Liu Shijin (Member of the Expert Committee of the 14th Five-Year Plan, Former Deputy Director of the Development Research Center of the State Council)
Entering 2021, China's economy has initially emerged from the covid-19 pandemic, and its economic growth rate is close to the potential growth level. In the past year, the global economy has been in deep recession, and China is the only large economy to achieve positive growth, and this achievement has been achieved in the face of the impact of the epidemic that has not been encountered in a century and the worst dilemma in Sino-US relations in 50 years. The government's decision-making and execution ability, mobilization ability, the unity of the masses of the people, the overall situation, and the observance of discipline are all of the utmost importance. We must also not ignore the market economy's ability to act and material foundation created by more than 40 years of reform and opening up. Two examples can be given. At the beginning of the epidemic in 2020, almost all economists, including this author, expected that foreign trade exports would be greatly affected. However, the actual situation is that the growth rate of imports and exports in 2020 will reach 1.9%, of which the growth rate of exports will reach 4%, and the share of foreign trade in the world will hit a record high. In the face of the demand gap caused by the impact of the epidemic, Chinese companies have shown extraordinary rapid response capabilities and growth resilience. A large part of the export growth of Chinese enterprises is due to the inability of other countries to keep up with the "filling of vacancies". Another example is that when the epidemic is scorching, residents can provide timely and rich products on the e-commerce platform without leaving their homes, and the quality of life has not decreased significantly. Behind the e-commerce platform is advanced digital technology, payment credit system and logistics system throughout urban and rural areas. It is not difficult to imagine what it would be like if we had relied on only a few state-run stores before the reform and opening up to encounter such a large epidemic impact. Undoubtedly, the epidemic is a stress test, which makes people see the deep power of the Chinese market system and technology system that cannot be seen in normal times.
In 2020, the research results of the Ten-Year Outlook for China's Economic Growth series were originally scheduled to expand the middle-income group, but due to changes in the situation, they turned to the discussion of the growth model of the epidemic. In considering the theme for 2021, we decided to continue the topic we set last year because we could not find a reason to abandon it. In fact, after the growth of the epidemic in 2020, the necessity and urgency of studying this topic have increased. On the basis of our research, we have formed this "New Multiplication Strategy".
<h3>What is the difficulty of expanding the size of the middle-income group</h3>
The reason why it is important to expand the size of the middle-income group is first of all related to whether it can overcome the middle-income trap and enter a high-income society. In a 2013 report titled "China by 2030: Building a Modern, Harmonious, and Creative Society," the World Bank and the Center for Development Studies of the State Council noted that of the 101 middle-income economies in 1960, only 13 had become high-income economies by 2008, and 87 percent of middle-income economies had not been able to successfully overcome the "middle-income trap" and enter the high-income stage for nearly 50 years.
There are many reasons for falling into the "middle-income trap", and one of the important variables is that the income gap is too large and does not form a sufficiently large and stable middle-income group. Conversely, Japan, South Korea, and Taiwan have all maintained small income disparities in overcoming the "middle-income trap." Therefore, Li Peilin and others put forward the proposition of the double middle-income trap, arguing that if the problem of the majority of the middle-income group cannot be solved, it will be impossible to successfully cross the "middle-income trap".
As far as the transition from middle-income society to high-income society is concerned, the significance of expanding the middle-income group is first of all to increase consumer demand and inject new momentum into sustained economic growth. During this period, economic growth has shifted from high-speed to medium-speed, the importance of investment and exports to growth has declined, and consumption and service industries have gradually turned into leading growth forces. As a part of the high marginal consumption tendency (relative to the high-income group) and strong spending power, the middle-income group has become a very important force to expand the consumption capacity and thus drive growth.
The expansion of the middle-income group and the expansion of consumption are premised on the ability to achieve income growth, so that this part of the population stands out from the low-income ranks. Some commentators talk about how to increase the willingness of low-income people to consume, and it seems that the low level of consumption of low-income classes is due to their reluctance to consume, which is not in line with reality, and its main constraint is still the low income level. There are many ways in which low-income earners can increase their incomes, such as through redistribution, but at the overall and long-term levels, low-income earners increase their incomes and enter the middle-income brackets, depending on their own ability to create wealth. So, from a growth perspective, for those who have the potential to enter the middle-income group, they are not only consumers, but more importantly, producers, innovators, and establish a sustainable cycle between these identities. They are first and foremost producers and innovators, creating social wealth, raising income levels, and thus increasing consumption and creating the conditions for the next round of production and innovation.
The formation and upgrading of this cycle is not easy, and the difficulty of expanding the middle-income group lies in this. The possibility of lower-income people, or potentially middle-income people, sharing existing development space and institutional conditions is obviously low, or even unattainable. If they want to reach the middle-income class, they must break the existing multi-level constraints and form a new set of development space and institutional conditions.
