Li Xuesong, Director of the Institute of Quantitative and Technological Economics, Chinese Academy of Social Sciences
The following views are compiled from Li Xuesong's speech at the China Macroeconomic Forum (CMF) (Q3 2021) (Issue 58).
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First, the multi-faceted Matthew effect of enterprises in the context of the digital economy has intensified
After the outbreak of the epidemic, in addition to the impact on economic growth, the economic structure has also undergone relatively large changes. The digital economy has sprung up, and the impact of the epidemic can be said to be a major development opportunity for the digital economy. The digital economy also has some characteristics that are very different from the traditional economy:
First of all, the heading of enterprises in the context of the digital economy has intensified. British economist Jonathan Haskell and Chinese economist Teng Tai and other experts believe that in the context of the digital economy, the market share of platform enterprises has become head-headed, and there has been a "two-eight phenomenon" or even a "one-nine phenomenon". The flow of production factors to the head enterprises, the capital market also pursues the head enterprises, so that non-head enterprises are seriously squeezed by the head enterprises, and the operating conditions of small and medium-sized enterprises deteriorate, affecting employment and income distribution. In addition, the level of profitability has also been polarized, and more concentrated to the head enterprises. The third aspect is the heading of productivity. Since 2000, the development of the Internet has had many large-scale technological innovations, and the labor productivity of head enterprises is rising, but the productivity of non-head enterprises has generally stagnated. This can explain the productivity paradox from one aspect, although it seems that there are many technological innovations, but whether it is developed countries such as the United States, Japan, Europe or China, productivity growth rates have declined in the past period, one of the important reasons is that the productivity of head companies is indeed growing significantly, but the productivity of non-head enterprises in the same industry has been creatively damaged by being squeezed by head enterprises. After the totalization of the whole society, the productivity growth rate has not increased, but has declined.
Second, in the context of the digital economy, the spillover effect of innovation on productivity of leading enterprises is different from the past. After World War II, the development of the capitalist economy ushered in a golden period, and the state invested heavily in universities and national laboratories, and its R&D investment had a strong positive externality. During the Trump administration, he cut U.S. university spending and shut down some national laboratories. In recent years, a large number of R&D innovations have come from head enterprises, but the innovation of head enterprises is different from the innovation of national laboratories and universities. The innovation positive externalities of national laboratories and universities are stronger, and the R&D innovation of head enterprises also has positive externalities, but its positive externalities must first serve the maximization of the company's own profits, serve the protection of patents, and reduce the speed of knowledge diffusion.
Third, the proportion of invention patents generated through cooperation in the context of the digital economy has increased significantly in the global invention patents. This includes transnational cooperative innovation and cooperative innovation between different institutions in China, such as industry-university-research collaboration, collaboration between different universities and research institutions, and transnational cooperation. Therefore, in the context of the current implementation of the strategy of scientific and technological self-reliance and self-improvement, we must also attach great importance to open innovation and cooperative innovation. Because in the context of the digital economy, cooperative innovation and open innovation are more efficient and iterative faster.
Second, the impact of the epidemic has brought about accelerated adjustment of the industry structure and led to profound changes in the regional structure
First, the impact of the epidemic has brought about significant changes in the industry structure. If we compare the growth rate of China's industry added value in 2019 with the average growth rate of January-August this year and January-August last year, we can see that under the impact of the epidemic, because of the increase in demand for home office, the production of computers and communication equipment has been greatly improved. In addition, the growth rate of pharmaceutical manufacturing, electrical machinery, general equipment, automobile manufacturing and other industries has increased significantly compared with before the epidemic. Although China's local pharmaceutical consumption has declined compared to before the epidemic, China's pharmaceutical production has increased significantly because of the sharp increase in exports. These major industries, computers, communication equipment, medicine, electrical machinery, automobiles, etc., belong to the relatively high added value or long industrial chain, although some industries are affected by the high price of bulk commodities, the profit margin has declined, but its growth rate has increased significantly. Therefore, under the impact of the epidemic, China's industry structure has undergone passive upgrading, which is an industrial upgrade brought about by domestic and foreign demand.
Second, the adjustment of the industry structure has led to significant changes in the regional economic operation situation and the regional economic structure. Before the epidemic, an industry may have become saturated or grown slower, but after the epidemic, the industry may be very hot. If the proportion of this industry in a certain provincial city is high, it will get better development. For example, the industrial added value of Beijing, Jiangsu, Zhejiang, Chongqing and other provinces and municipalities has grown rapidly. Beijing's biomedical development is better, Chongqing's automobile and electronics industries account for a relatively high proportion, and Zhejiang's digital economy industry is developed. Due to the industrial structure of these provinces and municipalities, the domestic and foreign market demand after the outbreak of the epidemic is more in line with the industrial structure, and the growth rate of industrial added value has been greatly improved.
Third, seize the opportunities of the development of the digital economy and accelerate the upgrading of supply, demand and efficiency structures
First, the development of the digital economy will change China's regional economic layout, and all localities should seize the opportunities for the development of the digital economy. Considering that the digital economy has the characteristics of head-headedness, in the next round of China's regional economic development, if it cannot keep up with the pace of digital economic development, it may lag behind faster. In the "14th Five-Year Plan", special emphasis is placed on vigorously developing the digital economy and raising the development of the digital economy to an unprecedented height. At present, there are still many problems in the development of China's digital economy, although the consumer Internet has developed rapidly, but the industrial Internet is still a big gap compared with developed countries. China still has great potential for development in industrial digitalization and digital industrialization. All localities should seize the opportunity of a new round of scientific and technological revolution and industrial transformation, especially the development of the digital economy. To this end, first, we must deepen the reform of the market-oriented allocation of labor, technology, capital, data and other elements, accelerate the formation of a unified national market, and promote scientific and technological innovation. Second, we must closely combine the digital economy with green development, many data centers are high energy consumption, and we need to adhere to green development. The development of the digital economy and the development of the green economy are the major directions for China's future development, and we must tap the new momentum of economic growth and promote a more balanced and fuller development of China's economy.
The second is to accelerate the upgrading of supply, demand and efficiency structures, and strive to enhance total factor productivity. In order to maintain the better development of China's economy and achieve the goals of the "14th Five-Year Plan", we must not only promote the upgrading of the supply structure and strive to promote the development of the digital economy and the green economy; but also promote the upgrading of the demand structure and build a strong domestic market; in addition, we must also promote the upgrading of the efficiency structure and accelerate the construction of an innovative country. At present, we are still facing many blockages, pain points and difficulties, and we need to continue to deepen reform and opening up and continuously release reform dividends. The Fourth Plenary Session and the Fifth Plenary Session of the Nineteenth Central Committee, including the previous Third Plenary Session of the Eighteenth Central Committee, have made a series of arrangements for the reform of the property rights system and the reform of the market-oriented allocation of factors, and the key is to better combine the top-level design with the grass-roots reform and innovation practice, so that the total factor productivity can be improved, and China will be built into a medium-developed country by 2035.