editorial comment/note
At present, the phased results of epidemic prevention and control in China have been further consolidated, important progress has been made in resuming work and production, and the economic and social operation order has been accelerated. At the same time, the international epidemic continued to spread, the downside risks of the world economy intensified, and the unstable and uncertain factors increased significantly. General Secretary of the Supreme Leader pointed out that in the face of the severe and complicated international epidemic and the world economic situation, we should adhere to the bottom line thinking and make ideological preparations and work preparations for coping with external environmental changes for a long time. Politburo meeting of the Chinese Communist Party, held on April 17th, made it clear that the strategy of expanding domestic demand should be firmly implemented to safeguard the overall situation of economic development and social stability. In order to further understand the important role of expanding domestic demand in coordinating epidemic prevention and control and economic and social development, the Economics edition specially invited three experts and scholars today to analyze the current macroeconomic situation and deeply interpret the strategy of expanding domestic demand.
Jiabin
Liu Shijin, Deputy Director of Chinese People’s Political Consultative Conference Economic Commission
Han Baojiang, Director of Economics Department of Central Party School
Liu Yuanchun, Vice President of China Renmin University
host
Guangming Daily reporter Zhang Yan Chen Heng
Shijin liu
Han Baojiang
Wenchun Liu
Portrait: Lu Chongguang’s painting
1. Fully grasp the total demand situation and accurately understand the significance of expanding domestic demand.
Moderator: According to the economic data of the first quarter released by the National Bureau of Statistics, affected by the epidemic, although the economic growth rate of China in the first quarter decreased by 6.8% year-on-year, the decline of major economic indicators in March was obviously narrowed, and the pace of economic recovery was accelerated. Excuse me, how do you view the current macroeconomic situation in China?
Liu Shijin:This economic downturn is due to an unexpected super external shock, rather than problems such as serious shortage of demand and excessive leverage in the economy. It is different from the financial or economic crisis. Under the external impact of the epidemic, economic recovery depends on two factors, one is the duration of the epidemic, and the other is the degree of production capacity damage. If the epidemic lasts for a short time and the production capacity is limited, a V-shaped rebound can occur after the epidemic; If the epidemic lasts for a long time, or the production capacity is seriously damaged, it is not so easy to rebound. Therefore, in addition to controlling the epidemic as soon as possible, the short-term policy focuses on minimizing the damage to production capacity and protecting productivity. Judging from the data in March, the signs of economic recovery are obvious.
In this case, I think we should adopt the evaluation method of "relative growth rate" to examine China’s economic growth, that is, use the ratio or difference between China’s growth rate and the world average growth rate to evaluate China’s economic growth. The basic background of this method is that China’s economy has been integrated into the global economy to a great extent, and the impact of this epidemic is also global. Compared with the past, if this ratio or difference is stable or rising, it shows that China’s economic performance is good, and vice versa. For example, in 2019, the average growth rate of the world economy was 2.9%, that of China was 6.1%, and the relative growth rate was 3.2%; If the world’s growth rate is -2.5% and China’s is 3% in 2020, our absolute growth rate will decrease, but the relative growth rate will increase to 5.5%, then China’s economic performance will be excellent. In a word, we should treat the current economic development of China comprehensively and dialectically.
Liu Yuanchun:The economic downturn caused by the epidemic is completely different from the general economic crisis and financial crisis. In epidemics such as infectious diseases, economic activities are almost completely at a standstill due to personnel isolation, and the complete industrial chain breaks into a single enterprise, and products, elements and funds cannot flow normally. Therefore, in a short period of time, the economic decline caused by the epidemic is often more severe than the economic recession caused by the financial crisis. But for the economy, the epidemic is a typical exogenous systemic shock, and the resulting economic downturn is also exogenous. For example, the decline caused by the epidemic is like an emergency in the economy, while the economic crisis is more like a chronic disease caused by bad living habits. Therefore, as long as the epidemic situation can be quickly controlled and the emergency can be quickly cured, the economy may achieve rapid recovery. On the whole, although China’s economy has been severely hit by the epidemic, the basic conditions and factors supporting the long-term improvement of the economy have not changed, the trend of industrial upgrading and rapid growth of new kinetic energy has not changed, and the economic and social operation order is accelerating recovery and continuing to improve.