<h3>The significance and focus of achieving the goal of doubling the middle-income group</h3>
In the early days of reform and opening up, Deng Xiaoping proposed: "Some regions and some people can get rich first, drive and help other people in other regions, and gradually achieve common prosperity." "After more than 40 years of reform and opening up, China has entered the second stage of achieving the goal of common prosperity. But the difficulty and uncertainty of the second stage are greater than those of the first stage. Groups that try to become richer generally lag behind those who have become rich first in terms of human capital, development opportunities and conditions of development, and the possibility of moving forward or backward exists, and there is precedent for countries that fall into the middle-income trap. From the domestic point of view, some time ago, affected by the epidemic, the income and consumption level of workers in some areas declined, and some data showed that the size of the middle-income group has shrunk in stages.
At this time node, it is necessary to put forward the goal of doubling the middle-income group, on the basis of the existing 400 million middle-income groups, and then use 10 to 15 years to promote the increase of this group by 400 million to 500 million people to 800 million to 900 million people, accounting for about 60% of the total population. The formulation and implementation of this objective could be accompanied by a number of considerations.
First of all, the doubling of the middle-income group is irreplaceable for expanding domestic demand, increasing productivity and socio-political stability, and the size of the middle-income group and the time to achieve the multiplication are of great significance. Insufficient scale or delay in time will directly affect the speed and stability of economic growth. Lack of awareness of this is likely to come at a global cost. Secondly, putting forward goals is meaningful in itself, which is conducive to forming a consensus in the whole society and mobilizing the enthusiasm and creativity of all parties, which is where China's institutional advantages lie.
It is feasible to achieve this goal. According to our research team's calculations, assuming that the average growth rate of real GDP in 2019-2030 is about 5.0%, the average inflation rate is 2.5%, the average annual growth rate of nominal GDP is 7.5%, and the nominal growth rate of disposable income matches the nominal GDP growth rate. At the same time, according to the weighted calculation of the distribution of urban and rural residents in different income groups, the income growth rate of low, middle and high income groups is 7.7%, 7.1% and 6.9% respectively, by 2030, the proportion of middle-income groups in China will rise to about 51%, the proportion of low-income groups will drop to about 45.6%, and the proportion of high-income groups will rise to about 3.3%. The middle-income group is 750 million people, and 370 million people have risen from low-income to middle-income compared with 2018. At roughly the same rate of change, it is possible to double the size of the middle-income group to 800 million to 900 million people by 2035.
Another relevant topic is the priority populations involved in achieving this goal. Judging from the research results of our team, the 370 million people who are likely to enter the middle-income group by 2030 mainly correspond to the low-income families with annual household incomes between 40,000 to 60,000 yuan, 60,000 to 80,000 yuan and 80,000 to 100,000 yuan in 2018, which is the potential middle-income group that we need to focus on. Urban residents account for 57% of this group, rural residents account for 31%, and migrant workers account for 11%. Among them, the migrant worker group, in terms of quantity and definition, is closer to the group of migrant workers in the city. Migrant workers refer to the population with agricultural household registration that is mainly non-agricultural employment in other places. According to the National Bureau of Statistics, in 2017, the number of migrant workers in China reached 287 million, 172 million migrant workers, and 137 million migrant workers in the city. Migrant workers are defined as "people from rural areas whose hukou is not in the urban community", accounting for 9.7% of migrant workers in 2018, with a population of about 135 million. In terms of quantity, the group of migrant workers is generally close to migrant workers in the city.
Compared with 2013, the proportion of migrant workers belonging to the middle-income group increased from 2.2% to 4.1% of the total population in 2018, accounting for 27% of the increase in the middle-income group, and the contribution rate was considerable. The migrant workers mentioned here are basically working-age people, and there are not many non-employed people. Among the rural population, a significant proportion of the population belongs to the children and parents of migrant workers, whose income status is directly dependent on migrant workers. In addition, the proportion of the rural population in local urbanization has gradually increased, and a considerable number of peasants are "urbanized" in the place of household registration. Therefore, the size of the rural population in the process of urbanization is significantly larger than that of the above-mentioned migrant workers. Judging from the characteristics of China's urban and rural structural transformation and income growth at this stage, "migrant workers in the city" in a broad sense are the key groups that need to be paid attention to in the future expansion of middle-income groups.
Judging from the survey data, the average expenditure intensity of migrant workers in urban migrant households, mainly migrant workers, is significantly higher than that of rural households, but because they cannot equally enjoy the relevant social security and public services of urban hukou, their willingness to save and avoid risks is high, so that the average consumption intensity of migrant families is still very different from that of urban households; the level of education is significantly higher than that of rural residents, basically close to the level of urban residents; the employment distribution is obviously different from that of urban residents, and new employment scenarios such as takeaway, taxi and express delivery have absorbed a considerable number of new employment scenarios." New migrant workers "employment, migrant workers with 10% of the population contributed 20% of the new employment, far more than urban and rural residents; more employment in the private sector, organs, enterprises and institutions employment accounted for a relatively low proportion, facing a series of factors restricting the steady growth of their income and consumption, such as low income, unstable employment, incomplete social security; unable to enjoy perfect urban social security and public services, medical insurance and pension insurance coverage rate is significantly lower than that of residents who also live in cities and towns A considerable number of migrant workers, especially the higher-earners among them, have a clear need to settle in towns. Proceeding from these characteristics of migrant workers in cities, we should adopt highly targeted, pragmatic and effective strategies and policies to promote more migrant workers entering the middle-income group.
