Article/Zhang Yansheng (the author is the chief researcher of China Center for International Economic Exchanges and the former director of the Institute of Foreign Economics of the National Development and Reform Commission)
Summary
In the next 30 years, China's development vision is to promote innovative development in science, technology, engineering, mathematics, etc., solve the riddle of Joseph Needham and the question of Qian Xuesen, and form a new era of accelerated growth in relative total factor productivity.
We will promote institutional openness in the areas of rules, regulation, management, and standards, and address the modernization of governance systems and capabilities to form a new era of rule of law.
We will promote the opening up of commodities, services, resources, factors and other mobile industries, improve the construction of a new system of a higher level open economy, and form a new era of internationalized development of economy, talents, cities, and industries.
Body
2024 will be a year of great differentiation. In 2024, influenced by the political cycle year (more than 70 countries hold elections in the world), the US economy will decline; The Republican Party estimates that it will require the 2024 US budget to be tightened, so the fiscal tightening will cause downward pressure on the US economy in 2024. In 2023, the U.S. economy will grow by 2.5%, so we predict that the U.S. economic growth rate may be about 1.7% in 2024. What will China's economy be like in 2024? This depends on whether China's macro policies can be strengthened, whether more measures are introduced to stabilize expectations, growth and employment, and whether economic and non economic policies can effectively implement overall coordination and consistency assessment to return economic development to a reasonable range. This requires precise and coordinated policy implementation.
Since the outbreak of the international financial crisis in 2008, rule-based globalization has been in trouble, which means that the golden age of global economic and trade growth in the past 40 years has ended. Nowadays, a series of new concepts have emerged in the competition between major countries and geopolitical games. Among them, the new globalization in the West is essentially "de sinicization", and China's economy faces certain challenges.
1、 China's economy faces three major challenges
The first challenge is the impact of COVID-19. The epidemic caused global personnel exchanges and supply chain disruption, and had a profound and lasting impact on globalization, global industrial chain supply chain, and global trade and investment. The survey found that international tourism in Europe, Japan, South Korea and other regions and countries has returned to normal, but the number of visitors to China is limited; At the same time, various restrictions on coming to China formed by Western countries during the epidemic were followed, forming a certain information gap and deepening the gap.
The second challenge is the impact of geopolitics, that is, the impact of the world's unprecedented changes in a century. It includes three meanings: First, the strategic competition between China and the United States is still in the initial stage. The United States has become the world's largest economy since 1894. By 1945, the United States had studied for 50 years before it became hegemonic, and consolidated its hegemony for more than 70 years after World War II. Now the United States is worried about the transfer of hegemony. In the future, how to enhance China's comprehensive ability to cope with the complex international environment is a big problem that needs to be solved. Second, the current technological capability competition between China and the United States is in the game stage of the fourth industrial revolution. The United States and other western countries are worried that China will take the lead in this industrial revolution, and even take war actions to stop the development of China's digital technology. In the future, China needs to start from its advantages and not collide with the strongest fields of the United States, but compete with them in the strongest fields of China, so as to narrow the gap and win the opportunity of digital technology revolution. Third, the game between China and the United States took place between the East and the West. The United States has tried to force more countries to join the US led supply chain at the expense of China's interests. Then, how to build the broadest international united front, isolate a few extremists who promote decoupling, and unite the majority is an important work that China must do well.
The third challenge is the competition between major countries on global climate change. The implementation of the EU Carbon Border Adjustment Mechanism (CBAM) agreement will bring major challenges to China's high carbon enterprises and export enterprises such as steel, aluminum, cement, fertilizer and electricity. The United States also adopts New industry Policies and trade protection measures will turn global climate change and energy transformation into major opportunities for the United States to create new jobs, new investment and industrial development opportunities.
Therefore, in the face of the above three medium - and long-term challenges, China's foreign trade, foreign investment, foreign economy, outsourcing, foreign intelligence and other aspects of opening up have undergone major transformation and changes. The reform and opening up in the past 45 years has moved forward in the international environment of economic globalization, new scientific and technological revolution, and Sino US economic and trade cooperation. In the future, it is possible to face the competitive "war" behavior of global economic and trade activities being geopoliticized and digital technology revolution. Sino US competition is likely to continue to move forward in the new international environment of two parallel systems.