Moderator: Politburo meeting of the Chinese Communist Party, held on April 17th, made it clear that the strategy of expanding domestic demand should be firmly implemented and the expansion of domestic demand should be placed in a more important position. If we want to make a comprehensive analysis of total supply and total demand, what kind of total demand situation are we facing at present? What is the significance of putting forward the strategy of expanding domestic demand?
Liu Yuanchun:According to the data of the first quarter and March, China suffered a severe total supply shock and total demand shock during the epidemic, but since March, the total demand has rebounded moderately. With the epidemic basically under control, the main macroeconomic contradiction is changing from a big impact on both supply and demand to a lack of total demand. In March, the resumption of work and production progressed smoothly, and the supply side started relatively quickly. Comparatively speaking, the recovery of demand side was relatively slow, and insufficient total demand was the main factor restricting the rapid economic recovery.
Specifically, the impact on consumer demand is the most obvious, 1-mdash; In March, the total retail sales of social consumer goods decreased by 19.0% year-on-year, but the decline in March was 1-mdash; It narrowed by 4.7 percentage points in February; In terms of investment demand, the epidemic has led to a rapid decline in fixed assets investment in China, which is gradually recovering. Compared with the same period of last year, although the fixed assets investment in the three major industries has dropped significantly, the growth rate of fixed assets investment in pharmaceutical manufacturing and Internet companies is significantly higher than that of the whole society. During the epidemic, more advanced technologies were widely used and the industrial structure of fixed assets investment was further optimized. In terms of net export demand, the accumulated trade surplus in the first quarter decreased by 80.6% compared with the same period of last year, but the foreign trade import and export in March was 1-mdash; In February, there was a significant improvement from the previous month.
The central government’s proposal to firmly implement the strategy of expanding domestic demand is conducive to maintaining the basic stability of total demand. Insufficient aggregate demand is the main problem facing the macro-economy at present, and the basic stability of aggregate demand is conducive to the stable development of macro-economy. At present, on the one hand, it is necessary for the whole industrial chain to resume production, on the other hand, it is necessary to prevent the second shutdown due to no orders and no demand after the resumption of production. In the current situation that foreign trade has not declined in an all-round way, there is a good window to boost domestic demand and prepare for shock prevention in advance, which must not be missed.
At present, the epidemic is spreading around the world, and the global value chain is facing a severe risk of breakage. If this situation lasts for a long time and the external demand is insufficient for a long time, it will pose a threat to the integrity of China’s industrial chain. Expanding domestic demand is conducive to maintaining domestic production capacity, maintaining the integrity and smoothness of the domestic industrial chain and creating favorable conditions for rapid economic recovery. In addition, the strategy of expanding domestic demand can not only achieve the goal of macroeconomic stability, but also guarantee the basic livelihood of grassroots people in many ways, which is conducive to maintaining the basic stability of society.
Han Baojiang:From the economic development history since China’s reform and opening up, the strategy of expanding domestic demand is an effective way to deal with the impact of the crisis. In 1997, in response to the impact of the Asian financial crisis on exports and utilization of foreign capital, the central government proposed "expanding domestic demand and strengthening infrastructure construction", which played an important role in minimizing the impact of the Asian financial crisis and achieving rapid and healthy economic development in China. After the outbreak of the international financial crisis in 2008, the central government made a strategic decision to deal with the impact of the crisis by expanding domestic demand, and launched a 4 trillion package of economic stimulus policies. China’s economy quickly realized a V-shaped rebound, which not only played an important role in completing the economic development goals at that time, but also made up for the shortcomings of economic and social development to a great extent by investing in infrastructure and ten strategic industries. At present, in response to the impact of the COVID-19 epidemic, the central government has made a strategic decision to expand domestic demand, not only to better hedge the external demand that has fallen sharply due to the spread of the epidemic in the world, but more importantly, to safeguard the safety of the domestic industrial chain and supply chain and to maximize the stable development of China’s real economy. By expanding investment demand, it is also conducive to speeding up the shortcomings of unbalanced and uncoordinated development and laying a solid foundation for future economic and social development.
