01
Coordinate long-term and short-term policies
Further improve the quality of development
Since "weak expectations" have gradually accumulated in the previous period, it is necessary to respond with long-term policies in order to fundamentally change the "weak expectations." However, history also tells us that long-term policies take a long time to take effect, and as Keynes said, "in the long run, we are all dead".
In order to prevent damage from short-term shocks, it is often necessary to adopt emergency stimulus policies such as easing credit, increasing fiscal deficits, and subsidizing consumption. However, in doing so, we must avoid the misconception that relying solely on short-term macroeconomic policy measures can solve medium- and long-term economic problems and achieve economic recovery.
In this regard, the lessons learned from Japan's response to recession over the past 40 years are noteworthy. The appreciation of the yen and weak external demand facilitated by the Plaza Accord in 1985 triggered a slowdown in the Japanese economy from 1986 onwards. At that time, the Japanese government responded by implementing expansionary macroeconomic policies to provide strong stimulus, and although this Keynesian short-term policy brought Japan a three-year bull market from 1987 to 1989, it also led to the formation of huge real estate and stock market bubbles, sowing the bane of the "lost 20 years".
In subsequent successes, Japan's macroeconomic authorities continued to focus on expansionary macroeconomic policies, until Shinzo Abe's second term put forward the "three arrows" policy of using short-term policies to stabilize the overall situation and long-term policies to lay the foundation for development.
Among them, the first arrow is to expand the money supply, and the second arrow is to expand the fiscal policy, both of which use the old Keynesian method of driving growth from the demand side. The third arrow is called "structural reform", which is defined internationally as reforming the economic system and the way the government behaves, and improving efficiency by strengthening competition. Abe's "structural reforms," such as liberalizing the electricity market and abolishing the rule that only individuals can run agriculture, did not have immediate results, but over time, they gradually showed the effect of gathering popularity and revitalizing the economy by improving the market system.
There are many differences between the mainland and Japan in terms of their historical origins and current environment, so we must not copy Japan's experience, but this practice of basing ourselves on long-term policies and combining short-term and long-term policies deserves in-depth study and selection of the best from them.
As far as the mainland is concerned, the most important thing at present is to use reform and innovation to solve the basic problems that hinder the sustained, stable and high-quality development of the mainland's economy. I suggest that we might as well use the method followed in studying and formulating the "Decision of the CPC Central Committee on Several Major Issues Concerning Comprehensively Deepening Reform," that is, "problem-oriented," starting with the major economic and social problems we are actually facing, exploring the causes of the economic system and policy bottlenecks that cause these problems, and then putting forward targeted measures that need to be taken, and then formulating specific plans and organizing their implementation. Only in this way can we better achieve the improvement of efficiency, the improvement of structure and sustainable development. Two points are particularly important.
First, building a unified, open, competitive, and orderly modern market system remains the core task of reform. In order to achieve this goal, we must start from political, economic, rule of law and other aspects, and rely on marketization, rule of law, and international reform to stimulate hundreds of millions of people to release the potential of innovation and entrepreneurship. Today, we might as well review the hundreds of important reform measures stipulated in the "Decision of the CPC Central Committee on Several Major Issues Concerning Comprehensively Deepening Reform" in due course, and study which reform tasks have not been implemented, why they have not been implemented, and how they should be solved and implemented, so as to clarify the problems existing in the current economic system and policies, as well as the projects that need to be reformed and updated.
Second, it is necessary to strengthen the implementation of competition policies and conscientiously implement the negative list for market access and the positive power list for government departments. At the same time, it is necessary to promptly sort out the existing economic policies that have a restrictive and contractionary effect on market activities, and make substantial innovations to relevant laws and systems that may hinder the flow of labor, land, and other factors. Some abuses of market dominance must be eliminated in a timely manner through the implementation of competition policy and the implementation of the principle of governing the country according to law.
02
Persist in reform and opening up
Grasp the wave of technological revolution
In 2024, the Political Bureau of the Central Committee of the Communist Party of China will study collectively for the first time, focusing on new quality productivity and emphasizing the need to continue to do a good job in innovation, which requires further creating an institutional environment conducive to scientific progress and technological innovation. The progress of science and technology is the cause of all mankind. In fact, science and technology should also be separated. Generally speaking, it is difficult to carry out basic research by relying on the market and enterprises, because the uncertainty and externalities are too strong, and basic research will not be carried out unless the enterprise has developed to a considerable size and financial resources. This is difficult for most ordinary small businesses to do, which requires more investment from the government and society. And for the incentives of technology, the market undoubtedly has more space.
Today, if we want to catch up with the trend in the new round of technological revolution and industrial transformation, and even go ahead of the trend, the most important thing is nothing more than two things: one is to adhere to reform in order to create an environment that is more conducive to stimulating innovation and entrepreneurship, so that more talents can emerge; Second, we should continue to open up to the outside world and cooperate with relevant people from all walks of life in the competition to push forward the revolution in science and technology.
For the business community, the most important thing is to build the core competitiveness of enterprises, improve the added value of products, and further extend to both ends of the value chain. The front end is R&D and design, and the back end is brand, marketing, channel, management, after-sales service, etc., both of which are high value-added.
For the government, it should do something and not do something, and always focus on providing a good business environment. For example, China borrowed from Japan's selective or differential industrial policies implemented in the early post-war period, which was an attempt to use a set of fiscal, monetary policies, and even administrative and legal means to support some industries, but objectively also inhibited the development of some industries. In the late 1990s, there was a growing consensus on the direction of industrial policy, that is, the need for a transition from differentiated industrial policy to functional industrial policy.
The so-called functional industrial policy refers to the use of industrial policy to help, improve, and strengthen the function of the market, and its relationship with the market must be friendly and mutually cooperative, which can promote the role of the market and strengthen orderly competition.
Actually, what is the best industrial structure? What is the most promising product to be accepted by the market? Almost no one can predict accurately. There is only one way, which is to create such a business environment as much as possible, so that individuals and enterprises can rush forward, and eventually there are always some people and enterprises who can make breakthroughs, so that they can continue to move forward along the path of these breakthroughs, rather than subjectively choosing the development direction and technical route of products. When the government cultivates an atmosphere of orderly competition in the market, allows the market to play its full role on the basis of the rule of law, and accelerates the survival of the fittest, the transformation from high-speed growth to high-quality development will be smoother.
This article was published in Exploration and Controversy, Issue 3, 2024. Source: CF40 public account