The great rejuvenation of China

3. the way of supply-side structural reform is to increase effective supply

The way of supply-side structural reform is mainly to increase the supply of effective systems, increase the supply of effective technology, and increase the supply of high-quality products. First, deepen the reform of the market economy system and increase the supply of effective systems. Entering the new normal, whether China’s economy has vitality and momentum, the key lies in the market players. To stimulate the vitality of market entities, the key is to deepen reform, clearly define the boundary between the government and the market, and change the adjustment of the economic structure from government-led to market-led. It is necessary to give full play to the decisive role of the market in the allocation of resources, give better play to the role of the government, straighten out the relationship between the government and enterprises, the relationship between the government and society, and release the vitality of economic subjects. To deepen supply-side structural reform, we must focus on deepening economic structural reform by improving the property rights system and market-oriented configuration of factors, and resolutely break down the institutional obstacles that restrict the vitality and momentum of development. First, adhere to and improve the basic economic system. We must unswervingly consolidate and develop the public- owned economy, unswervingly encourage, support and guide the development of the non-public- owned economy, adhere to the principle of distribution according to work as the main body and the coexistence of multiple distribution methods, accelerate the improvement of the socialist market economic system, improve the scientific and technological innovation system and mechanism, and build a new system of a higher-level open economy. In accordance with the spirit of the “Opinions of the CPC Central Committee and the State Council on Accelerating the Improvement of the Socialist Market Economy System in the New Era”, comprehensively improve the basic systems of market economy such as property rights, market access, and fair competition. The second is to deepen the reform of “decentralization, management and service” and promote the reduction of institutional transaction costs. Further reduce the negative list of market quasi-persons, and promote the universal implementation of “non-prohibited access.” The government should minimize the direct allocation of market resources and direct intervention in microeconomic activities, strengthen supervision during and after the event, accelerate the reform of factor marketization and the formation of a competitive market system.

Let the market regulate everything that the market can regulate independently, and let the enterprise do what it can do. The third is to innovate and improve macroeconomic regulation and control, give play to the strategic guiding role of the national development plan, improve the coordination mechanism of fiscal, monetary, industrial, regional, consumption, investment and other economic policies, accelerate the establishment of a modern fiscal system, deepen the reform of the financial system, reform and improve the basic system of the capital market, and promote the healthy and stable development of the multi-level capital market.

Second, improve total factor productivity through scientific and technological innovation and increase effective technology supply. The 19th National Congress of the Communist Party of China clearly pointed out that “we must adhere to quality first, benefit first, take supply-side structural reform as the main line, promote the quality change, efficiency change, power change of economic development, and improve total factor productivity.”1 The so-called “total factor productivity”, often referred to as the rate of technological progress, is a measure of the contribution of technological progress to economic growth. From the perspective of the imbalance, uncoordination and unsustainability faced by China’s economic development, based on the realization of the transformation of economic growth power, it is necessary to adhere to innovation to lead development, cultivate and expand new momentum, and strive to improve total factor productivity. The innovation practice of various countries shows that enterprises are the main body of innovation and the most active innovation unit, and the government needs to provide a good institutional environment for enterprises to engage in innovation activities. To deepen supply-side structural reform, we must increase effective technology supply through scientific and technological innovation. First, it is necessary to increase the support for basic research and applied basic research, strengthen original innovation, and strengthen the research of key core technologies; second, promote the reform of the scientific and technological system and accelerate the transformation of scientific and technological achievements into real productive forces; third, improve the integrated innovation mechanism of production, education and research with enterprises as the main body; fourth, improve the venture capital system and give play to the supporting role of finance in high- tech industries and technological innovation; fifth, strengthen the protection of intellectual property rights and improve relevant laws and regulations. Promote industrial upgrading through the improvement of independent innovation capabilities, and give play to the leading and supporting role of innovation driving in improving the quality and efficiency of enterprise supply. Third, while moderately expanding aggregate demand, increase the supply of high-quality products. Comrade Xi Jinping profoundly pointed out: “Supply and demand are the two basic aspects of the internal relationship of the market economy, and they are both antagonistic and unified dialectical relations

