of Policy Measures for Solidly Stabilizing the Economy”, and introduced 33 measures in six areas. On May 25, the State Council specially held a national video and telephone conference on stabilizing the economy, asking all localities to seize the time window and strive to ensure reasonable economic growth.

In order to stabilize the economic market, in addition to implementing a package of measures, what other policies are needed to have an immediate effect? In addition, the stimulus policy is an emergency measure after all. In the long run, if the economy is to gradually return to the right track, what reforms need to be further promoted?

Regarding the above issue,CIC reporter interviewed Zhang Wenkui, a researcher at the Development Research Center of the State Council.He believes that a series of policy combinations will give a boost to steady growth. However, the current difficulties of market players are largely due to the large distance from normal production and living order, and some distances are caused by unscientific layers of overweight. landing takes effect.

Regarding the direction of long-term reforms, Zhang Wenkui believes that China’s economic growth miracle in the past few decades has benefited from the social potential unleashed by market-oriented and legalized reforms, and stable growth in the future still needs to be achieved through market-oriented reforms. “If we do not engage in a market economy, many people will be busy and work hard, but they will be caught in a lot of formalism, bureaucracy, and dogmatic work, and they will not be able to create value and promote growth.”Dialogue with Zhang Wenkui: How to stabilize the economic market -Dialogue-with-Zhang-Wenkui-How-to-stabilize-the-economic-market

Zhang Wenkui, researcher at the Development Research Center of the State Council

CIC: You have previously written an article publicly stating that the difficulties of market entities are largely caused by the inability of normal production, normal business, normal sales, and normal transactions. How to coordinate the relationship between epidemic prevention and control and economic and social development?

Zhang Wenkui:The central government has made it very clear that it is necessary to efficiently coordinate epidemic prevention and control and economic and social development. After the “Notice of the State Council on Printing and Distributing a Package of Policies and Measures to Stabilize the Economy” was issued, local inspections were organized. Recently, the Office of the Leading Group of the State Council’s Logistics Guarantee and Smooth Work has issued a warning notice, informing about some problems such as overweighting and excessive control at local levels, including excessive requirements for registration and filing, and all vehicles being persuaded to return to other places.

If the logistics and the flow of people are all blocked, economic activities will be far from normal development, the economic cycle will not be smooth, it will be difficult for enterprises to generate operating income, the tax reduction policy will actually have no tax base, and enterprises will not have much credit. Inadvertently taking on loans will increase the burden on enterprises and accelerate the collapse of some enterprises. Therefore, the burden reduction policy and loose monetary policy for market entities, as well as policies to increase investment and encourage consumption, need to be based on non-excessive control policies. If fish cannot swim in the net, what about releasing water? Can the national economic cycle be smooth?

Of course, how to grasp the “degree” of control still depends on science. On June 10, Academician Zhong Nanshan pointed out earnestly that it is not advisable to carry out layer-by-layer actions in order to prevent the epidemic, which will obviously affect economic development; to do a good job in prevention and control depends on science, and to achieve scientific management and scientific Prevention and scientific treatment. Therefore, all localities still need to consult with experts like Zhong Nanshan to formulate policies, instead of blocking the flow of goods and people.

The warning notice issued by the Office of the Leading Group for Logistics Guarantee of the State Council also emphasized that all localities must resolutely prevent the unauthorized closure of expressways, ordinary roads, and unauthorized establishment of inspection stations. Of course, some places have actually optimized their control policies based on local conditions. For example, the Jiangxi Provincial Party Committee and Provincial Government recently issued a notice to allow people in low-risk areas to move freely and no longer check nucleic acid certificates. Such policies can be more local. From the perspective of governance, the scientific and rationalization of the accountability system is very important, because local officials will allocate resources and determine key tasks according to the accountability system.

