China's economy is coming to an end in 2023. As the first year of post-pandemic recovery, China's economy has climbed through the hurdles and is full of resilience. 2024 is a critical year for the implementation of the 14th Five-Year Plan, and in the current context of economic recovery, how to strengthen stable growth is the focus of market attention.
How should we evaluate this year's economic performance and how should we set the economic growth target for next year? As the key to China's economic recovery at present, where is the stamina for consumption growth, and how can we improve expectations and boost confidence? How will a series of policies to support the private economy be effective in the later stage? What new economic growth points will the digital economy and future industries represented by artificial intelligence and computing power bring to China's economy? How can we tap the potential of China's economic growth through a new round of reform?
With these questions, the first financial reporter interviewed Teng Tai, president of Wanbo New Economic Research Institute.
Shifting from investment-driven to consumption-driven requires institutional and institutional reforms
Yicai: 2023 is the first year of post-epidemic recovery, what do you expect the economic growth rate to be this year, and how should the economic growth target be set next year?
Teng Tai: The economy will be generally stable and improving in 2023. Although it is said that it is facing severe challenges such as negative export growth, negative growth in real estate investment, and negative growth in private investment in the past six months, it is mainly driven by consumption and can achieve the economic growth target of more than 5% set at the beginning of the year. In 2022, China's economy will be greatly affected by the epidemic and have a relatively low base, and if the economic growth rate in 2023 reaches or slightly exceeds 5%, it is actually somewhat lower than expected.
Considering the continuity of economic growth and the orientation of economic growth targets, I personally believe that the economic growth target for 2024 should also be set at more than 5%, and the challenges and pressures to achieve it will be greater than in 2023 because the base is different. Although it is difficult to achieve the goal, it is still possible for all departments and localities to give full play to the potential of China's economic growth and achieve it through arduous efforts.
If the economic growth rate of more than 5% is achieved in 2024, first of all, the growth rate of consumption should be higher than this year, and at the same time, private investment should also be further increased, at least to become positive growth, and exports should be stabilized and expanded. Monetary policy requires further easing, and interest rates and financing costs for companies need to be further reduced. Only with the support of proactive fiscal policy and loose monetary policy, and the premise that consumption, private investment, and exports are all recovering, can economic growth of more than 5% in 2024 be achieved. Achieving this goal is of great significance for the growth of disposable income and ensuring the stability of employment.
Yicai: In recent years, you have been calling for a gradual shift from the past investment demand-driven to consumption-driven consumption, and expanding consumption is the key to China's sustainable economic growth. What do you think will be the characteristics of the recovery of consumption in 2023? Where is the momentum for China's consumption growth, and what suggestions do you have for income and expectations to become important reasons for weak consumption?
Teng Tai: This year's consumption should contribute more than 80 percent to economic growth, so at the end of last year, the central government proposed to give priority to stabilizing and expanding consumption, and to give play to the basic role of consumption and the key role of investment. This year's consumption itself accounts for the proportion of total GDP and the proportion of its contribution to driving GDP, which also fully proves this judgment and important strategic deployment.
Why we should gradually shift from investment-driven to consumption-driven demand is determined by the level and stage of a country's economic development.
In the post-urbanization and post-infrastructure period, not only will long-term high growth be unsustainable, but the growth rate of fixed asset investment will gradually decrease, or even show negative growth. In the stage of rapid industrialization and urbanization, a large amount of infrastructure investment, real estate investment and manufacturing investment are necessary, but after the peak stage of industrialization and urbanization, the economic and social benefits of investment have declined significantly.
Considering that the current multiplier effect of each unit of fiscal fund expenditure used for investment is less than 1, and if it is used to issue consumption vouchers, the multiplier effect is greater than 3, so if the excessive, inefficient, and ineffective investment expenditure of more than 20 trillion yuan per year is converted into residents' disposable income, and then converted into residents' consumption expenditure, so as to achieve more than three times the expansion of aggregate demand, we should comprehensively examine excess investment and inefficient investment, and use the saved financial funds to increase residents' income, improve social security coverage and strength, or issue money to subsidize residents' consumption.
To shift from relying on investment to relying on consumption, it is necessary not only to change our concepts, but also to readjust the government's macroeconomic management mechanism. In the stage of rapid urbanization and industrialization, the mainland has formed a set of top-down investment-driven decision-making and implementation mechanisms, which have shifted from investment-driven to consumption-driven, and need to be reformed in terms of institutional and institutional settings.
