Economist Jia Kang: 2023 is a "year of opportunity" GDP is likely to remain above 5% this year

Editor's note: In 2023, China's economy will find its way forward amid changes. Tencent Finance's "Economic Everyone's Talk" column and Henan Radio and Television Elephant Fortune jointly launched the 2023-2024 New Year's Eve series to plan "The Power of Changing Situations", dialogue with financial experts, gain insight into the direction in the intricate industrial changes, find determination in the surging tide of the times, and draw strength from the new development logic. This is the first article in this New Year's Eve series.

Jia Kang, a well-known economist and founding president of the Huaxia Institute of New Supply Economics

Text丨Zhu Yuting

Video丨Feng Biao

If you use a key word to describe China's economic trend in 2023, Jia Kang uses the "year of opportunity" to realize the "L-shaped". Where is the exact location of this "inflection point"? He thinks it's right where the tail of "L" pulls out.

Looking forward to 2024, Jia Kang said that he is "cautiously optimistic", and he believes that it is likely that after hard work, it can continue to operate at more than 5% in 2024 and 2025.

He made it clear that in 2024, to plan a new round of fiscal and tax reform, it is necessary to serve the overall situation, grasp the priorities, and make multiple rounds of "minimum package" promotion.

Talking about the downward trend of CPI, Jia Kang said: there is indeed no inflationary pressure at present, but he does not agree with the proposal of "pushing up the inflation level to 6%", he believes that the current outstanding contradiction is still insufficient domestic demand, and there is no need to worry about whether the liquidity on the money supply side will be too abundant.

The following is the full text of the conversation:

Xi "precautionary savings" The proportion of consumption is low

Tencent Finance: At the macro policy level, we have been mentioning the key word of "expanding domestic demand". In recent years, what kind of changes have been made in the proportion of consumption in economic growth? Compared with developed countries, what are the shortcomings of our consumption?

Jia Kang: In the field of economic research, there are indeed many scholars who pay attention to this perspective, and a more influential judgment more than 10 years ago was that compared with the three major sectors of China's national income distribution, namely, the enterprise sector, the government department, and the household (resident) sector, the proportion of household income in mainland China is relatively low, and when it comes to the comparison between investment and consumption, the proportion of consumption in the overall economy is obviously low.

However, in fact, the income of residents in China is not statistically represented, and the previous conclusion has to be revised to a certain extent. This has had a certain impact on policy formulation, and many policies have paid special attention to how to better consider how to increase people's incomes and how to guide and encourage consumption. In the next ten years, the proportion of our consumption has increased in terms of indicators.

Compared with the international level, there is still a saying that it is low. However, I think it is necessary to take into account that China is still the "world's largest developing economy", and under certain national conditions, the proportion of consumption in our current stage of development is lower than that of the general international experience, and there are also some positive points that it deserves attention and stages.

Because the motivation of Chinese people to "save precautionarily" after obtaining income is still relatively high. Therefore, while the people's income has increased, the proportion of income that has been converted into consumption in the current period has a "marginal consumption tendency" in economics, and this concept is relatively low. In other words, the savings rate of the Chinese people is relatively high, and the proportion of investment and consumption is relatively low.

To change, it is necessary to relieve worries about the future along with the increase in the people's income, and further improve the social security system, so that a large number of Chinese can minimize their worries and obstacles in terms of medical treatment for serious illnesses in their families, expenses for their children's education in the future, and solving the problems of housing and old-age care, so that they will dare to use their current income more for actual consumption. There will be a historical process.

2023 is a "year of opportunity", and GDP will continue to be above 5% in 2024 and 2025

Tencent Finance: The concept of "expanding domestic demand" has been proposed for many years, do you think it is still a problem?

Jia Kang: The support of our domestic demand for the operation of the entire economy is weak, so we must expand domestic demand. The process of China's economic growth slowdown has been going through more than a decade, and the main influencing factors are multiple, and some are unexpected.

