2024-03-08 08:22:09
China Net: Hello fellow netizens! This is a series of interviews on the 2024 National Two Sessions “Towards the New” published by China.com’s “China Interview”. When the Two Sessions are held in 2024, people see that deepening reform, expanding opening up, and generating new economic momentum are the issues of greatest concern to representatives and committee members attending the session, and how to develop new productive forces has become a hot topic during the Two Sessions. At the opening meeting of the Second Session of the 14th National People’s Congress held on March 5, the Prime Minister’s “Government Work Report” proposed a series of measures in response to the current situation. So what new ideas for development does the report propose? How should we develop new productive forces and generate new momentum? The China Interview program “China Interview” specially invited the famous economist Xu Hongcai to give an interpretation.
Xu Hongcai, deputy director of the Economic Policy Committee of the China Policy Science Research Society. (Photo by Yang Jia)
China Net: Hello, Teacher Xu! Welcome to China.com’s “China Interview”.
Xu Hongcai: Hello host! Hello netizens!
China Net: When reviewing the work in 2023, the “Government Work Report” pointed out that “economic recovery and development itself has many difficulties”, including “the decline in external demand and insufficient domestic demand, and the coexistence of cyclical and structural problems.” So are you How to understand these difficulties?
Xu Hongcai: These difficulties are still there this year. Last year, following a year of adjustments, it should be said that we have made great progress. Some problems have been solved, and some problems are still continuing, especially the sequelae of the epidemic, which are still present to varying degrees. reflected on.
From a mid- to long-term perspective, China’s economy is facing a transition between old and new driving forces and structural adjustment, transformation and upgrading, and the overall trend in the future is for economic growth to gradually decline. Because the overall volume and economic scale have become larger, it is unrealistic to think of a rapid growth of more than 6% or 9% as in the past. In addition, we must feel that many changes in the international and domestic situation are indeed within expectations, and some are beyond expectations. For example, our own conversion of old and new kinetic energy involves a traditional function that is shrinking, and at the same time, the cultivation of new kinetic energy is a bit weak and cannot keep up. Therefore, we have always emphasized the need to be driven by innovation and increase investment in R&D. , increase the support of relevant innovation resources. However, it cannot achieve immediate results; it must take a long time to achieve results and be gradually reflected.
On the other hand, due to China’s special national conditions, some problems are coming one following another, such as the aging society is accelerating; in addition, the new urbanization is still in the second half, and the task has not yet been completed. Due to the superposition of multiple factors, plus some overcapacity in some regions and industries, potential risks are still there.
From the perspective of external factors, this year is a global election year, so there are also some uncertainties, and geopolitical conflicts continue. Overall, I think the certainty of world economic growth is increasing, but there are still some uncertainties.
The increase in certainty is reflected in the (world) economic growth rate, which was expected to be 3.1% last year and this year (Note: According to the data of the International Monetary Fund’s “World Economic Outlook” on January 30, 2024), both are relatively low. However, Inflation has slowed significantly and pressure is declining. From the perspective of economic growth, the International Monetary Fund predicts that next year (world economic growth) will have a slow rise of 3.2%. However, global trade and cross-border direct investment will see significant improvement this year. Last year, they both experienced contraction and negative growth. This year, global trade is expected to grow by more than 3%.
In addition, (global) FDI (foreign direct investment) will also return to positive growth (in 2024), and it may go further next year and exceed the (world) economic growth rate. This means that through repairs over the past year, these global division of labor systems and supply chain systems are returning to normalcy. This process actually reflects the gathering of many positive factors, from which China will surely benefit. This is a positive aspect. Moreover, the Federal Reserve is expected to cut interest rates in the middle of this year, which is also good news for China, because the interest rate difference between China and the United States has narrowed, and the pressure for RMB depreciation has been reduced, and so on. There are also some certain factors, including the recent easing and stabilization of relations between major powers that we have seen. This year is an election year in the United States. I believe that nothing abnormal or unexpected will happen during the election, and that overall it will remain relatively stable. This is good news for us all.
But there is also uncertainty. What impact will the Fed’s policy shift and adjustment have on the financial system? In addition, there are some local geopolitical conflicts that we cannot predict that may arise, which will also have a negative impact on global commodities, the price system, and so on.
I think taking into account the changes in the international and domestic situation, we (face) both challenges and opportunities, but the opportunities outweigh the challenges.
China Net: We noticed that the “Government Work Report” mentioned that to solve the problem of insufficient consumption willingness and weak consumption ability of our residents, comprehensive measures should be taken from the aspects of increasing income, optimizing supply, and reducing restrictive measures. What do you think? Look at these measures, will they work?