Without demand, supply cannot be realized, new demand can give birth to new supply; without supply, demand cannot be satisfied, and new supply can create new demand. 1 Therefore, emphasizing the adjustment of the supply structure does not mean ignoring demand. On the contrary, the next stage of supply structure adjustment must be carried out around the transformation and upgrading of consumer demand. Over the past 40 years of reform and opening up, China has bid farewell to the shortage economy, a new round of upgrading and transformation of the consumption structure of residents, more to “personalized and diversified” consumption, and China’s economy has entered a consumption-oriented era. How to meet the needs of the people for a better life has become a new space for economic development. It is necessary to promote the formation of a strong domestic market and continue to release the potential of domestic demand. Give full play to the basic role of consumption and the key role of investment, stabilize effective domestic demand, and provide strong support for the smooth operation of the economy. It is necessary to strive to meet the final demand, improve product quality, accelerate the development of service industries such as education, childcare, pension, medical care, culture, and tourism, improve the consumption environment, and enhance consumption capacity. In China’s economic structure, investment still has a lot of room for development. From the perspective of supply-side structural reform, the focus of expanding investment is to increase infrastructure construction in emerging fields such as artificial intelligence and the Internet of Things, and increase intercity transportation, logistics, municipal infrastructure, and rural infrastructure construction. Section 3: Promoting high-quality economic development The fundamental purpose of adapting to and leading the new normal of economic development is to strive to achieve high-quality economic development. This has become the fundamental requirement for determining development ideas, formulating economic policies, and implementing macroeconomic regulation and control at present and for some time to come.

1. China’s economy has shifted from a stage of high-speed growth to a stage of high-quality development

Practice is developing and awareness is increasing. On the basis of adhering to adapting to and leading the new normal of economic development, the 19th National Congress of the Communist Party of China further clearly pointed out:

“China’s economy has shifted from a high-speed growth stage to a high-quality development stage”,1 which is the basic feature of China’s economic development at this stage. Shifting from a high-speed growth stage to a high-quality development stage means that the growth rate will shift from the original high-speed growth to medium-high-speed growth, which means that economic development is in a critical period of transforming the development mode, optimizing the economic structure, and transforming the growth momentum. This is highly consistent with the four basic characteristics of the new normal of economic development, and is a deepening of the new normal of economic development.

China’s economy has shifted from a high-speed growth stage to a high-quality development stage, which is an important judgment made by the Party Central Committee in accordance with changes in the international and domestic environment, especially changes in China’s development conditions and development stages. “From” means that the historical curtain has been opened from the stage of high-speed growth to the stage of high-quality development, and it is inevitable; “turning” means that China’s economy is only marching towards high-quality development, and has not “turned” to the stage of high-quality development. In a country with a huge economy and population, it is not easy to shift from a high-speed growth stage to a high-quality development stage, and it may be a long historical stage. In this process, our economy faces two types of thresholds. One is the unconventional threshold unique to China’s economic development at this stage, for which it is necessary to fight the three major battles of preventing and resolving major risks, precise poverty alleviation, and pollution prevention and control; the other is a conventional long-term threshold, that is, transforming the mode of economic development, optimizing the economic structure, and transforming the growth momentum, so it is necessary to build a modern economic system. Only by crossing these two types of thresholds can China’s economy truly achieve high- quality development.

Comrade Xi Jinping pointed out that promoting high-quality development “is an inevitable requirement for maintaining sustained and healthy economic development”, “this is an inevitable requirement for adapting to the changes in the main contradictions in our society and comprehensively building a moderately prosperous society and building a modern socialist country in an all-round way”, and “this is an inevitable requirement for development in accordance with economic laws.“2 From the perspective of economic development needs, China is currently in a period of transformation of economic development mode, the demographic dividend has plummeted, the marginal return on investment has declined, the resource and environmental constraints have increased, and the traditional extensive economic development mode of unilaterally pursuing scale and speed is no longer sustainable. Only by promoting high-quality development and forming a high-quality, efficient and diversified supply system can we achieve a balance between supply and demand at a new level and achieve sustained and healthy economic development

From the perspective of the main contradiction in society, the contradiction between the people’s growing need for a better life and unbalanced and inadequate development has become the main contradiction in society, and the focus of the people’s needs has shifted from “whether it is good or not” to “whether it is good or not.” Whether it is to meet the needs of the people for a better life or to solve the problem of unbalanced and insufficient development, it is necessary to pay more attention to the quality of economic development. Judging from the requirements of building a modern and powerful socialist country in an all-round way, the 19th CPC National Congress planned the strategic goal of “two steps.” To realize socialist modernization, the economy is the foundation, the country must be strong, the economy must be strong; the economy must be strong, scale is the foundation, and quality is the key. Today’s world is ushering in a new round of industrial revolution and technological revolution, scientific and technological strength, innovation ability, human capital, etc. have become the focus of international competition, scale alone can no longer win in international competition, must turn to high-quality development. From the perspective of the law of economic development, economic development is a non-linear spiral upward process, the accumulation of quantity to a certain stage must be turned to quality improvement, China’s economic development should also follow this law. In 2019, China’s total economic volume has reached 99 trillion yuan, ranking second in the world. We must attach importance to quantitative development, and even more to solving qualitative problems, and put the main energy on promoting high-quality development.