■Chi Fulin Hu Lei
The meeting of the Political Bureau of the CPC Central Committee held on April 30 pointed out that "reform and opening up is an important magic weapon for the cause of the Party and the people to make great strides to catch up with the times", and demanded that "the whole party must consciously put reform in a more prominent position, and further deepen reform in an all-round way around the promotion of Chinese-style modernization".
The mainland is a large country in structural transformation, and the analysis of economic growth prospects should not only look at the short-term, but also look at the medium- and long-term. It is necessary to look at both the total amount and the structure. On the one hand, significant progress has been made in structural transformation, which has become an important condition for achieving high-quality development. On the one hand, the structural transformation has not yet been completed, and it is facing multiple challenges brought about by changes in the internal and external environment. On the whole, there is still huge room for structural transformation on the mainland, and it has become the biggest confidence to support economic growth of about 5% in the next 5-10 years. To unleash the growth potential of structural transformation, it is necessary to deepen supply-side structural reform with structural transformation as the main line.
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The transformation of economic structure contains huge room for economic growth
The transformation of the mainland's economic structure contains huge room for growth, which is the greatest potential for the mainland's economic growth and an important condition for achieving economic growth of about 5 percent in the next five to 10 years.
First, the mainland's economic structure is in a critical period of transformation, and there is still considerable room for economic growth.
The upgrading of consumption structure is at an important juncture. Despite the challenges in many aspects, the trend of upgrading the consumption structure of residents in the late stage of industrialization has not changed. In 2022, the proportion of service-oriented consumption of urban and rural residents in mainland China was 43.16%, and this proportion will increase to 45.2% in 2023. The share of service consumption is expected to reach about 47% by 2025 and is expected to exceed 50% by 2030. If the service-oriented consumption of a country with a population of more than 1.4 billion reaches more than 50 percent, it will not only promote the economic growth of the mainland, but also be a major positive for the global market.
The upgrading of the industrial structure is at an important juncture. In 2023, the mainland's secondary industry will account for 38.3% and the tertiary industry will account for 54.6%. It is expected that by 2025, the proportion of the mainland's primary industry will gradually decline, the proportion of the secondary industry will be relatively stable, and the proportion of the service industry is expected to reach more than 55%. Among them, the proportion of producer services in the service industry will increase from 41.5% in 2021 to about 50%. The increase in the proportion of producer services is an important condition for the high-quality development of the manufacturing industry, and will form an important foundation for the transformation and upgrading of the mainland's manufacturing industry.
The upgrading of the scientific and technological structure is at an important juncture. In 2023, the R&D intensity of the mainland will reach 2.64%, and in 2022, the proportion of basic R&D in the mainland will reach 6.57%; The proportion of R&D expenditure in R&D expenditure reached 79.02%. The research team of the China (Hainan) Institute of Reform and Development predicts that in the next few years, the mainland's R&D intensity is expected to exceed 3%, the scale will exceed 4 trillion yuan, and the proportion of basic R&D is expected to exceed 10%, thus forming a huge space for scientific and technological R&D.
The upgrading of urban and rural structures is at an important juncture. At the end of 2023, the urbanization rate of the permanent resident population in mainland China will reach 66.16%, and the urbanization rate of the registered population will reach 47.7% in 2022. In the next few years, there is still considerable room for urbanization. By 2030, the urbanization rate of the permanent population is expected to exceed 70%, and there is still room for improvement of at least 15 percentage points in the urbanization rate of the registered population.
Second, the structural transformation of the economy contains huge growth potential. The structural transformation of a population of more than 1.4 billion objectively contains huge room for growth, which is China's unique "transformation dividend".
The consumption potential contained in the upgrading of consumption structure. It is estimated that by 2030, the proportion of service-oriented consumption in mainland China will rise from 45.2% in 2023 to about 50%. As a result, it will bring 10 trillion yuan of new service consumption. In the face of unstable macroeconomic growth, the importance of unleashing the potential of service consumption has increased significantly.