For example, at the beginning, we subjectively judged that we need to bid farewell to high-speed development and turn to medium-high-speed and higher-quality development. This is the level of Chinese per capita national income reached 4,000 US dollars in 2010, and after sitting firmly in the position of middle-income economy, it is necessary to bid farewell to the extensive development characteristics of the economic take-off stage and turn to the characteristics of intensive development, so it is necessary to sacrifice some speed and lead the new normal.

After the first quarter of 2018, an important factor came: a major change in the world's most important bilateral relationship, the U.S.-China relationship. As a result, the economic growth rate broke through the three-year bottom line of 6.7% that year, and fell to 6.1% in 2019.

At this time, the third major headwind came: the three-year impact of the new crown epidemic, but we finally survived.

All these factors are intertwined, which has led to the constant emphasis on expanding domestic demand for so many years.

However, 2023 has important characteristics as a "year of opportunity". The growth rate in the first quarter of this year was generally in line with expectations, rebounding to 4.5 percent year-on-year, close to the lower edge of the medium-high speed as generally understood, and more than 5 percent can be regarded as the medium-high speed state; in the second quarter, investment and consumption were not boosted enough, and major economies had problems with foreign trade, and the economic growth rate was far lower than expected; in August, because of the introduction of a series of specific guidelines and policies of the central government, the overall situation was improving, and it continued to improve in September. In this way, GDP grew by 5.2% year-on-year from January to September, and as long as the year-on-year growth of 4.4% is achieved in the fourth quarter, the annual growth target of 5% can be achieved. Therefore, it is now very clear that there is no suspense that the annual GDP will be 5%.

What will happen in 2024 and 2025? We will mobilize the objective conditions and potential of China's growth as much as possible, and in addition to better promote institutional innovation and policy optimization in the subjective aspect, coupled with scientific and technological innovation and management innovation, it is likely that we will continue to operate at more than 5% in 2024 and 2025.

Now some forecasters believe that China's GDP will be 4.5% (less than 5%) in 2024, but I don't think so.

I am cautiously optimistic about the future of China's economy. The key is that the objective depth of industrialization and urbanization still exists, and the development space is considerable, and the subjective efforts to mobilize the potential of our economy to show due resilience and room for maneuver are supported by objective conditions.

Therefore, the key to force is the subjective aspect, how we do our own things well. It is necessary to boost the private enterprises that have the characteristics of "five-six-seven-eighty-nine" (that is, they contribute more than 50% of tax revenue, more than 60% of GDP, more than 70% of technological innovation achievements, more than 80% of urban labor employment, and more than 90% of the number of enterprises and new jobs. ), the confidence of the private economy, improve market expectations, the head enterprises "improve rectification", "launch a number of green light projects", boost the development of the real economy, do a good job in the continuous innovation and development of specialized and special new enterprises, etc., and continue to promote China's modernization with a medium and high speed (growth rate of more than 5%).

It is necessary to plan a new round of fiscal and taxation reform The local tax system has not yet taken shape

Tencent Finance: In the future, where will the new drivers of China's economic growth appear?

Jia Kang: China's economic development needs to transform the old and new kinetic energy, and fundamentally speaking, the new kinetic energy still depends on institutional innovation, which brings out scientific and technological innovation and management innovation, and also keeps up with the innovation of ideological concepts.

How can we really bring about the improvement of the quality and efficiency of the entire supply system through institutional innovation? We still need to grasp some key points. The recent Central Economic Work Conference made it clear that it is necessary to plan major reform measures and a new round of fiscal and taxation reform.

Finance is the foundation and important pillar of national governance, and in the reform and development, the grasp of the strategy should be reflected in the overall support, the selection of key points, entry points, and breakthrough points must be considered in advance from the fiscal and taxation aspects, and the "minimum package" type of multiple rounds of advancement.

"Promoting stability with progress" must inevitably "establish first and then break" It is necessary to see it first

Tencent Finance: At this Central Economic Work Conference, there is a key word that has been widely mentioned by many economists, "first establish and then break", how do you understand this word?

