· The full text is 5000 words long and about 11 minutes long
· Source of this article: Liu Shengjun's overall view (produced by Liu Shengjun Micro Finance)
Text: Liu Shengjun
New quality productivity is a political term, not an academic term. But don't underestimate the power of political vocabulary.
The most eye-catching topics of the two sessions in 2024 are not common prosperity, anti-corruption, and real estate, but a new concept: new quality productivity.
New quality productivity is a political term, not an academic term. But don't underestimate the power of political vocabulary. At the beginning of reform and opening up, seemingly simple political discourses such as "seeking truth from facts," "emancipating the mind," "black cats and white cats," and "letting some people get rich first" played an immeasurable role in promoting social development and ideological emancipation.
To understand "new productivity", it is necessary to combine it with two other concepts. In 2017, the 19th National Congress of the Communist Party of China put forward the expression of "high-quality development" for the first time. Corresponding to "high-quality development" is "extensive development". Before the 18th National Congress of the Communist Party of China, China's economy was growing rapidly, but its quality was not high (pollution, corruption, widening gap between rich and poor, etc.), unbalanced, uncoordinated, and unsustainable. Therefore, "high-quality development" is the core goal of economic development in the new era. The 20th National Congress of the Communist Party of China put forward "Chinese-style modernization", which is a general program, and "high-quality development" is the goal of "Chinese-style modernization" in the economic field
With the goal of "high-quality development", the next question is how to achieve high-quality development. After the exploration of the past few years, the answer has become clear: the development of "new quality productivity" is the main path to achieve high-quality development.
What is New Qualitative Productivity?
In September 2023, General Secretary Xi Jinping proposed for the first time to accelerate the formation of "new quality productivity" during his inspection and investigation in Heilongjiang. Regarding the new qualitative productive forces, the general secretary gave a "definition":
• The new quality productivity is the quality of the advanced productivity that plays a leading role in innovation, gets rid of the traditional economic growth mode and productivity development path, has the characteristics of high technology, high efficiency and high quality, and conforms to the new development concept. It is born by the revolutionary breakthrough of technology, the innovative allocation of production factors, and the deep transformation and upgrading of the industry, with the basic connotation of laborers, labor materials, labor objects and their optimal combinations, and the substantial increase in total factor productivity as the core symbol, characterized by innovation, the key is high quality, and the essence is advanced productivity.
From this definition, there are three main paths for the development of new quality productivity: 1) technological revolutionary breakthroughs. In recent years, revolutionary technologies such as blockchain, cloud computing, big data, virtual reality, and new energy have emerged, on the basis of which new models such as ChatGPT and SORA have been born; 2) innovative allocation of production factors, such as the application of data as a new factor of production in many fields, will bring new business models, management methods, and consumption methods (such as the algorithm behind Douyin);3) Industrial transformation and upgrading, such as the transformation from fuel vehicles to new energy vehicles.
It is worth noting that the general secretary particularly emphasized:
• It is necessary to strengthen scientific and technological innovation, especially original and disruptive scientific and technological innovation, accelerate the realization of high-level scientific and technological self-reliance and self-reliance, and do a good job in tackling key core technologies, so that original and disruptive scientific and technological innovation achievements can emerge one after another, and cultivate new momentum for the development of new quality productive forces.
Why the emphasis on disruptive innovation?
Disruptive innovation often creates a huge lead. Taking Apple as an example, Steve Jobs took the lead in subverting Nokia and leading the world into the era of smartphones. Although Samsung, Huawei, Xiaomi and other companies have been able to quickly follow suit, so far no one has been able to match Apple's position as the king in the smartphone field.
The moment the iPhone was released, Jobs shook the world
Much of America's strength stems from disruptive innovation. Over the past half-century, the United States has contributed most of the disruptive innovation. The U.S. stock market has been strong in recent years, with the "Magnificent Seven" (Google, Alphabet, Amazon, Apple, Meta (Facebook), Microsoft, Nvidia and Tesla) as the core engines. The Big Seven contributed 60% to the S&P 500's gains. The combined market capitalization of the Big Seven is more than $13 trillion, which is almost three times the GDP of Germany, the world's third-largest economy ($4.5 trillion).
Three epochal backgrounds of new qualitative productivity are proposed
Know what it is, but also know why. The proposal of new quality productivity has a profound background of the times:
Humanity has been around for 2.5 million years, and real economic growth is only about 250 years old. The growth of the human economy began with the first industrial revolution.
The technological revolution is also a key driving force for the profound changes in the international balance of power and the rise of emerging powers. The first industrial revolution, with machines replacing human power as the core, helped Britain rise to become an empire on which the sun never sets.
The second industrial revolution with electrification as the core and the third industrial revolution with information technology as the core have helped the United States leap to become a world hegemon. It is worth mentioning that the United States relied on the Third Industrial Revolution to pull down the "Japan No. 1" altar, and Japan fell into a lost 30 years.
Stepping into the 21st century, the fourth industrial revolution marked by digitalization and intelligence is coming. This industrial revolution is a PK between the United States and China. Whether the United States succeeds in maintaining its world hegemony or China's rise is the key to this war.