We should complete the theoretical innovation of China's private economy as soon as possible
Yicai: This year, the central and local governments have issued a series of policy documents to promote the development and growth of the private economy, which is rare in recent years. On the other hand, private investment increased by -0.5% year-on-year in January ~ October, and has been negative for 6 consecutive months. What are the main reasons behind this? What are the difficulties and difficulties in the implementation of policies, and how to break down the barriers that hinder the development of private enterprises?
Teng Tai: Private investment has been negative for six consecutive months, and this situation is indeed unprecedentedly severe. The private economy is the source of the vitality of China's market economy, and if this situation is not changed, the impact and challenges on the long-term and healthy development of China's economy in the future will be very severe.
There are many reasons for the negative growth of private investment, including macro expectations, structural transformation, financial deleveraging, and the private economy itself. In addition, some public opinion still has not completely shaken off the influence of some erroneous ideas such as the "theory of the exit of the private economy" and the "new public-private partnership theory", which has seriously affected the confidence of China's private economy and even caused the growth rate of investment in China's private economy to decline, which has become one of the important factors inhibiting China's current economic prosperity.
To thoroughly dispel the misleading and influence of the theory of planned economy and thoroughly clarify the erroneous remarks that affect the development of the private economy, it is necessary to complete the theoretical innovation of China's private economy as soon as possible. In addition to promulgating some practical policies, we should also guide the whole society to pay more attention to the role of private entrepreneurs in the process of economic and wealth creation, to have a more comprehensive understanding of their legitimate remuneration, and to respect and encourage the innovation and production and business activities of private entrepreneurs.
The investment opportunities presented by artificial intelligence are everywhere
Yicai: This year, artificial intelligence such as AI large models has become a new engine of the economy. You've pointed out that the impact of AI on economic growth is underestimated. What new economic growth points and new challenges will the digital economy and future industries represented by artificial intelligence, computing power, and the metaverse bring to China's economy, and how should China seize this opportunity?
Teng Tai: According to Goldman Sachs' forecast, artificial intelligence will bring $7 trillion in value in the next 10 years, which is more than 7% of global growth. In addition, some research institutions believe that metaverse technology will also bring trillions of dollars of growth in the next 10 years. Even if the above predictions are correct, the $10 trillion increase in AI and metaverse technology reflects only 20% of its impact, with the remaining 80% impacting changes to the way we live and work.
However, if AI only replaces the old mode of production, it will not bring significant economic growth, and only by creating new ways of production and lifestyle, and bringing new demand growth, will it bring economic growth. The impact of this new supply on the old supply, on the economic growth model, on the improvement of production efficiency, and on the promotion of human welfare is huge and unlimited.
Artificial intelligence is set to revolutionize the way production is done in all walks of life, so investment opportunities are everywhere. In the short term, the investment opportunities brought by artificial intelligence are mainly concentrated in the following three aspects. The first is the historical opportunity of artificial intelligence large models, the second is in the field of artificial intelligence-related computing power and algorithms, and the third is the new products, new content, new scenarios, and new experiences brought by artificial intelligence.
Yicai: At present, the economic growth rate is slowing down and the development momentum is weakening, and tapping the growth potential through a new round of reform has become the key to stable growth. In your opinion, where is the potential of China's economic growth in the next stage, and what reforms should be promoted?
Teng Tai: In terms of demand structure, China's economic growth in the future should be mainly driven by consumption, and the transformation from investment-driven to consumption-driven requires the reform of the national income and expenditure structure to be initiated as soon as possible.
The key to reforming the structure of national income and expenditure is to save 20 to 30 trillion yuan of inefficient, ineffective, and excess investment every year and turn it into disposable income for residents, and then into consumption. This kind of reform is a deep-seated reform, and at the same time, it also needs to reform the supply structure, China's previous traditional industries, including real estate-related, infrastructure-related industries, have been oversupplied, and it is no longer possible to rely on these old supply to drive the economy. We must rely on the digital economy such as artificial intelligence and metaverse technology, these new technologies, new products, new scenarios, and new experiences to create new needs.
To seize such an opportunity, in addition to grasping the principle of production function, we must also learn innovative thinking, and understand the management philosophy and innovation methodology contained in the principle of innovation function. In the past, we mainly relied on the consumption of natural resources to create wealth, and in the future, we mainly relied on human resources to create wealth; in the past, we mainly relied on labor to create wealth, and in the future, we will mainly rely on wisdom to meet the needs of a better life, so that we can timely promote the transformation of China's economy from investment-driven to consumption-driven, and from traditional real estate manufacturing to R&D-driven.