In the short term, foreign trade in 2022 and 2023 is mainly affected by three aspects: first, the sequelae of COVID-19; Second, the external demand is shrinking and the domestic demand is insufficient; Third, geopolitical impact. Because of the influence of these three factors, the global trade growth in 2023 is significantly lower than that in 2022, and is expected to be lower than that in 2024. The World Trade Organization (WTO) predicts that the global trade growth rate will be 3.3% in 2024. China's situation is the same as the global foreign trade situation.
Geopolitics is falling into a "tug of war", with extremists at one end hoping to "decouple" and "eliminate risks"; On the other hand, it advocates cooperation and ultimately leads to win-win results. China has always supported win-win cooperation. However, for the security related supply chain, the United States forced decoupling; For the supply chain unrelated to security, the United States forced industries and orders to move out to compete with China in the third-party market.
Europe emphasizes the need to "de risk", reduce dependence on China's supply chain, and achieve industrial diversification. We should find out whether Europe wants to "de China" or diversification. The survey found that only a few European enterprises chose to decouple from China and cut off the long-term economic and trade cooperation ties with China in the past; More European enterprises choose the normal diversification strategy and insist on maintaining traditional economic, trade and commercial ties with Chinese enterprises. Therefore, this has left room for China EU cooperation rather than decoupling in diplomacy, security, politics, economy and trade.
Japanese and Korean enterprises are different from European and American enterprises. For Japanese and Korean enterprises, the compliance red line under the long arm jurisdiction of the United States is very unclear, and is constantly changing and adjusting. European and American enterprises dare to step on the edge of the red line to minimize economic losses. However, Japanese enterprises dare not do like European and American enterprises, while Korean enterprises will actively lobby for exemption to the maximum extent. This leaves room for us to do our work. It is worth noting that the data released by the Japanese Cabinet Office recently shows that the Japanese people's unfriendly interest in China has increased from 81.8% last year to 86.7%, and the interest and interest of South Korean young people in China has also declined. Therefore, we should do a good job in all aspects of work, clarify China's position of win-win cooperation, and shape a good national image, which is very important to enhance strategic economic and trade relations.
If political correctness is considered, under the pressure of geopolitics, it is very difficult for European, American, Japanese and Korean enterprises to do business with China in compliance as usual, and they are under great pressure to choose sides. For example, Apple's industrial chain does not want to leave China for India, but they have to do so because they are under great political pressure.
2、 Sino US trade friction continues
The International Monetary Fund (IMF) predicts that the global economic growth rate will be lower than the long-term equilibrium level by 2028. In this case, China's foreign trade in 2024 should first be prepared to practice internal skills in the long and medium term; Second, seize the opportunities brought by the improvement of the economic situation of some countries to rise against the trend; Third, actively respond to the "new three types" (electric manned vehicles, lithium batteries solar energy Battery) possible trade friction; Fourth, do everything possible to stabilize the US market, the European market, the Japanese market and the Korean market; Fifth, foreign affairs, security, publicity, economy and trade and other departments should work together to promote the improvement of foreign trade situation.
At present, the Regional Comprehensive Economic Partnership Agreement (RCEP) has officially entered into force, marking the official landing of the world's largest free trade area with the largest population and economic and trade scale. There are three economic cooperation circles, namely, China and ASEAN, China, Japan and South Korea, and China and Australia, New Zealand, These three economic cooperation circles are crucial for China to promote high-quality development of foreign trade in the next step. ASEAN has become an extension and expansion area of our supply chain. China, Japan and South Korea will determine the direction of the transformation of the production mode in East Asia. Australia and New Zealand are important safeguards for the safety of China's primary products.
In this case, the United States launched the "Indo Pacific Economic Framework" (IPEF), which included other major economies in East Asia except Myanmar, Laos and Cambodia. The difference between RCEP and IPEF is that RCEP is a free trade agreement. After the end of the transition period, the proportion of zero tariff will reach 90%, and that of China and Japan will reach 86%. In addition, the negative list of service trade will be achieved six years later. However, the US led Indo Pacific Economic Framework (IPEF), which does not engage in free trade, has formed four pillars dominated by US rules, namely, the formulation of so-called fair, high standard and binding rules in digital trade, labor and environment; Improve the resilience and security of the supply chain of chips, high-capacity batteries, medical products, key minerals and other important industries; We will promote high standard infrastructure construction, decarbonization and green technology development, as well as taxation and anti-corruption.