By expanding domestic demand and providing more demand space for the products or services produced by enterprises to achieve a "thrilling leap", more enterprises can survive and employment, finance and people’s livelihood can be guaranteed. Moreover, to expand domestic demand, especially investment demand, there are long-term "strategic" considerations: not simply to let enterprises "survive", but also to focus on meeting the new industrial revolution, cultivating new development momentum, and increasing investment in new technologies, new industries and new business models; Focus on maintaining the relatively complete manufacturing advantages of China’s industrial chain, and increase investment in the shortcomings and weaknesses of the industrial chain in order to win a better future.
Liu Shijin:To cope with the impact of the epidemic and achieve steady growth, the current policy focus must be on stabilizing consumption. In the past, when we encountered economic downturn, our first thought was to expand investment demand, especially infrastructure investment, which was related to the economic structure and the growth stage at that time. For example, in 2008, in response to the impact of the international financial crisis, a 4 trillion stimulus plan was implemented. At that time, in the GDP increment calculated by the expenditure method, investment accounted for 62.8%, consumption accounted for 42.5%, and investment accounted for more than consumption, so the demand stimulus was mainly to expand investment demand. By 2019, in the GDP increment calculated by the expenditure method, the proportion of investment has dropped to 17.2%, the proportion of consumption has risen to 66.9%, and the proportion of household consumption has reached 49.5%. The proportion of consumption is far greater than that of investment, which shows that the key to steady growth at this stage should be to stabilize consumption, especially household consumption.
2. New opportunities, new features and new requirements for expanding domestic demand strategy.
Moderator: Focusing on the strategy of expanding domestic demand, the Politburo meeting of the Chinese Communist Party held on April 17th made arrangements from many aspects, such as stimulating consumption and investment, and promoting people’s livelihood security. What impact will these measures have on enterprises and individual residents?
Han Baojiang:The strategy of expanding domestic demand will bring many opportunities to enterprises. Expanding residents’ consumption and increasing public consumption will stimulate the demand for "high-quality necessities", such as health care, culture and entertainment, tourism and leisure, low-carbon ecology and other industries, which will usher in new and greater development space. The state will increase its investment in "new infrastructure", which is not only of great benefit to many enterprises directly related to "new infrastructure", but also can more effectively promote the development of traditional industries such as steel, cement and construction. Therefore, enterprises should closely follow the national policies and find and seize the development opportunities that suit them.
The positive impact of the strategy of expanding domestic demand on individual residents mainly comes from the policies closely related to the production and life of ordinary people, such as ensuring employment, ensuring basic livelihood, encouraging residents’ consumption and increasing the transformation of old residential areas. For example, under the impetus of relevant policies, enterprises’ efforts to reduce prices and promote sales will bring cheap goods and "consumer surplus" to consumers, the state encourages automobile consumption and other policies to bring new "demand satisfaction" to consumers with corresponding needs, and the transformation of old communities will directly improve the living and living quality of residents.
Liu Yuanchun:It will have a significant positive impact on the development of enterprises. China is in the stage of rapid development of new industrialization, informationization, urbanization and agricultural modernization, and the investment demand potential is still huge. Judging from the published fiscal policy, effective investment will be actively expanded in the future, including the renovation of old residential areas, strengthening investment in traditional infrastructure and new infrastructure, and expanding investment in strategic emerging industries. These measures have increased the support for private capital to participate in projects in key areas, which is conducive to mobilizing the enthusiasm of private investment. Enterprises, especially the vast number of private and small and medium-sized enterprises, should seize the opportunity and expand their own development space. On April 17th, Politburo meeting of the Chinese Communist Party proposed "supporting enterprises to export to domestic market" and supporting some foreign trade production capacity to domestic market, which is also the breakthrough point for enterprises to adapt to positive macro policies and promote their own development. The benefits of individual residents in the strategy of expanding domestic demand are direct and concrete. Judging from the policies that have been promulgated, it can directly enhance the purchasing power of residents and improve the living standards of special groups.