<h3>Implement a multiplier strategy centered on enhancing human capital</h3>
After entering the second stage of common prosperity, the core of the strategy and policy of expanding middle-income groups is to promote equal opportunities, focus on improving the human capital of low-income groups, narrow the human capital gap between different groups, and narrow the income gap in the form of efficiency-driven growth. A simple logic is that after stripping away the cloak of social relations, the gap in ability between people is far less than the gap between income distribution and property distribution in the real world. If we can create a social environment for the fair development of human capital, and people's enthusiasm and creativity are universally and fully exerted, fairness and efficiency can be mutually causal and promote economic growth while enhancing social equity.
According to this line of thinking, the next step in the implementation of the strategy of doubling the middle-income group should focus on improving the human capital of migrant workers in the city, adopt multi-faceted targeted and operable policies and measures, and strive to achieve obvious results in a short period of time.
I. Implement a negative list system for migrant workers and their families settling in cities. At present, small and medium-sized cities and some provincial capital cities have abolished the restrictions on settlement, and the negative list system has been implemented for cities that still have restrictions, that is, from stipulating what conditions can be settled and what conditions are not met. Actively create conditions to accelerate the reduction of the negative list. Implement differentiated policies for the urban core areas of Beijing, Shanghai, Guangzhou, Shenzhen and other mega-cities and non-core areas, and small and medium-sized towns in the metropolitan area, adopt different negative lists, and appropriately relax the settlement restrictions of the latter.
Second, the construction of housing projects for migrant workers. Focus on building safe housing in large cities, especially in several metropolitan areas and urban agglomerations, and strive to solve the problems of low-income migrant workers who can stabilize employment, contribute to local development, and pay social security on the spot, live and work in peace and contentment. Focusing on small apartments of 40 to 60 square meters, we will reduce construction costs and control the price of safe housing at a level compatible with the purchasing power of migrant workers. Lower the threshold for purchase qualifications, and do not discriminate against the population without household registration and education. The government will take the lead in raising land resources, designing operating rules, strengthening supervision, and implementing market-oriented operation within the framework of policies to form a commercial sustainable mechanism.
Third, in line with the rural population settling in cities and providing safe housing, accelerate the equalization of basic public services such as education, medical care, and social security, improve the mechanism for linking fiscal transfer payments with the urbanization of the agricultural transfer population, continue to promote and expand the policy that basic public services such as compulsory education can be carried with the movement of personnel, and open up the connection between rural social security, medical insurance, and urban residents' social security and medical insurance. Implement the policy of enrolling the children of migrant workers with the main basis of residence permits.
Fourth, provide basic public services for employment, and encourage the absorption of migrant workers for employment. For migrant workers who have the ability to work and employment needs, they can enjoy basic public services for employment at the public employment service agency of their permanent residence with a residence permit. Comprehensively strengthen vocational education and training for migrant workers, and gradually provide vocational education and training as a basic public service. Implement a new type of artisan training program for migrant workers. Encourage all kinds of technical colleges and universities, vocational schools, employment training centers, etc. to participate in vocational skills training for migrant workers, and give certain financial subsidies. Encourage enterprises to carry out vocational skills training for migrant workers, and have necessary incentives in fiscal, taxation, credit and other aspects. The state will provide corresponding support to cities that absorb more migrant workers for employment and settle down, in terms of financial subsidies and infrastructure investment.
V. Accelerate the entry of rural collective construction land into the market and the circulation of homestead land, and increase the property income of migrant workers. Implement the requirements of the Third Plenary Session of the Eighteenth Central Committee, promote the entry of rural collective construction land into the market, and enter the market at the same price and with state-owned land. Create conditions to allow the right to use homesteads to flow outside the collective organization. Actively and steadily and pragmatically solve the problem of small property rights. The income obtained from the entry of farmland into the market and the circulation of homestead land should be given priority to improving the social security system of the rural population in the corresponding areas, so that they, like the urban people, no longer rely on land security, and at the same time improve the efficiency of land use and increase income, they are supported by a more effective and stable social safety net.
6. Promote equity of opportunity. Further break down improper administrative control, dredge up channels of social mobility, and prevent the solidification of social classes. Change the discriminatory practices against low-income migrant workers in some places, and provide more accessible opportunities for low-income groups in terms of employment, further education, promotion and other aspects under roughly equivalent conditions.
Governments at all levels should formulate plans, improve policies, conduct regular inspections, and ensure implementation. It is necessary to include the settlement of migrant workers, housing, basic public services, employment and vocational training into the "14th Five-Year Plan" and annual planning, clarify the tasks and responsibilities of relevant departments, regularly check the implementation, make progress assessments, and report to people's congresses at all levels. At the same time, it is necessary to make necessary adjustments and improvements to relevant planning policies according to economic and social transformation and upgrading and changes in employment conditions. Encourage all localities to actively explore and innovate based on reality, and promote good experiences and practices throughout the country.
(This article is compiled from the "New Multiplication Strategy" (edited by Liu Shijin, CITIC Publishing Group, October 2021). The article represents the views of the author only. ）