Jia Kang: At the 2010 Central Economic Work Conference, "seeking progress while maintaining stability" was proposed. Since then, it has been the general tone of economic work. The internal logic here is to emphasize that in "seeking progress while maintaining stability," we must overcome the challenging factors of "instability" and eliminate the threat of instability.

We must "stabilize" in a reasonable range and "stabilize" the sustainability of high-quality development. "Promoting stability with progress" must ensure that the speed runs within a reasonable range, so that the substantive demand for "stability" can be achieved.

How to proceed? It is necessary to better integrate the "counter-cyclical" principle of expanding domestic demand with the main line of "cross-cyclical" modernization of supply-side reform in the current overall economic operation. To promote stability, high-quality upgrading and development is the last word in the process of advancing with the times at this stage.

There is another logically bound essentials in "promoting stability through progress", that is, "first establish and then break". You must first see the right thing, lay out how to do what you need to do to promote stability, stand up, and then solve all the problems that need to be corrected that should be eliminated.

The "guarantee track" is supported by 40%-50% The housing price of commercial housing is not so lethal

Tencent Finance: The consumption concept of contemporary young people has changed, from "buying, buying, buying" to "exquisite and saving", do you think our consumption concept is changing?

Jia Kang: There is a saying called "consumption downgrade", which is very logical on the surface: after the epidemic, there was a "scar effect", which is a necessary process to smooth out scars.

In the middle of this process, we must not be in a hurry, and the common people are careful in their calculations, which is completely in line with the idea of economic analysis. Residents' consumption, may be the pursuit of famous brands in the past few years, get their hands on it, have face, but after a long time, they still have to be careful to calculate, which has a positive effect on the entire economic and social life, and the public is more and more rational consumption, which is healthier.

Of course, I am convinced that with the "year of opportunity" in 2023, we will complete the "L-shaped" transformation in the future, and China's consumption potential will be further brought out under the sustainable development of the medium and high-speed intervals.

This is because effective investment brings stable employment, predictable and stable income, and forms the purchasing power that residents can use for consumption. In addition, the state has necessary policy support, such as raising the standard of subsistence allowance for low-income groups, and providing bereavement relief for particularly difficult groups. China's future consumption stratification should develop at the same time, with relatively rational low-end, middle-end consumption, and high-end consumption, which is a prospect that can be seen in the fluctuating process of the gradual smoothing out of the "scarring effect".

Tencent Finance: How do you understand the specific position of the "L-shaped" in 2023, and can we enter a stage of regular growth in the next few years?

Jia Kang: I think we should strive to take 2023 as an inflection point, which I call the "year of opportunity", to realize the L-shape.

This inflection point is where the tail of the "L" pulls out. We stand above 5%, which is basically in line with the statement of a reasonable range. Operation of more than 5% may fluctuate, but it generally runs above the lower edge of the medium-to-high-speed range, and this is a state that we should strive to achieve.

Tencent Finance: From the perspective of economics, how do the different consumption concepts of residents affect the macro economy?

Jia Kang: It should be combined with rational policy guidance in expanding domestic demand. For example, when we talk about "having a place to live," how can we provide effective supply for the low-income strata? We cannot rely on commercial housing; in terms of the concept of the "three major projects," it is from the transformation of shantytowns to the transformation of urban villages, which is suitable for both the low-end and the low-end and the middle-end.

After these houses are renovated, the general property rights cannot be fully circulated in the market. Public rental housing is only rented but not sold, and there is no property right certificate; co-ownership houses have property right certificates, but they are not ready to be listed and traded, which blocks the arbitrage space.

For example, young white-collar workers and income sandwich layers can buy houses at lower prices, and young white-collar workers who have just graduated can get a fixed residence by buying a co-ownership house, which is very decent and suitable for China's national conditions.

The government has given policy guidance, whether it is public rental housing, co-ownership housing, or long-term rental housing to be developed, it is a "guarantee track". The government has held up the "guarantee track" to 40%-50%, and the housing prices on the other track of the commercial housing track in the entire market will not be so lethal.