In terms of artificial intelligence (AI) patents, in 2022 alone, Chinese AI patent applications accounted for more than 40% of global AI patent applications, almost twice that of the United States, according to tracking data from the World Intellectual Property Organization (WIPO).
However, in the field of chips, which are crucial to computing power, the United States has entangled Taiwan and the Netherlands, forming a bottleneck threat to Chinese mainland.
In addition, the rapid development of ChatGPT and SORA once again proves that the United States has a strong advantage in disruptive innovation from 0 to 1.
Second, China's economy has entered a new stage
Economic growth is the core proposition of macroeconomics.
The traditional theory of economic growth holds that economic growth is mainly driven by the growth of two factors of production, capital and labor.
It wasn't until 1957 that this notion was overturned by the work of Nobel laureate Solow. When Solow studied the economic growth of the United States from 1909 to 1949, he "unexpectedly" found that capital accumulation and labor growth could only explain less than 13% of the growth of per capita output in the United States, and the remaining mysterious 87% was the famous concept of "Solow residual value", which is the "total factor productivity" that everyone is familiar with today.
Total factor productivity (TFP) is actually the growth brought about by the improvement of efficiency when capital and labor remain the same. How can efficiency be improved? This can be done by adopting new technologies, improving management, improving the quality and skills of the workforce, and new business models.
China's total factor productivity has made great strides since the reform and opening up, but it has declined significantly since the subprime mortgage crisis in 2008. Another piece of data is evidence of this: China's marginal capital output rate (input-output ratio) continues to rise, accompanied by a decline in GDP growth.
The reasons for this phenomenon are: 1) There is a large gap between Chinese enterprises and foreign enterprises, and there is a lot of room for "learning and imitation", which provides a convenient path for rapid improvement of TFP. 2) Before the subprime mortgage crisis in 2008, China promoted drastic reforms (state-owned enterprises, banks, market economic system, WTO accession, housing reform, fiscal and taxation, etc.), and institutional transaction costs were greatly reduced, opening up space for enterprise innovation. Nowadays, the reform has entered a deep water area, and it is difficult to advance. From the Qinling villa incident in Shaanxi, we can get a glimpse of the great resistance to reform. 3) The transfer of labor from the inefficient and inefficient agricultural sector to the industrial sector (migrant workers) in China has largely ended.
Marginal capital output (ICOR) and GDP growth
In this context, China's efforts to slow the economic downturn by increasing investment (typified by the 4 trillion yuan stimulus of 2009-2010) will not only be ineffective, but will also pose serious debt and financial risks.
In its Global Competitiveness Report (2006-2007), the World Economic Forum has divided the countries of the world into three specific stages of development: factor-driven, efficiency-driven, and innovation-driven. Obviously, China has gone through the two stages of factor-driven (resource consumption) and efficiency-driven (learning and imitation), and must switch to the innovation-driven stage. This is another background for proposing "new quality productivity".
Total Factor Productivity in the United States (1954-present)
In the face of China's rise, the United States adheres to a "zero-sum game" mentality and tries to contain China's development with technological bottlenecks (entity list sanctions). This is a direct threat to China's economic development.
As I pointed out in "", the United States has two sides, ostensibly under the banner of "liberal democracy and the rule of law", but inwardly it is full of the law of the jungle mentality of "the law of the jungle". We must "throw away illusions and have the courage to fight" about the United States.
With more than 450,000 parts, state-of-the-art EUV lithography machines are the crown jewels of manufacturing
Against this background, the central government has put forward a new economic pattern. The Central Committee specifically pointed out: ".
From the supply side, this new pattern is to solve the problem of technology bottlenecks, and from the demand side, it is to solve the problem of domestic consumption capacity. The development of new quality productivity is the key to breaking through the bottleneck of technology and realizing the domestic cycle as the main body. This is the third context in which the new qualitative productivity is proposed.
It can be seen from this that the development of new quality productive forces is not only necessary, but also urgent, and it is the "great power of the country."
How to develop new quality productivity?
Now that the necessity and urgency of developing new productive forces have been clarified, the next question is how to develop them. To find out how to develop, we must first find out who is the "main body" in the development of new quality productive forces, the government, state-owned enterprises, or private enterprises?
Taking the United States as an example, almost all scientific and technological innovation is completed by private enterprises. The seven giants of American technology are all private enterprises.
The same is true for China. According to the data of the State Intellectual Property Office, private enterprises have contributed 70% of the technological innovation achievements of the whole society, covering 80% of the national specialized, special and new "little giants" and 90% of high-tech enterprises. Since the reform and opening up, almost all major innovations have been completed by private enterprises: Huawei's 5G, CATL's batteries, BYD, NIO, and Li New Energy Vehicles, Xiaomi, OPPO's mobile phones, BGI's gene technology, Tencent, Alibaba, JD.com, and Pinduoduo's Internet revolution......
The practices of Japan, South Korea, and Taiwan also show that no matter how the government promotes it through industrial policies, it is always private enterprises that play a leading role in innovation.
