Yu Miaojie, PARTY secretary of Peking University Institute of International Development: Standing in the new stage of development, the most important thing is to achieve high-quality economic development

Looking back at 2021, China has gone through an extraordinary year.This year, China achieved its first centenary goal of building a moderately prosperous society in all respects, and embarked on a new journey toward building China into a great modern socialist country in all respects and realizing the second centenary Goal.This year was also the first year of China’s 14th Five-Year Plan.Standing at a new starting point of development, China’s economy achieved 8.1 percent growth in 2021, higher than the target of 6 percent.But we must also recognize that there are challenges beneath high growth.According to the Central Economic Work Conference held in December 2021, China’s economic development is facing three major pressures: shrinking demand, supply shock and weakening expectations. In 2022, China’s economic work should be stable and progress should be made while maintaining stability.In the government work reports released by provinces and municipalities in 2022, the vast majority of provinces also identified stable growth as a key task for 2022.According to the 2022 GDP growth target announced by 31 provinces, nearly two-thirds of them have set the target at 5.5 percent to 6.5 percent.Most provinces, autonomous regions and municipalities have lowered their GDP growth targets for 2022 compared with 2021, choosing to make progress while maintaining stability.How to understand the word “steady”?What are the key points for China’s economy in 2022?What are the new potential energies?Ahead of the 2022 NPC and CPPCC sessions, we invited Yu Miaojie, Party Secretary of the National School of Development at Peking University and distinguished professor of Boya at Peking University, to explain the new stage of China’s economic development.Yu Miaojie, party secretary of the National School of Development of Peking University and distinguished professor of Boya of Peking University, clearly put forward the background of the current domestic economy at the central Economic Work Conference held at the end of 2021, namely demand contraction, supply shock and weakening expectations.The expression and the sixth plenary session of the 19th Central Committee of the Party of the same line.The sixth Plenary Session of the 19th Central Committee of the Communist Party of China mentioned that the economy is facing triple pressure, namely the superposition of the economy in three phases. Its main meaning is that the economic growth rate has entered the shift period, the economic structure has entered the adjustment period, and the early stimulus policies have entered the digestion period.In fact, no matter it is the three phases of superimposition or triple pressure, it means that the current economy is facing certain challenges.So in the face of challenges, the New Year’s economic work and how to achieve the “stable” word priority, stable progress?What is the background of the word “steady”?To achieve “progress while maintaining stability”, we should first understand the three backgrounds proposed by the Central Economic Work Conference.The general background of demand contraction is from 2008 to 2016, especially after the financial crisis, the purchasing power of various countries decreased, and the income and development of various countries did not grow as fast as before. However, China’s economy was mainly driven by external demand before, which led to the overall demand contraction.But the contraction in demand in recent years, especially in 2021, has been mostly domestic.This year, China still faced strong external demand, and its trade surplus reached about 4.4 trillion yuan (a record high). However, due to the impact of the epidemic, some enterprises developed relatively slowly and faced great pressure to survive.In other words, the disposable income of residents rises slowly and it takes some time to recover domestic demand. Therefore, it is objectively possible for domestic demand to shrink and it will be a long-term and arduous task to stimulate domestic demand.At present, China, like other countries, has been deeply integrated into the global economic and trade integration. Although China’s export will continue to rise in 2021, the price of upstream products will increase, leading to higher import prices, so that the profits of enterprises in the field of foreign trade will not become more, or even thinner.This is the main supply shock facing China’s economy right now.The weakening of expectations is based on the once-in-a-century changes we are facing and the once-in-a-century pandemic.After the 2008 financial crisis, countries faced certain development pressure or weakened demand.In this context, trade protectionism in some countries has risen and many trade protection measures have been introduced, making the current global economy facing an unprecedented complex situation.In addition, the Novel Coronavirus is still mutating, and it is also having a distinct impact on our economies.Given the triple pressures of shrinking demand, supply shock and weakening expectations, the Central Economic Work Conference has clearly pointed out that in 2022, China’s economic work should give top priority to “stability” and seek progress while maintaining stability.This needs to be achieved through a combination of policies, including macro, micro, industrial, structural, regional, health, social insurance and other policies.Although the Chinese economy is facing the above-mentioned three pressures, we can still see both opportunities and challenges, and new opportunities are born in the crisis.As the economy gradually made it big “cake”, China’s growth relative to the market after the golden decade objectively declined, but from a global perspective, China’s economy is pull the economic growth of the world’s locomotive, in 2021 China’s economic growth is above 8.1%, far higher than the 6% expected, this shows that China’s economy is resilient.At present, China is in a new stage of development. The most important feature of the new stage is to achieve high-quality economic development.In essence, this is different from the previous extensive development.In the form of extensive development, capital, labor, land and other factors of production are put in. With the increase of factors of production, output will rise. In addition, the original