The problem of housing and consumer demand at the low-end and middle-end are met through appropriate and effective supply, and the remaining middle-class and above class exercise their consumer sovereignty is a matter of selecting buyers in the competitive housing market. This is the long-term mechanism for the healthy development of the real estate market.

To solve the problem of the people's housing consumption and housing, we must treat both the symptoms and the root causes, and the root cause must be cured, and the construction of basic systems must at least include the reform of the land system, the reform and improvement of the dual-track housing system, the mutual coordination of commercial finance and policy-oriented finance in the financial field, and the property tax system that we will discuss in the future.

The issuance of consumption vouchers is supplementary and cannot be relied upon to mobilize consumption potential

Tencent Finance: How to expand domestic demand and increase consumption, how can fiscal policy be precise? Can the issuance of consumption vouchers boost confidence?

Jia Kang: After the outbreak of the epidemic in 2020, some local governments used to attach great importance to consumption vouchers, which makes sense, and it is actually a kind of promotion that local governments subsidize and cooperate with businesses.

What is this promotion to solve? It is to improve the economic prosperity through promotion when the low-middle-income class and middle-income class have a certain amount of spending power and are able to enter the scene for consumption.

The local government provides some money to subsidize businesses to do consumption voucher-style promotions, but in fact, they use the turnover tax represented by the VAT they expect to get in advance.

Because as long as there are such trading activities in the market, regardless of whether the merchant is profitable or not, the consumption tax must first be paid in accordance with the law, especially the first major tax under the concept of tax transfer, value-added tax. VAT is expected in local government revenues. If the consumption vouchers are made in advance in advance, it will contribute to a relatively quick recovery of economic life, which is reasonable.

But on the whole, it is still subsidy, and it is impossible to solve the problem of mobilizing China's consumption potential by using "consumption vouchers" year after year.

Of course, we have also seen that some foreign practices are to directly discover gold for ordinary people. In the short term, helicopter money can indeed promote the economic boom. However, in terms of the actual effect of the policy, the level is very low. For example, many wealthy people also receive cash subsidies.

So let's consider treating people differently and only giving cash to low- and middle-income people, so as to promote consumption in this way? I think the management cost is extremely high, what kind of people should be paid, and how much? How to verify the actual income of the family?

I suggest that there is a kind of consumption voucher that could be borrowed from it: a coupon for the low-income class, which cannot be circulated in the market in a normal monetary way, and can only be used to buy basic daily necessities in supermarkets.

However, if China issues such ration coupons, it will also face the problem of how to issue them and to whom: if they are determined according to permanent residents, it will not be possible to solve the problem of actual frequent population movements; if they are issued according to household registration, they must also consider the issue of household registration and its limitations, as well as the identification of low-income strata in cities; and at the same time, it is also necessary to guard against the emergence of "scalpers" in the market......

Therefore, there are many aspects that need to be considered in a comprehensive and detailed manner, and it is still necessary to be more comprehensive and thoughtful when learning from overseas experience.

At present, there is no inflationary pressure, and prices above 4% must be squeezed!

Tencent Finance: The CPI data in 2023 has been running at a low level, and it will decline year-on-year in October and November. What do you think are the reasons for the decline in the price index, and what are the risks that need to be guarded against at the moment?

Jia Kang: The price issue is a matter of great concern. The Central Economic Work Conference has a very good idea: It is necessary to see that the money supply in the entire economic operation should be adapted to economic development, and also to the operating state of prices, and to match the expected target of the price level.

In the medium and long term, changes in prices must correspond to the supply of liquidity, and we cannot just look at the high macro leverage ratio, China's broad money supply is 2.5 times that of GDP, and we feel that a catastrophe is coming. In fact, after so many years, our prices have not fluctuated. At present, the ex-factory prices of manufactured goods and the performance of means of production have continued to decline (PPI is continuously lower). The CPI is also moving lower, what does this mean? There are no inflationary pressures. In this context, "prices as a thermometer of economic operation" tell us that more attention can be paid to policy operations related to "maintaining reasonable and abundant liquidity".