The investment potential of industrial structure upgrading. For example, the mainland's data infrastructure will attract about 400 billion yuan of direct investment every year, which will drive about 2 trillion yuan of investment in the next five years.
The potential of domestic demand in the urban-rural structure. According to preliminary estimates, every 1 percentage point increase in the urbanization rate will boost the demand for new investment by about 6.6 trillion yuan. Under the current dual structure of urban and rural areas, the consumption of migrant workers has been suppressed by 23%, and if the consumption potential of 180 million migrant workers is released through urbanization, more than 2 trillion yuan of consumption can be generated every year.
Third, the transformation of the economic structure will support economic growth of about 5% in the next 5-10 years.
For example, after the urbanization rate exceeds 60%, every 1 percentage point increase will lead to a 3.5% increase in per capita capital stock over the same period. Coupled with the impetus for structural transformation in other aspects, it is conditional and possible for the average annual growth rate to reach about 5% in the next 10 years.
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Efforts should be made to resolve the outstanding contradictions faced by structural transformation
While focusing on solving short-term growth pressures, it is also necessary to focus on solving the structural contradictions faced by structural transformation.
First, structural transformation faces many challenges.
The upgrading of consumption structure is facing challenges. In 2023, although the proportion of service-oriented consumption in mainland China will increase compared with the previous year, it will not return to the level of 2019 (45.86%). From 2013 to 2021, the proportion of service-oriented consumption in rural residents' consumption in mainland China was 6-8 percentage points lower than that of urban residents.
The upgrading of the industrial structure is facing challenges. The mainland's producer services account for more than 20% of GDP, but there is a significant gap compared with the level of 40%-50% in the developed countries in the West, among which the producer services in the United States, the European Union, and Japan account for 70%, 55.6%, and 57% of the national economy respectively.
The upgrading of the scientific and technological structure is facing challenges. Although the mainland's R&D intensity continues to increase, there is still a significant gap compared with developed countries. In 2023, the R&D intensity of the mainland (2.64%) is still lower than the average of 2.7% of the Organisation for Economic Co-operation and Development (OECD) countries; In 2022, the proportion of basic research expenditure in mainland China (6.57%) is lower than that of the United States, Japan, South Korea and other countries.
The upgrading of the trade structure is facing challenges. On the whole, there is a prominent structural imbalance of "one more and three less" in the trade in labor-intensive services, and less in knowledge-intensive, technology-based and patented services, and less capital-based services. In 2022, the mainland's trade in services accounted for 14.18%, which has not yet recovered to the level of 17.15% in 2019, and is more than 7 percentage points behind the global average of 21.88% in 2022. In 2022, the mainland's three traditional services trade in goods-related services, transportation services, and travel services accounted for 53.8% of the total trade in services, 11 percentage points higher than the world average and more than 17 percentage points higher than that of G7 countries.
Second, structural contradictions are an important factor hindering structural transformation.
Constraints caused by irrational factors in the pattern of national income distribution. In 2021, the proportion of the total primary distribution income of the household sector in mainland China was 61% of total income, about 5 percentage points lower than the world average. The proportion of workers' remuneration was 55.1%, 11.4 percentage points lower than the world average. The proportion of workers' remuneration in GDP has been low for a long time, which restricts the release of the consumption potential of urban and rural residents.
The structural contradictions faced by investment restrict the release of investment potential. From the perspective of investment entities, the proportion of private fixed asset investment in the mainland will reach 50.4% in 2023, down 3.8 percentage points from 2022 (54.2%), the lowest in recent years, and from the perspective of investment industry, the proportion of fixed asset investment in the service industry will reach 65.8% in 2023, down 2 percentage points from 2020. The decline in private investment in the investment field is directly related to structural contradictions. If these structural contradictions cannot be well resolved, it is possible to stabilize the expectations of private capital and "achieve twice the result with half the effort".