Moderator: What macro-policy measures are usually adopted to expand domestic demand? What are the new features of the current domestic demand expansion strategy compared with the previous domestic demand expansion policy?
Han Baojiang:The macro-policy measures to expand domestic demand are mainly proactive fiscal policy and prudent monetary policy. At present, the requirements of the central government are: the proactive fiscal policy should be more active and promising, and some measures and requirements have been put forward, such as improving deficit ratio, issuing special anti-epidemic bonds, increasing special bonds of local governments, and improving the efficiency of fund use, so as to give greater play to the role of proactive fiscal policy in stabilizing the economy; A prudent monetary policy should be more flexible and appropriate, including the use of RRR cuts, interest rate cuts, refinancing and other means to maintain a reasonable and abundant liquidity, guide the interest rate in the loan market to fall, and use funds to support the real economy, especially small and medium-sized enterprises, and so on.
Some supply-side structural reform policies, industrial policies and social policies aimed at improving the quality of China’s economic development and improving labor productivity and total factor productivity have also been added to the policy of expanding domestic demand. These policy measures have jointly formed a "policy combination boxing" with China characteristics, which is also a policy system to realize the modernization of China’s economic governance. There are still many specific measures to expand domestic demand, and at present, there are still many tools in our policy toolbox that have not been taken out.
A notable feature of the current strategy of expanding domestic demand is that it does not engage in flood irrigation, but starts from promoting the high-quality development of the national economy and meeting the needs of the people’s better life, and exerts its strength from both the supply side and the demand side, aiming at the structural contradictions and shortcomings in the development of the national economy, and provides the right medicine and precise policies. The focus of the policy is to solve the problem of insufficient imbalance in the development of social productive forces, and on this basis, actively cultivate new economic growth points and form more new kinetic energy for economic development.
Liu Yuanchun:At present, the macro-economic policies to expand domestic demand focus on people’s livelihood assistance, economic stimulus and the reform to turn crisis into opportunity, which mainly show the following characteristics: fiscal policy expansion is the main body, supplemented by monetary policy; Take the project layout as the guide and follow up with capital investment; The combination of epidemic relief and short-term expansion, short-term stimulus and medium-term development; Based on bottom line management and camera decision-making, it will be gradually promoted in stages; Demand expansion is coordinated with supply management, consumption start-up and investment expansion are parallel, and multi-channels and multi-tools are implemented simultaneously.
The policy of expanding domestic demand is being implemented, and the fiscal policy includes three categories, totaling 23 items, with a total expenditure of 1.3 trillion yuan and an implementation amount of more than 500 billion yuan; Monetary policy includes 30 financial supports and a monetary policy promotion plan, with a total of 4.4 trillion yuan of financial support. In terms of consumption promotion policies, 23 departments have issued 19 categories of policies, and many places have also issued policies such as providing consumer vouchers and income subsidies in coordination with epidemic relief; The investment promotion policy focuses on old and new infrastructure, and the investment expansion policy focusing on "new infrastructure" will effectively improve short-term demand and provide a better foundation for high-quality development.
Moderator: Under the premise of normalization of epidemic prevention and control, promoting "six stabilities" and grasping "six guarantees" are the main focus of persisting in striving for progress while maintaining stability and grasping all aspects of economic and social development. How to combine expanding domestic demand with promoting "six stabilities" and "six guarantees"?
Han Baojiang:The "six guarantees" are the "policy bottom line" for implementing the strategy of expanding domestic demand. In other words, no matter the policy of expanding consumer demand or investment demand, we should make overall arrangements for the "six guarantees", the active fiscal policy should be more active in the "six guarantees", and the prudent monetary policy should be moderately loose in the "six guarantees" field.