The broad money supply should be combined with the velocity of money to form a real effect. If we look at the high level of the ratio of our broad money supply to GDP in recent years, it also means that the velocity of money circulation must be low when prices are not fluctuating. It is still a manifestation of the problem that domestic demand and prosperity levels are still insufficient in our economic operation.

Therefore, the main contradiction that is prominent at present is still the lack of domestic demand, and there is no need to worry about whether the liquidity on the money supply side will be too abundant? This means that monetary policy can continue to operate on the channel of interest rate cuts and RRR cuts if necessary.

Tencent Finance: Recently, Professor Zhang Wuchang proposed that the mainland needs to push up inflation to 6% to alleviate the current situation. What do you think of this proposal?

Jia Kang: This should be Mr. Zhang Wuchang's family words. From the perspective of the management of the policy, it is certainly not desirable to have such a big upswing and stimulate the inflation rate to 6% at once, which may not be good.

One of the most important items in our "six stability" is to "stabilize prices", and prices are generally considered to be tolerable below 4%, and more than 4% are intolerable, and must be suppressed.

Therefore, Mr. Zhang's suggestion, I think it can only be his words, the reasonable core is not to worry too much about inflationary pressure, appropriately increase the weight, and there is room for policy re-development. But there is no need to raise inflation to 6% as he says, and I don't think the monetary policy authorities can think that way.

Effective investment is the key, consumption is the foundation, and the two should not be neglected to form a virtuous circle

Tencent Finance: The Politburo meeting mentioned that "efforts should be made to expand domestic demand and form a virtuous circle in which consumption and investment promote each other." "How do you think consumption and investment can be mutually reinforcing?

Jia Kang: From the perspective of the principle of reproduction, consumption and investment are an economic cycle that interacts. Consumption is to meet people's needs, and it will inevitably lead to the starting point and destination of supply side and production and business activities, which is very clear. From the standpoint of humanism, all our economic activities finally fall on consumption to meet people's needs, and people's needs are constantly improving, so that people's better life will rise step by step.

But in order to make consumption sustainable, where does the source of living water come from? It must be innovation on the supply side, effective investment on the supply side, and effective investment to bring out the effective supply of products and services. In the middle of this process, it is manifested in the employment that supports the basic operation of society and the people live and work in peace and contentment, so as to form a stable expected income of the general public, and the process of increasing income with economic development.

With such a stable expectation, the public will continue to have disposable income in their hands, and form the purchasing power to pay to meet their own selective consumption. Everyone's preference can be realized in the consumption link with the purchasing power of the ability to pay, which is a virtuous circle state.

That's why effective investment is the key, consumption is the foundation, and the two should not be neglected to form a virtuous circle.

If we look at policy design, we can't skip effective investment, and we talk about stimulating consumption, thinking that the economy will be alive after stimulating consumption, and this will fall into a misunderstanding.

To tell you the truth, I have come into contact with some influential researchers who say that in a super-large market like China, as long as we do a good job of "stimulating consumption", all the problems will be solved. This is something I completely disagree with.

If we only talk about stimulating consumption, we will definitely have no stamina and be unsustainable at a certain time. The source of consumption must be the support of effective investment ahead.

The government-guided public infrastructure investment we are arranging now can play a comprehensive role in optimizing the structure and improving people's livelihood. Once investment starts, it will immediately have the effect of expanding consumption and expanding domestic demand, and why? A fairly high proportion of the domestic demand formed by it will be used for the payment of wages and bonuses in engineering projects, and it will be immediately turned into consumption. Once completed, the improvement of people's livelihood will be followed to support better consumption scenarios in terms of people's livelihood. The level of public infrastructure has improved, and people are more willing to visit shopping malls, and are more willing to travel by high-speed rail or plane, and all these consumption potentials will be explored.

Coming soon

Wu Xiaobo: In the era of mutation, believing that the country is getting better and better is a particularly big judgment