CIC: Some market participants believe that the current package of economic policies is still not strong enough and its coverage is too small. Taking the remaining tax refund as an example, according to the data released by the State Administration of Taxation from April to May, it was about 1 trillion yuan, nearly half of the total amount, but it was only refunded to 1.49 million taxpayer accounts, accounting for the entire market entity. The ratio is very low. Considering that the central government’s debt ratio is not high, it is suggested to increase the central government’s fiscal expenditure. What do you think?

Zhang Wenkui:Stabilizing the economy requires a package of policies, including central and local policies, which add up to many. No matter how many there are, it is nothing more than reducing the burden of taxes and fees, increasing money supply and lending, increasing investment in fixed assets, stimulating short-term consumption, and allowing the flow of goods and people to ensure smooth circulation, and so on.

Many of these specific policies require money to be implemented, that is to say, the policies themselves have costs. How much the government can afford depends on the government’s financial resources, and beyond that is fiscal monetization. Therefore, whether the strength is sufficient or not, and whether the coverage is large or not, depends on the financial resources and the space for fiscal monetization. How much financial power do you have now? Everyone knows that. The government’s debt ratio has a certain space. If the central government borrows money and directly pours money into market entities or individual residents, how much will this implementation cost? How high is the actual effect? It’s clear when you do the math.

So I have to go back to the above question, which is my judgment,The difficulties of market entities are largely due to the inability of normal production and business operations. Enterprises are far from normal production and operation, and people are far away from normal work and life, and some distances are caused by unscientific layers of overweight, so the government cannot make up for it no matter how much money it has. The common people pay for themselves. China’s macro leverage ratio is actually not low, and it is likely to reach a height of 300% in the next few years. Therefore, short-term policies must also be considered in the medium and long term.

CIC: If the bailout policy can have an immediate effect, in addition to the economic policy, what other supporting policies are needed?

Zhang Wenkui:Short-term relief policies based on the impact of the epidemic are necessary, but if the current economic slowdown is completely attributed to the impact of the epidemic, it may affect our correct judgment of the situation. In addition to the impact of the epidemic, social expectations and social confidence are also undergoing some subtle changes. The Central Economic Work Conference mentioned the issue of “weakening expectations”. This requires great attention.

An important document issued by the state this year is the “Opinions on Accelerating the Construction of a Large National Market”. The title and content of this document are obviously positive signals, which is to establish an efficient, standardized, fair competition and fully open market. There are some “beefs”, that is, to promote some major construction projects, but many people have not read the content of the documents, and there are also some concerns about the so-called “new planned economy” in the society. This is a question of social expectations. To reverse social expectations is more complicated than bailing out companies, expanding investment, and stimulating consumption. In general, it is still necessary to reform and open up, and in accordance with the spirit of the State Council’s “Regulations on Optimizing the Business Environment”, and follow the direction of marketization, rule of law, and internationalization, in order to continuously liberate and develop productive forces.

Surging News: The growth rate of real estate has further slowed down this year, and the growth rate of exports is also lower than expected. In the new economic momentum, the development of the digital economy has attracted market attention. Some studies estimate that by 2025, the output of digital industrialization and industrial digitization may together exceed 50% of GDP (gross domestic product). Can the digital economy be used as a new driving force for China’s economy in the future? What conditions are required for this? In the development of the digital economy, how to allow private enterprises to better participate?

Zhang Wenkui:In the next step, to maintain a relatively good economic growth rate, new kinetic energy in the industrial structure is indeed needed, and the digital economy should be the most important new kinetic energy. The statistical caliber of China’s digital economy is not the same as that of the United States. The US government estimates that its digital economy accounts for about 10% of the entire economy. Some Chinese institutions estimate that China’s digital economy accounts for nearly 40% of the entire economy. The so-called 2025 Annually reaching 50% may be based on such a statistical caliber. But such statistics may exaggerate the size and momentum of China’s digital economy. China’s digital economy is still mainly concentrated in the fields of shopping, games, social networking, entertainment, publishing and communication, but what about the United States?