Among them, I pay special attention to ensuring residents’ employment, basic people’s livelihood and market players. To ensure employment, it is necessary to do a good job in the employment of key industries and key groups, and the employment of college graduates should be the top priority in the near future. To ensure the basic livelihood, we need to do a good job in ensuring people’s livelihood, increase the intensity of poverty alleviation, and ensure that the task of poverty alleviation is fully completed as scheduled; Improve social security and ensure the basic livelihood of the people. To protect the main body of the market, it is necessary to speed up the implementation of various policies, and strive to help small and medium-sized enterprises tide over the difficulties and improve their survival and development capabilities by reducing taxes and fees, financing costs and housing rents. Protecting market players is helpful to maintain the stability and competitiveness of China’s industrial chain supply chain, and promote the coordinated resumption of production and production in the industrial chain.
Liu Yuanchun:The combination of expanding domestic demand and the goals of "six stabilities" and "six guarantees" embodies the basic idea of "bottom line management" of economic policy. Expanding domestic demand can not only help macroeconomic stability, but also guarantee the basic livelihood of grassroots people and help maintain social stability. Only an adequate demand management policy can ensure that the economic system can quickly return to normal after the shutdown, so that enterprises can get enough orders to maintain normal operation after the resumption of work and production, and avoid stopping work and stopping production again and dismissing workers. Therefore, demand recovery and moderate demand expansion are the most fundamental methods to ensure residents’ employment and the foundation to protect market players. It ensures the basic employment of residents and the normal operation of market players, which also guarantees the basic livelihood of the people. Wage income and operating income are the core of residents’ income and the basis of fiscal revenue. The normalization of fiscal revenue is not only the basis of various public utilities and transfer payments, but also the basis of the normal operation of local governments. In the above sense, expanding domestic demand is the core and foundation of "six stabilities" and "six guarantees" and the key to ensuring the basic operation of the economy and society.
Regardless of "six guarantees" or "six guarantees", the first place is employment. According to estimates, every percentage point increase in China’s GDP will bring about 2 million jobs, but every percentage point increase in GDP will bring about nearly 4 million unemployment. Therefore, we must fully realize the seriousness of completing the employment task and turn the goal of ensuring and stabilizing employment into a policy goal and policy action to expand domestic demand.
3. Make a good combination of policies to ensure the synergy of macro policies.
Moderator: The central government has proposed to hedge the impact of the epidemic with greater macro-policy, a proactive fiscal policy, and a prudent monetary policy. How can fiscal policy and monetary policy work together to expand domestic demand?
Liu Yuanchun:In the policy combination of crisis relief, monetary policy is often the main policy, supplemented by fiscal policy. However, this traditional coping policy faces more constraints and constraints when dealing with the economic downturn caused by the epidemic. First of all, the traditional monetary policy is to create a relaxed environment conducive to enterprise investment and household consumption by lowering interest rates and expanding money supply. However, when economic activities are interrupted and the industrial chain is broken, the cash flow income of families and enterprises is interrupted, and they are uncertain about their future expectations, and often have no willingness to expand consumption and investment. At this time, too much emphasis on monetary policy, increasing liquidity and encouraging debt consumption or investment may make families and enterprises bear a heavier debt burden. Therefore, the response of households and enterprises to monetary policy is often low. Secondly, the traditional fiscal policy helps to reduce the cost of enterprises by reducing taxes and fees, but it has limited help to expand investment demand. In the state of stagnant production activities of enterprises, tax reduction and fee reduction are conducive to reducing the fixed costs of enterprises, so that enterprises can last longer without income cash flow. However, in the absence of downstream demand, enterprises are unwilling to resume work and production, and the stimulating effect of tax reduction and fee reduction policy on expanding enterprise production and investment is limited.
Under the limited means of traditional monetary policy and fiscal policy, what is needed to restart the economy is a one-time total demand, especially the final demand. The expansion of final demand can realize bottom-up transmission along the industrial chain and become the exogenous driving force for the economy to break away from the suspended state. Before the uncertainty of epidemic situation and market risk are eliminated, this exogenous driving force mainly depends on government expenditure. Once the economy begins to recover, the normal economic operation mechanism will begin to play a role, and the role of traditional expansionary monetary policy and fiscal policy will gradually emerge.