Xu Hongcai: I think a multi-pronged approach and comprehensive implementation of policies from these aspects will definitely have positive results. The first is that we need to increase revenue. This is because the income of urban and rural residents has kept pace with economic growth for many years, but there is a problem of polarization and unfair distribution. In particular, the consumption ability of low-income groups has been greatly restricted. This includes increasing the income level of our 300 million new citizens and improving their social security; it also includes increasing the income level of our hundreds of millions of farmers. This is the key to increasing income in the future and surmounting the middle-income trap. So we need to take a multi-pronged approach, such as increasing employment, encouraging the development of small, medium and micro private enterprises, etc., which can increase our income; it also includes improving the social security system, and some reforms, etc. This is from a revenue perspective.
In addition, from the perspective of supply, it is true that our current consumption needs are diversified, multi-level, and uneven. Some basic consumption such as food, clothing, housing and transportation are basically satisfied, but improved and upgraded consumption We still have insufficient supply for consumption. For example, what is imminent is the consumption of elderly care and health. The consumption of big health is never-ending and is a rigid demand. In addition, our supply is insufficient for demands for culture, tourism, education, entertainment, sports, etc., which are closely related to human activities and the spiritual level. If you want to spend money to buy services, you can’t. . Therefore, if we want to improve related supply, we must guide funds to increase investment in these aspects. Therefore, at the end of last year, the Central Economic Work Conference stated that we must stimulate potential consumption and expand profitable investment. Potential consumption refers to areas where there is huge room for future demand growth but short-term supply is insufficient and cannot keep up. This is a shortcoming we need to make up for. At the same time, our investments must focus on areas where there are orders and potential demand. We increase the supply of funds and cultivate new economic growth points, thereby improving our demand and creating a positive interaction between supply and demand. , this relative balance of supply and demand can be achieved at a higher level. Therefore, when we expand consumption in the future, we must also improve supply. I am afraid it will not be effective from the demand side alone.
In addition, some of our policies in the past had artificial barriers.
China Net: For example?
Xu Hongcai: For example, for some bulk commodity consumption, such as the purchase of housing, weren’t there purchase and loan restrictions in the past? There are many restrictive measures, including the consumption of cars in some big cities. Many restrictive measures now seem outdated. We should cancel them and optimize our policy supply. So we are talking regarding working together from these aspects and taking a multi-pronged approach. I believe that the role of our future consumption in stabilizing economic growth will be further enhanced.
China Net: The word “housing” was mentioned 15 times in the report, compared with 17 last year, and all real estate-related work is arranged in the chapter on risk prevention. What do you think of the measures proposed in the report to resolve the risk of a real estate hard landing?
Xu Hongcai: The real estate market has been adjusting for a while. I think this adjustment process will continue in the next one or two years. The magnitude of this adjustment is somewhat beyond expectations. Because in our golden decade before the epidemic, the entire real estate industry played an irreplaceable role as a pillar industry of the national economy, accounting for regarding 1/3 of investment and 1/3 of residents’ consumption. In addition, It also accounts for a considerable proportion of the government’s revenue. The current overall adjustment shows that the demand structure has changed, and our supply capacity and production capacity in the past were excessive. Now you can see that the houses we have in stock that have not yet been sold out and are for sale are large in size and large in size. Now the per capita housing area owned by residents in central cities has reached saturation and is close to the level of developed countries. The future population structure is still changing. Of course, our urbanization is still in the second half. In addition, young people still have rigid needs, as well as improved rigid needs, and the structure of this demand will also change with the changes in the age and population structure. There will be some changes, for example, the demand for small apartments may increase in the future, etc.
All in all, the current drastic adjustment reflects that the past development model of acquiring land-developing-building houses-selling houses is no longer sustainable. Therefore, in the future, following several years of adjustment, a new dynamic balance will emerge. This new dynamic balance (meaning that) future investment capabilities and future consumption capabilities will be completely different from those in the past. , a relative equilibrium will be formed at a relatively low level. Therefore, we must see the potential risks and impacts that the current drastic adjustment has on our companies and even the national economy. Therefore, the “Government Work Report” discusses this area in the chapter on risks. I think it is targeted. To solve this problem, the Central Economic Work Conference at the end of last year made arrangements, that is, we need to make large increments, or build first and then break. Three major projects were clearly proposed, namely the construction of affordable housing, the transformation of urban villages, and Construction of public facilities for “both leisure and emergency use”. In fact, this creates new opportunities and finds new business opportunities for those developers. We need to create some business opportunities, but this is not enough. Relevant policies of our financial institutions have also been adjusted. For example, we have lowered the required rate and interest rates, lowered the down payment ratio, lowered the loan interest rate, extended the loan period, and abolished a series of policies restricting purchases and lending. It is a multi-pronged approach.
