Yao Yang: In 2024, we are cautiously optimistic about economic development|Looking forward to 2024

As long as the environment is good, entrepreneurs and innovators will emerge in the market.

Yao Yang, Dean of the National School of Development, Peking University

Interview collation|"Chinese Entrepreneur" reporter Kong Yuexin

Edited by Ma Jiying

Header image source: Attempt library

Summing up the key words of economic development in 2023, I think the first is rugged, the second is unusual, and the third is hope.

The economic recovery in 2023 has not been smooth, and the path has been particularly bumpy. In the first quarter, everyone was full of confidence because the economic recovery momentum was relatively strong, but the economic recovery slowed down in the second quarter. Until the Politburo meeting in July, the economic situation in 2023 was set and a series of measures were introduced, the development in the third quarter was slightly stable, and the fourth quarter gave everyone hope.

With the government's policy in force, I think 2024 will be better than 2023.

First of all, the real estate industry, the government has introduced a number of measures in 2023, especially after the Central Financial Work Conference, the policy liberalizes corporate lending, which is conducive to stabilizing the supply side of real estate. On the demand side, the government has implemented city-specific measures, and most cities have basically liberalized real estate.

However, the real estate industry has been in a downward trend for 3 years, and more efforts are needed to really stabilize it, but as long as the government policy is not relaxed, I expect that in the middle or second half of 2024, the real estate industry can stabilize and no longer fall.

Second, at the local government level, since the second half of 2022, the central government has adopted relatively strict control measures for local governments, so the debt of local governments has been stuck, and the epidemic has caused a large deficit in local governments, so investment and consumption are relatively weak.

Since the second half of 2023, the central government has launched a series of fiscal stimulus measures, such as 1.5 trillion yuan of chemical debt funds and the issuance of 1 trillion yuan of government bonds, which I think will work in the first half of 2024, which is equivalent to allowing many projects to start ahead of schedule. I am cautiously optimistic that local government investment in 2024 will remain at least at the level of 2023.

Innovation and entrepreneurship should be encouraged

Many people have misconceptions about China's economy, and always think that it is a lack of consumption, but in fact, in 2023, the main thing is that the domestic investment is insufficient.

In 2023, our consumption growth is already impressive, its contribution to GDP growth has reached 83%, and we cannot expect it to be even higher. The current (GDP) difference is due to the decline in exports on the one hand and the investment not meeting expectations on the other. In the past few years, the new growth from investment has been around 2 percentage points, but in 2023 it will only be 1.6 percentage points.

For us, exports are not under our control, and as long as demand from other countries falls, our exports will fall, especially when exports from all over the world are falling.

What we can control ourselves is domestic consumption and investment. In terms of investment, real estate investment will drop by 15%~20% in 2023, which accounts for a large proportion, and in addition, the investment growth rate of local governments has also declined.

In this regard, I feel that there are a couple of things that we need to seriously consider. The first is finance, and now we are talking more about strengthening financial supervision and guarding against financial risks. There is nothing wrong with this direction, but we must also note that there are risks in finance, and without risks it is not called finance, and it is impossible to completely remove financial risks.

Second, if we want to encourage innovation and entrepreneurship, we must have an active capital market.

The so-called activity of the capital market is to let everyone see that the capital market has a "play", otherwise it is impossible for everyone to be active. What does it mean to have a "play head"? It is necessary to constantly have new things popping up, and sometimes they will rise very high. Without this kind of surprise, people will not want to play finance, and they will not innovate.

But when we talk about innovation now, we are afraid of duplicate construction, but as long as we innovate, there will definitely be duplicate construction and bubbles. If we get rid of the bubble first, we won't be innovating.

We look at capital markets from an innovative point of view, why do we need capital markets, especially the stock market? Some people say it's for financing, maybe it is. But from the perspective of innovation, the stock market is paying for innovation, and it can even be said that it is paying for the failure of innovation.

The probability of success of an innovation may be 1%, and an innovation like Alibaba in the early years is even 1/3000, because after Son Masayoshi supported Ma Yun, his return rate was 2900:1, where did the 2900 times return come from? Ma Yun could not give it to him, he got it from the listing, that is, from ordinary people.

Why is it true that investors get high returns from the stock market?

Because if there is no such 2,900 times return, then in the beginning, no one will choose to invest. When a company goes public, investors return 2,900 times. And before, he may have failed 2,900 times, which no one has seen. The social cost has already been paid, so we have to get the successful person to get the cost back, otherwise he won't invest again next time.

After realizing this, we will not be afraid of a bubble in the stock market, or wonder why the stock price has risen so fast, which is actually for everyone to "play". We need to think about what to do after the financial system is put in order.

After that, as long as we provide a good environment, entrepreneurship can be handed over to the market. I think as long as the environment is good, entrepreneurs and innovators will emerge in the market.

In the future, we will recreate half of the Chinese market overseas

In recent years, going to sea has been a hot topic, especially when we can't control exports, going to sea is a very normal and correct choice.

We are now going to sea at a higher and higher level, which is welcomed by various countries. On the one hand, the foundation of these countries is relatively good, and our technology industry has a great advantage in the past, so I think it is worth encouraging to move to those places.

For example, once SHEIN is listed, its founder Xu Yangtian may be ranked in the top 10 of China's rich list. Even many people have never heard of this company, and it is still a traditional industry - the clothing industry, but it still makes money, and it is still valued at 66 billion yuan.

In the next 10~20 years, we will recreate half of the Chinese market overseas, and all successful countries have done this in the past.

However, for entrepreneurs, going overseas will face great challenges. One of the most important is the cost problem, because the domestic supply chain is too complete, after the enterprise goes to sea, the supply chain may have to stay in the country, and many enterprises may have to face a large number of imports from China, resulting in the rise in the cost of components. I'm sure entrepreneurs will figure out how to solve these problems.

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