This is not an accident, but a mechanism.
The innovation advantages of private enterprises are: 1) the mechanism is flexible, entrepreneurs can be arbitrary, rapid decision-making - innovation often needs to be arbitrary to break the conventional thinking, Jobs, Musk are typical of domineering presidents; 2) private entrepreneurs can take the risk of failure, success can obtain huge benefits
The disadvantages of innovation in SOEs are: 1) SOEs are often locked into procedures and it is difficult to break through conventional thinking, and 2) the leaders of SOEs are held accountable for failures and difficult to share sufficient benefits if they succeed, which makes it difficult for SOEs to engage in high-risk innovation. The system determines that state-owned enterprises are "more conservative than old, and not enough innovative".
It is important to clarify a common misconception that innovation depends on big business. This perception is wrong. While Microsoft, Google, Nvidia, and Tesla are all giant corporations today, let's not forget that none of them didn't grow from insignificant small businesses. What's more, their most important innovations were actually completed at the beginning of the business, and the great innovations after success were lackluster. Therefore, not paying attention to small and micro enterprises is tantamount to erasing the future of Google, Tesla and Nvidia.
Apple, Amazon, HP, and Google all have their roots in the garage
The most important bottleneck in the development of new quality productive forces is not money and basic research, but "entrepreneurial spirit." Without Ren Zhengfei's entrepreneurial spirit, there would be no 5G, and with Ren Zhengfei's entrepreneurial spirit, the results of Turkish mathematician Erdal Arıkan's research can be transformed into "new qualitative productivity". Entrepreneurship is 1, and the other elements are a string of zeros after 1
Standing at the height of "entrepreneurship is the primary productive force", we can understand why the central government issued the "Opinions on Creating a Healthy Growth Environment for Entrepreneurs, Promoting Excellent Entrepreneurship, and Better Playing the Role of Entrepreneurs" (2017) and "Opinions on Promoting the Development and Growth of the Private Economy" (2023).
How to thrive on entrepreneurship?
1. The rule of law is the best reassurance, legally and theoretically clarifying the concerns of private enterprises about "the need for the private economy is a helpless choice, and the elimination of the private economy is a great ideal", so as to truly realize "those who have constant production have perseverance";
2. Reduce administrative examination and approval, and give entrepreneurs more and more room for innovation;
3. Truly eliminate all inequalities between private and state-owned enterprises in all fields such as financing, market access, resource access, and market competition;
Implementing "competitive neutrality" is easier said than done
4. Vigorously develop the capital market and make the capital market a powerful assembly line for cultivating "new quality productivity".
5. Educational reform, from cramming education to cultivate "engineers" to heuristic education to cultivate "creative talents".
The key to achieving this lies in reform. General Secretary Xi Jinping pointed out:
• To develop new productive forces, it is necessary to further deepen reform in an all-round way and form a new type of production relationship that is compatible with it. It is necessary to deepen the reform of the economic system and the scientific and technological system, focus on breaking through the blockages that restrict the development of new quality productive forces, establish a high-standard market system, innovate the allocation of production factors, and let all kinds of advanced and high-quality production factors flow smoothly to the development of new quality productive forces.
To develop new quality productive forces, the entrepreneurial spirit should play a leading role. The government is not inactive. Premier Li Qiang once said eight words, which are very incisive:
• Respond to requests and leave nothing unattended.
With regard to the development of "new quality productive forces," "responding to requests" means that the government should encourage universities and scientific research institutes to do a good job in basic research and provide specialized personnel for enterprises; and deepen structural reform so that science and technology enterprises will not be trapped by financing or burdened by relationships. It is more difficult and important to "do nothing", and the government should not increase policy uncertainty for enterprises, and do not be kind enough to help. The government must be able to endure loneliness and "take a step back and open the sky". Sometimes, not distracting is the biggest help. Former U.S. President Ronald Reagan famously said, "Government is not the solution to our problem, government is the problem."
At the same time, it is necessary to resolutely prevent the "movement" of developing "new quality productive forces," resulting in disorderly competition, detachment from reality, and waste of resources. In particular, we must be vigilant against local governments blindly investing and attracting investment under the banner of "new quality productivity".
The lesson of Wuhan Hongxin's painting cake circle money must be remembered
At the two sessions in 2024, General Secretary Xi Jinping specially reminded:
• The development of new quality productive forces does not mean ignoring or abandoning traditional industries, it is necessary to prevent a rush to the top and bubbles, and it is also necessary not to engage in a model. All localities should persist in proceeding from reality, first establish and then break down, adapt measures to local conditions, and provide guidance by category.
Liu Shengjun @ Lugu Lake
Economists who insist on telling the truth
Political Economy + Big Historical View
In 2014, he participated in the Prime Minister's Economic Symposium
Liu Shengjun is the founder of Micro Finance
Member of the Shanghai Economic Committee of the Zhi Gong Party
Chief expert of Shandong Provincial Human Resources Development Promotion Association
Author of "The Next Decade"
Shandong Heze Dingtao people