Xu Hongcai, deputy director of the Economic Policy Committee of the China Policy Science Research Society, was a Alex Reed at the “China Interview” studio. (Photo by Yang Jia)
I think that in order to make up for the gap caused by such drastic adjustments in real estate, we may need new ideas. In fact, everyone has seen the direction of this new idea from relevant policies. For example, at the end of last year, it was proposed that for the development of the silver economy, China will build ten related industrial parks in the future to promote the development of industries related to the silver economy and the development of industrial clusters, such as life sciences, biomedicine, and health and elderly care service systems. etc. New investment will be added, and if it increases by several trillions every year, it will make up for the gap in real estate adjustment to a certain extent.
There is also a comprehensive green transformation. We must achieve the dual-carbon strategic goals and increase investment in the future. Another is the advent of the intelligent era of the digital economy. We must increase investment in the cultivation of new productive forces and technological transformation and upgrading by applying new technologies in traditional industries. Isn’t it also proposed to trade in large equipment for new ones this year? In fact, it is to promote this transformation and expand the areas of investment and consumption.
In this case, we will take a multi-pronged approach and give it a boost in terms of investment. Because the investment growth rate last year was only 3%, which was a drag. In this way, following our future real estate industry is adjusted, the impact on the national economy will gradually subside and a smooth transition and transformation will be achieved.
China Net: When the “Government Work Report” mentions the government’s main tasks in 2024, the first one is to build a modern industrial system and develop new productive forces. We all know that cultivating new productivity is not achieved overnight. What do you think of the measures listed in the report?
Xu Hongcai: I think it is targeted and very pragmatic, especially in the process of conversion of old and new kinetic energy. Our traditional expansion relies on extension, such as the traditional old production factors – land, labor, capital, input It is very limited. We will focus on efficiency, tap the potential and connotation of development, and take the path of connotative development, which requires innovation-driven development. Therefore, technological innovation is the core element of new productivity.
In fact, this concept has a corresponding concept in economics, which is “total factor productivity”, which is based on the improvement of efficiency and the reduction of energy and resource consumption driven by technological changes. This year we still propose specific reduction targets for energy consumption per unit of GDP and carbon emissions. In the future, we will still have this goal every year, which is reflected in the improvement of economic quality. Therefore, this transformation of old and new driving forces and the transformation of development methods will inevitably bring regarding earth-shaking changes, which will have far-reaching impacts and changes on our industrial structure, our consumers, and the status and influence of China’s economy in the international community. . Therefore, I think we emphasize innovative development, and we have a series of policy measures in this regard, and the actions we have taken are also reflected in a series of achievements in China’s innovative development, which is also well-known. The number of patents we apply for internationally every year is now among the best. The overall innovation capability has steadily improved in the past few years, but there is still a gap compared with developed economies. We aim in this direction, set high standards, continue to move forward, forge ahead, increase investment in research and development, reform and innovate related mechanisms, and release the potential of our economic development.
China Net: In the past year, China’s economic development has overcome many difficulties. Looking to the future, you also mentioned that we face many challenges, but of course there are also more opportunities. What expectations and suggestions do you have for the new year and the future of China’s economy?
Xu Hongcai: I think the new year will follow a stable, good, and upward development trend based on the past year. The economic growth rate may remain relatively stable or even decline slightly, but the quality will improve and the efficiency will increase. will rise, and the structure will continue to be optimized. This will also lay a solid foundation for the mid-term development goals of the “14th Five-Year Plan” and even 2035. This year will be better than last year, and next year will be better than this year. It will get better and better.
China Net: Well, thank you, Director Xu, for your wonderful interpretation. Thank you!
(Staff for this issue: Editor/Copywriter: Han Lin; Host: Tong Jing; Photographer: Liu Kai/Fang Xiaoqi; Post-production: Liu Kai; Photographer: Yang Jia; Editor-in-Chief: Zheng Haibin)
Interpretation 1 of the “Government Work Report”: Why is the expected GDP growth target this year set at around 5%? Is a 3% deficit rate still healthy?
Interpretation 2 of the “Government Work Report”: Xu Hongcai: my country’s institutional opening-up is accelerating and it actively benchmarks international high-standard economic and trade rules
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