In addition to these areas, it is constantly innovating in areas such as search, new networks, operating systems, software architecture, and virtual reality. Therefore, if the digital economy is to have stronger momentum in the Chinese economy, efforts are still needed, including the need to further improve the development policies of the digital economy, especially the industrial organization and anti-monopoly, anti-unfair competition policies and their innovation policies. I have done some research in this regard. In general, we should not be too entangled in indicators such as industrial concentration, market structure, and market share of enterprises, but should regulate some typical strategic behaviors of enterprises, and let litigation play a role. effect.In the development of the digital economy, it is still necessary to focus on encouraging the entry of private venture capital, because it is difficult for state-owned capital to undertake some important functions of venture capital.For example, the bold design of incentive schemes, the tolerance of huge investment losses, the repeated tolerance of innovative trial and error, and so on.

CIC: Since the epidemic, infrastructure investment has been given a more important role in stabilizing growth. But economic laws and reality tell us that infrastructure investment can still effectively drive economic growth in the short term, but it will face the dilemma of declining efficiency in the long run. What do you think?

Zhang Wenkui:Keynesian policies are still an effective option for short-term policies. There is still a big gap between China’s per capita capital stock and developed countries, and China’s overall infrastructure level is not high, so it is possible to increase infrastructure investment. However, a balance should be maintained between infrastructure investment policy and fiscal and monetary policies to prevent investment from bringing too much sequelae to finance and currency. Of course, project management should be done well to prevent useless projects and ineffective projects as much as possible. . The most important thing is the investment in the manufacturing industry with enterprises as the main body. According to the data from January to April this year, it is not bad, reaching 12.2%, but the growth rate is firstly recoverable, and secondly, if the price factor is deducted, it will be lower Much more, the next step is to continue to observe the changes and trends of this data.

More important is household consumption. In the first decade of this century, from 2000 to 2009, the annual arithmetic average of the contribution rate of China’s domestic consumption expenditure to economic growth was only 51.5%; in the second decade, from 2010 to 2019 , reaching 59.2%. It seems that the contribution rate of consumption is higher, but the absolute value of the percentage point of economic growth driven by consumption expenditure has actually declined, from an average of 5.3 percentage points per year in the first decade to the second. The ten-year average of 4.5 percentage points per year has dropped below 4 since 2020. If China wants to maintain an economic growth rate of around 6% in the next few years, 4 points of consumption contribution will not be enough. If there are only 3 points, then even 5% of the economic growth rate will be difficult to support. From the perspective of consumption contribution rate, developed economies have reached more than 70%, so China has a large room for improvement in expanding household consumption. Of course, the improvement of consumption requires the improvement of residents’ income as the foundation, which requires greater efforts.

Surging News: The only way for fiscal policy to exert its force is to re-stimulate the inherent vitality of the market, which requires market players to have stable and optimistic expectations. According to recent data from Tianyancha, the main entities of enterprises have been greatly affected in April and May, among which small and micro enterprises are more affected, the number of registrations has declined rapidly, and the ratio of registration and deregistration is lower than 1. How to stabilize the expectations of market entities?

Zhang Wenkui:The reform of the commercial system since 2015 has made the number of Chinese market players from 70 million at the end of 2014 to exceed 150 million by the end of 2021, more than doubling in more than six years. This fully proves how effective reforms that focus on decentralization and simplify procedures and procedures will show. Of course, not every registered market entity can continue to operate, but the proportion has reached about 70%.

Since the outbreak of the new crown epidemic, the registration of market entities, especially the operation of business, will undoubtedly be affected. In the future, the focus should be on ensuring how small, medium and micro enterprises and self-employed individuals conduct business activities. With the improvement of the scientific level of epidemic prevention and control, the situation of inability to operate will improve. However, in the medium and long term, the policy of opening up the market and expanding access should make more progress, so that market players can see more business opportunities.

(This article is from CIC, for more original information, please download the “CIC” APP)

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