The structural contradictions faced by trade in services restrict the release of the potential of trade in services. In 2022, 12 of the 22 industries in mainland China were above the global average. Among them, sound recording, telecommunications, film and courier services (including postal services) ranked highest in the world.
Third, the key to resolving structural contradictions is to deepen structural reforms. From a practical point of view, the adjustment of macroeconomic policies is very important, and it is even more important to deepen structural reforms. For example, studies have shown that an important breakthrough in the reform of factor marketization will increase economic growth by 1.9 percentage points on the existing basis. The key to stabilizing enterprises, employment and growth is to fully implement the decisive role of the market in the allocation of resources and give better play to the role of the government, so as to create a first-class business environment that is market-oriented, law-based and internationalized.
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Deepen structural reform with structural transformation as the main line
To deepen structural reform, we should pay more attention to the structural contradictions in the operation of the system and mechanism, pay more attention to solving structural imbalances and structural challenges, pay more attention to straightening out the relationship between the government and the market, and create a market environment of fair competition.
First, we need to promote structural transformation through structural reforms. The important goal of structural reform is to stabilize and enhance development expectations, fully stimulate market vitality, and form a market environment of fair competition. For example, to promote the transformation of consumption structure and form a service-oriented economy, it is not only necessary to further promote the comprehensive opening of the service market, but also to deepen the reform of the distribution system; To promote the transformation of urban and rural structure, it is necessary to deepen the institutional reform of the equalization of basic public services; To promote the transformation of the scientific and technological structure, it is necessary to speed up the reform of the scientific and educational system and continuously enhance the mainland's ability to innovate independently.
Second, structural reforms should be used to resolve structural contradictions.
Structural reform is used to solve the structural contradictions in the implementation of policies. For example, guided by market decisions, policies that are not conducive to structural transformation should be revised, adjusted and abolished to reduce administrative interference in macroeconomic operations; Solve the problem of inconsistency between policies and policies, and improve the consistency level of policies.
Structural reform should be used to solve the structural contradiction between policy and system. It is necessary to break through the "two unswerving" problems that the Party Central Committee has repeatedly emphasized from both theoretical and practical aspects. For example, we should speed up the implementation of an institutional environment for fair competition, adopt relevant structural reform measures, and make major breakthroughs in market access, access to factors, government procurement, and property rights protection.
Structural reform should be used to solve the structural contradictions between the system. For example, promoting the transformation of industrial structure involves both the reform of the scientific and technological system and the reform of the education system; To promote the transformation of the urban and rural structure in the mainland, it is necessary not only to deepen the reform of the basic public service system in urban and rural areas, but also to deepen the institutional reforms such as the two-way free flow of urban and rural resources, the elimination of the dual structure of urban and rural areas, and the establishment of a unified national residence permit system for urban and rural areas as soon as possible.
Third, structural reform should not only deepen the market-oriented reform of the economic system, but also promote the reform of the administrative and social systems.
On the one hand, it is necessary to deepen market-oriented reform with a focus on technology, data, land and other factors of production. For example, deepen the reform of the right to use, dispose of and benefit from scientific and technological achievements; Accelerate the improvement of the basic framework for data rights confirmation, establish data pricing mechanisms, clarify the public nature of public data, form institutional arrangements for the convenient flow of cross-border data with practical measures, and improve the digital governance system; Actively explore the orderly circulation of rural homesteads, deepen the reform of the rural land acquisition system, and optimize the distribution mechanism of land value-added income.
On the other hand, it is necessary to focus on promoting the reform of the administrative system guided by the construction of a service-oriented government, and promote the reform of the social system such as public services guided by fully releasing the consumption potential of the mainland's super-large-scale domestic demand market.
[Chi Fulin is President of China (Hainan) Institute for Reform and Development; Hu Lei is an assistant researcher at the China (Hainan) Institute for Reform and Development.
Chief Producer丨Wang Hui and Che Haigang
Producer丨Li Piguang, Wang Yu, Liu Weimin
Editor-in-Chief丨Mao Jinghui Editor丨Gu Yun