Han Baojiang:Theoretically, in the macro-control system, there is a division of labor between fiscal policy and monetary policy. Although both of them can play a role in expanding the economic aggregate, fiscal policy is more capable of solving structural problems and making more precise policies. Although monetary policy can also play a structural role through policy tools such as differential interest rates, its advantage is mainly to solve the problem of loose or tight aggregate. Therefore, the two should have a division of labor, give full play to their own strengths, and cooperate to avoid the hedging of policy effects. For example, the purpose of structural tax reduction is to reduce the burden on small and medium-sized enterprises. If the tax burden is reduced and the problems of difficult and expensive loans are not solved, enterprises will also be unable to live or live well. Only when the two fluctuate at the same frequency and work together can enterprises realize the real burden reduction and survive the crisis well.
Moderator: To maintain the overall situation of economic development and social stability, we must adhere to the new development concept, adhere to the supply-side structural reform as the main line, and persist in promoting high-quality development with reform and opening up as the driving force. How does the policy of expanding domestic demand organically cooperate with these requirements?
Liu Shijin:The importance of demand policy lies in responding to the short-term impact of the epidemic. From the long-term development point of view, economic recovery and development still need to rely on exerting structural potential. For decades, China’s economic growth rate has been much higher than that of developed economies, mainly relying on its structural potential. This structural potential is the late-developing advantage in economics, and in layman’s terms, it is the development potential of a late-developing economy in terms of technological progress, upgrading of industrial structure and consumption structure, and urbanization process. Therefore, the strategy of expanding domestic demand in response to short-term shocks needs to be based on the long-term and coordinated with structural potential. The effective exertion of structural potential requires the supply policy to play a greater role, which means that we must firmly grasp the main line of supply-side structural reform and promote the continuous upgrading of supply structure.
Supply policy and demand policy should be matched according to the different problems and main contradictions faced at different stages. For example, in the stage of epidemic control, it is necessary to increase the distribution of relevant emergency materials through supply policies, and in the stage of resuming production, it is necessary to use administrative means to promote the whole industry chain and the whole field, and then carry out corresponding demand-side policy cooperation.
Han Baojiang:Policies to promote demand should work together with policies to promote reform. First of all, we must adhere to the party’s centralized and unified leadership over economic work, which is the institutional prerequisite for coordinating efforts. Secondly, the supply policy should be in tune with the demand policy. In other words, it is necessary to improve the adaptability of the supply structure to the demand structure, and increase the efforts to meet the middle and high-end demand on the basis of maintaining the general demand. Facts have proved that China’s demand is not insufficient, or there is no demand, but the demand has changed, but the products supplied have not changed, and the quality and service cannot keep up. The lack of effective supply capacity has brought about a large amount of demand spillover and a serious outflow of consumption power. To solve these structural problems, we must promote supply-side structural reform. Thirdly, the supply policy should strive to be "half a beat or a beat" earlier than the demand policy, and create "new demand" with "new supply". In today’s era, the prominent feature of socialized mass production is that once the supply side realizes successful subversive innovation, the market will respond with magnificent transaction generation. This is the truth.
Liu Yuanchun:A few days ago, the CPC Central Committee and the State Council issued the Opinions on Building a More Perfect System and Mechanism for Market-oriented Allocation of Factors, which classified the reform directions and specific measures in the five areas of land, labor, capital, technology and data, and deployed and improved the formation mechanism of factor prices and the market operation mechanism. Global production and consumption have been comprehensively impacted by the epidemic, and China’s economic and social development is facing new difficulties and challenges. Firmly pushing forward major reforms and further improving the business environment will certainly stimulate the vitality and creativity of the whole society, release more new kinetic energy in the market, and provide a solid institutional guarantee for hedging the impact of the epidemic and increasing the stamina of China’s economic development.
The impact of the epidemic is accidental and phased. The demand expansion policy is mainly introduced to deal with the short-term impact of the epidemic, and the policy based on stimulation cannot be used for a long time. Therefore, the demand policy should be exerted moderately and should not be overexerted. To achieve the annual economic and social development goals and promote high-quality economic development, we must focus on long-term development and firmly grasp the main line of supply-side structural reform.