The United States is constantly changing its rules in order to compete strategically with China. The United States used to promote free trade in the world, but now the United States believes that free trade allows China to gain advantages and the United States suffers losses. Therefore, it does not engage in free trade, but instead engages in IPEF, formulates American rules and standards, and wants China's neighboring countries to follow the United States. At the same time, US restrictions on foreign direct investment have expanded from semiconductor, microelectronics, AI, quantum information technology to new energy power generation, biomedicine, medical device manufacturing, new materials, and into infrastructure, including digital infrastructure and public infrastructure investment.
At present, the international policy environment has also undergone profound changes. Research results on international industrial policies show that in 2010 after the outbreak of the financial crisis, there were only 34 global industrial policies, while in 2021, the number rose to 1594. The countries that have issued the most industrial policies in the world are Germany, Japan, Brazil, the United States, Canada, etc., and China ranks 11th. It can be seen from this that who is using protection policies, industrial policies, state intervention and other means?
The industrial policy, protection policy and state intervention of the United States have increased significantly, which has led to the continuous increase of its manufacturing investment, and the investment of other countries in the United States has also increased significantly. Since 2008, the United States has pursued the strategy of reindustrialization, adopting industrial policies, protective policies and state intervention, including geopolitical blockade and suppression of competitors, which has led many enterprises, including Chinese enterprises, to invest in the United States, and the United States has provided subsidies for 10 years. At present, the biggest problem in the United States is the hollowing out of industry. Through protectionism, industrial policy, state intervention and geopolitical means, in the past three to five years, in the process of competition between China and the United States in technical, industrial and business capabilities, the United States has seen signs of the return of manufacturing, and investment in manufacturing and fixed equipment has increased. From the comparison between Chinese and American unicorn enterprises and AI enterprises, we can see that the United States has obviously dominated the development in recent years.
3、 Future development vision of China's economy
What kind of competition policy, industrial policy and national support should China adhere to in order to support China's transformation from low cost to high value-added under the situation of rising geopolitical risks and the US's suppression of the "new three types"? We believe that the effectiveness of industrial policies depends on the marketization, rule of law and international environment and foundation, on the correction or distortion of security, green, science and technology, energy, society and other fields, and on strategic competition goals; If the marketization, legalization and internationalization are not well done and the policy effect is generalized, it may aggravate the distortion of market behavior. Therefore, in the international environment of global security generalization, industrial policy generalization, and protectionism generalization, China should comprehensively deepen market-oriented reform, expand opening up, and improve the rule of law. In the final analysis, the solution is to do your own thing well.
Now our problem is that once the "New Three Kinds" are well developed, local governments will rush to introduce the "New Three Kinds" through subsidies. Conditionally or unconditionally, a large influx of credit funds into the "New Three Kinds" may eventually lead to overcapacity and price competition in the "New Three Kinds". Enterprises need economic surplus and profits to support innovation. However, after excessive competition leads to a sharp drop in prices, it will be difficult for truly innovative enterprises to get enough returns to support subsequent innovation. In general, we should continue to deepen reform, expand opening up, improve the rule of law, and consolidate the basic work of a high standard market system, a high-level socialist market economy, and a new high-level open economy as soon as possible.
All the policies of stabilizing foreign investment issued by China are very good, but there are still several problems: first, the policy measures need to formulate operational details. Second, China needs to study and formulate anti decoupling, anti containment and anti sanctions strategies. For example, multinational companies reflect their difficulties and lack land for investment and construction in their own countries; Lack of workers for investment and construction in the United States; Investment in China is restricted by the long arm jurisdiction. What should we do? If we want to attract foreign capital, we need to take more effective and targeted measures to hedge the protectionist industrial policies of the United States. For example, the chip bill of the United States has a subsidy of 12 billion dollars, and the European Union and Japan also have corresponding subsidies. Can China also subsidize foreign-funded enterprises in cutting-edge science and technology? Third, implement a more open foreign investment policy. From the concept of trade statistics, no matter which country's enterprises have been in local business for more than one year, their trade, added value and employment are all local. From this perspective, China still has much work to do in introducing foreign capital. We need to understand what foreign capital is worried about, such as war, border selection, and policy uncertainty.