economic scale is relatively small, and the whole economy will naturally show a trend of rapid growth.However, it should be noted that the growth rate brought by this kind of growth is not sustainable.There are two reasons: first, factor input can not continue to increase, factor return will appear marginal decline characteristics;Second, according to the statistical principle, as the economic “pie” gets bigger and the GDP base increases, the denominator base will increase. Under the same circumstances, the larger the denominator, the smaller the result will be, which is reflected in the decline of economic growth.In the new stage of development, economic growth mainly depends on intensive growth, which is mainly reflected in the improvement of total factor productivity, which is one of the core elements of high-quality economic development.The high quality development of economy can be expressed in six aspects from micro to macro.The first is the improvement of the added value of products. There are two major categories of products in international trade: processing trade and general trade.Compared with processing trade, products of general trade have higher added value.Today, the share of general trade has risen from 50% to more than 65%.In processing trade, the industrial structure has also undergone profound changes, from the original lowest value-added labor-intensive products to higher value-added machinery and equipment, transportation equipment, optical instruments, especially machinery and transportation equipment.The second is reflected in the improvement of product quality. The improvement of product quality can be seen from the quality improvement of export products.Statistics show that the quality of exports increased by about 30 percent between 2001 and the 18th National Congress of the Communist Party of China, and by another 25 percent between the 18th and 19th National Congress of the Communist Party of China.It can be seen that the quality of exports has improved significantly.Third, the improvement of enterprises’ total factor productivity was based on the entry into the market in 2001. By the 19th National Congress of the CPC, China’s total factor productivity had increased by about 50%. Meanwhile, the absolute level of China’s total factor productivity also reached half of that of the United States, which was also an obvious improvement.China has a complete industrial system with 41 major categories and 666 sub-categories listed by the United Nations, and is the only unique industrial country with complete industries, complete equipment and complete categories in the world.Fifth, the industrial development is characterized by distinct industrial agglomeration. Every industrial city in China has its own flagship industries and industrial name cards, such as electronic machinery in Shenzhen, machinery and electronics in Dongguan, toys in Shantou, wood in Langfang and cashmere in Xingtai. Each city has its distinctive industrial characteristics.The sixth is reflected in the new characteristics of the proportion of the three major industries. The proportion of the development of China’s three major industries shows that the primary industry accounts for about 7.5% of the national economy, the secondary industry for about 37%, and the tertiary industry for about 53%.Compared with western countries at the same level of development, the proportion of secondary industry is relatively high, which is an obvious feature, reflecting The characteristics of China as the world’s factory, which can play a positive role in economic development.How to understand common prosperity and tax and fee cuts?As China’s economy has entered a new stage of development, the Central Economic Work Conference has also put forward the main tasks for the new stage of development, including common prosperity, tax and fee reduction.So how to understand common prosperity and tax cuts and fees?Common prosperity is the ultimate goal of the socialist system and China’s economic development. All development is for the common prosperity of the people. This is an unshakable fact.However, we need to be deeply aware that common prosperity is not achieved overnight, but a long-term and arduous process.In different stages, common prosperity has different requirements, connotations, realization methods and approaches.Common prosperity does not mean robbing the rich to give to the poor, nor does it mean robbing the rich to make them poor.Its realization way is the first is the initial distribution, give play to the market economy mechanism, make the “cake” bigger;The second is redistribution, through fiscal taxation, transfer payments to narrow the income gap, to achieve a reasonable distribution of income;The third is to persuade the group that gets rich first to make more social contribution and donation through moral force.At this stage, we should continue to make the pie bigger and, on the basis of doing so, do a good job in the distribution of the pie.In other words, fairness and efficiency should be taken into account, and efficiency should be given priority at the current stage. Meanwhile, various finance, taxation and social security construction work supporting fairness should be improved.How to understand tax and fee cuts?Our ultimate goal is to realize the structural adjustment of the three spending areas, and gradually shift from relying on export and investment to relying on domestic demand (namely consumption).Only in this way can residents have the ability and willingness to expand consumption. In this way, the taxes and fees borne by the residents in the initial income should be reduced. This is of great significance for reducing taxes and fees, and the ultimate goal is to boost domestic demand.The reduction of taxes and fees was accompanied by a decline in state revenue.The paradox is that we have so much needed infrastructure spending that government spending stays the same or even goes up.In this context, tax and fee cuts need to be achieved through deficit finance or proactive fiscal policy.This is why, as emphasized at the Central Economic Work Conference, both fiscal and monetary policies will exert their force at the same time.(The author is Yu Miaojie, Secretary of the Party Committee of the National School of Development, Peking University, and distinguished Professor of Boya At Peking University. The author is interviewed by Wang Qian, reporter of Business School magazine.)

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