At the Central Economic Work Conference held at the end of last year, it was put forward that we must adhere to high-quality development as the absolute principle of the new era. Therefore, we should comprehensively promote the anti decoupling strategy, take expanding high-level opening up and comprehensively deepening market-oriented reform as the starting point, vigorously promote the forward development of high-value goods trade, service trade, digital trade, green trade and two-way investment, implement a balanced opening strategy with developed countries, developing countries and countries in transition, and not decouple from the world economy; Comprehensively promote the anti containment strategy, distinguish a few extremists from enterprises and people who want to deepen cooperation, and promote all-round international cooperation; Promote the strategy of anti hot war and cold war conflict, and maintain a peaceful international environment and a stable international order.
This year and next, the macro policies will be moderately strengthened, and all policies will form a joint force to mobilize people's enthusiasm. The core issue is how to implement and implement the policies after they are formulated. The Central Economic Work Conference put forward the major strategic deployment of "three new and one high", namely, new stage, new concept, new pattern and high-quality development. New concepts such as new globalization, new Washington consensus, new capitalism and new industrial policy are popular internationally, and their essence is geopoliticization. Therefore, we should promote high-quality development of China's economy from a global perspective. Chinese style modernization has entered a new stage and new features have emerged. It is very important to implement the new development concept of innovation, coordination, green, openness and sharing, build a new development pattern with domestic circulation as the main body and domestic and international double circulation promoting each other, cultivate new advantages in international cooperation and competition, and implement the "three new and one high" into concrete actions. For example, in 1980, the Bidu Act put forward by the United States increased the transformation rate of scientific and technological achievements more than ten times, making great contributions to the transition of the United States from the industrial economy era to the knowledge-based economy era. China has also formulated the Law on Science and Technology Progress and the Law on Promoting the Transformation of Scientific and Technological Achievements, and we are constantly revising it to make it more and more perfect. However, there are still some difficulties in implementing the law. The core is to solve the problem of modernizing the governance system and governance capacity.
To achieve high-quality development, we must emancipate our minds, seek truth from facts, and put into place the connotation of high-quality development, the characteristics of the new development stage, the new development concept and the new development pattern. This is crucial for the development of the next 30 years. Chinese style modernization is the biggest politics, including five connotations. The first connotation is the modernization of a huge population. The first problem to be solved in the modernization of major countries is whether the modernization of major countries is an opportunity or a threat to the world? If the winner takes all, plays zero sum game and bullies the weak, it is a threat; If we can make it possible for everyone to eat, discuss and share things, and be willing to provide global public goods, that is an opportunity. As a large country with a huge population, China will influence the world in every word and deed. Therefore, in the process of realizing Chinese style modernization, we must consider the interaction between China's economy and the world economy. In addition, Chinese modernization includes the harmonious coexistence of man and nature, the coordination of material civilization and spiritual civilization, and the path of peaceful development.
In my opinion, China's development vision for the next 30 years is to promote innovative development in science, technology, engineering, mathematics, etc., solve the riddle of Joseph Needham and the question of Qian Xuesen, and form a new era of accelerated growth of relative total factor productivity. We will promote institutional openness in the areas of rules, regulation, management, and standards, and address the modernization of governance systems and capabilities to form a new era of rule of law. We will promote the opening up of commodities, services, resources, factors and other mobile industries, improve the construction of a new system of a higher level open economy, and form a new era of internationalized development of economy, talents, cities, and industries. In the future, China will build a world brain, attract outstanding talents from Chinese people around the world, attract outstanding talents from developing countries around the world, attract outstanding talents from developed countries around the world, promote the development of Chinese style modernization through all-round international cooperation, build world-class talents and research universities, modern finance and multi-level capital market system High standard market system and legal system. These are the problems we need to solve in the next step.
(This article was published in the fourth issue of Enterprise Reform and Development in 2024)
(The author of this article introduces: Researcher of the Academic Committee of the National Development and Reform Commission, Chief Researcher of the China Center for International Economic Exchange)
