Core Tips.
* The Economic Work Conference explicitly called for "expanding profitable investment" when deploying economic work in 2024. Investment will not only affect aggregate demand in the short term, but also affect aggregate supply in the long run, and strengthen the coordination and cooperation between short-term policies (including monetary policy and fiscal policy and other stability policies) and long-term policies (including growth policy and structural policy) can encourage enterprises to "be able to invest", "dare to invest" and "willing to invest", so as to establish and improve a long-term mechanism that can expand investment.
Chen Xiaoliang. In 2023, China's economic operation will continue to pick up and improve, and the economic growth rate will reach 52%, an increase of 22 percentage points, which continues to be among the top in the world's major economies. It should also be noted that it is necessary to overcome some difficulties and challenges to further promote the economic rebound, one of which is the lack of effective demand. To this end, the Economic Work Conference clearly requires "expanding effective investment" when deploying economic work in 2024. In order to continue to stimulate the vitality of investment, it is necessary to build a long-term mechanism that can stimulate effective investment, and the general secretary clearly emphasized the need to "improve the expansion of investment mechanism" when presiding over the second collective study of the Political Bureau of the Communist Party of China. Considering that investment will not only affect aggregate demand in the short term, but also affect aggregate supply in the long run, strengthening the coordination and cooperation between short-term policies (including monetary and fiscal policies and other stability policies) and long-term policies (including growth policies and structural policies) can motivate enterprises to "be able to invest", "dare to invest" and "willing to invest", so as to establish and improve a long-term mechanism that can expand investment. This will help to achieve the important goal of "stimulating potential consumption, expanding profitable investment, and forming a virtuous circle in which consumption and investment promote each other" put forward by the first economic work conference.
Broaden the investment space and promote enterprises to "be able to invest".
Investment space is essential for the sustainability of the investment. If investment space is limited, competition between companies will be fierce and overcapacity can be triggered. In order to continue to expand investment demand, it is necessary to continuously expand the investment space so that enterprises can "invest". Supply-side structural reform can broaden the space for investment in two ways. Create more "new spaces". One of the main goals of supply-side structural reform is to "expand effective and mid-to-high-end supply", which will help foster new industries and thus create new investment space. In recent years, supply-side structural reforms have prompted the emergence of a large number of new industries represented by the Internet, big data, and artificial intelligence. Dig into more "old spaces". Another major goal of supply-side structural reform is to "reduce ineffective and low-end supply", which will help resolve the problem of overcapacity, thereby freeing up investment space occupied by excess capacity. After nearly a decade of efforts, the supply-side structural reform has significantly alleviated the problem of overcapacity. By the end of 2022, a total of about 300 million tons of backward production capacity and excess capacity have been eliminated and overcapacity has been eliminated, 1 billion tons of coal, 300 million tons of cement, and 1 million tons of flat glass500 million weight box.
At the end of 2023, the ** Economic Work Conference pointed out that "overcapacity in some industries" is still one of the difficulties and challenges that need to be overcome for the economic recovery, and it is also necessary to further promote new industries with disruptive technologies and cutting-edge technologies. Therefore, by accelerating the supply-side structural reform, we can also broaden the investment space by a large margin. Strengthening the coordination and cooperation between stabilization policies, growth policies, and structural policies, and realizing the "integration of three policies" of macroeconomic policies will help accelerate the supply-side structural reform, thereby broadening the investment space. First, monetary policy and fiscal policy and other stabilization policies can effectively deal with the short-term employment pressure and downward pressure on the economy that may be triggered by the process of supply-side structural reform and elimination of backward production capacity, so as to ensure the smooth operation of the economy. Second, growth policies and structural policies can work together to cultivate new productive forces more quickly, thus giving rise to new industries. The new quality productivity is a new concept proposed by the general secretary of Heilongjiang during his inspection of Heilongjiang in September 2023, which is closely linked with strategic emerging industries such as new energy, new materials, advanced manufacturing, electronic information and future industries, and is the key to giving birth to new industries. Strengthening the coordination between growth policies and structural policies will help implement the requirements of the ** Economic Work Conference at the end of 2023 to "promote industrial innovation with scientific and technological innovation, especially to promote new industries, new models, new kinetic energy with disruptive technologies and cutting-edge technologies, and develop new quality productivity", so as to create new investment space and allow enterprises to "invest".
Improve the return on investment and encourage enterprises to "dare to invest".
The goal pursued by entrepreneurs is to maximize profits, and the higher the return on investment of the real economy, the more motivated the enterprise will be to expand investment, and the enterprise will lack the incentive to invest. Due to the "blockages in the domestic circulation, the complexity, severity and uncertainty of the external environment have risen", the return on investment of enterprises has declined in recent years. In 2022 and 2023, the total profits of industrial enterprises above designated size will decrease by 4% and 2., respectively3%。In this context, some enterprises, especially some private enterprises and small and micro enterprises, may face the problem of "not daring to invest", thus limiting the investment vitality of the whole society.
In order to motivate companies to "dare to invest", they need to improve their return on investment. An important factor in determining the level of return on investment is the level of total factor productivity. During the period of high growth before the international financial crisis in 2008, the main reason for the high rate of return on investment in China was the relatively high growth rate of total factor productivity. After the 2008 international financial crisis, the growth rate of total factor productivity in major economies around the world, including China, has declined, which has reduced the return on investment to a certain extent. Strengthening the coordination between growth policies and structural policies will help increase the growth rate of total factor productivity, which in turn will improve the return on investment. First, we need to use growth policies to increase the speed of technological progress, thereby increasing the growth rate of total factor productivity. China's technological innovation has entered a new stage, mainly relying on independent research and development, requiring the strengthening of applied basic research and cutting-edge research. On February 21, 2023, when presiding over the third collective study of the 20th Political Bureau, the general secretary stressed that "strengthening basic research is an urgent requirement for achieving high-level scientific and technological self-reliance and self-reliance, and the only way to build a world scientific and technological power". The focus of the growth policy is to strengthen applied basic research and frontier research, which will help achieve breakthroughs in disruptive and cutting-edge technologies, better implement the innovation-driven development strategy, and promote industrial innovation with scientific and technological innovation, so as to improve the growth rate of total factor productivity. Second, we should use structural policies to improve the efficiency of factor allocation, so as to increase the growth rate of total factor productivity. In the past decade, the supply-side structural reform has improved the efficiency of factor allocation to a certain extent by optimizing the industrial structure and other channels. However, there are still certain structural problems between urban and rural areas, between regions, between industries, and between enterprises. By strengthening the use of structural policies, the allocation of resources can be further optimized, thereby increasing the growth rate of total factor productivity.
Improve the investment environment and encourage enterprises to be "willing to invest".
Since the 18th National Congress of the Communist Party of China, the general secretary has attached great importance to optimizing the business environment and investment environment, emphasizing that "the business environment is only better, not the best". For entrepreneurs, it is necessary not only to pay attention to the tax burden and financing costs in the initial stage of entrepreneurship, but also to pay attention to the long-term competitiveness and viability in the process of production and operation. This requires policymakers to strengthen coordination between stability policies such as fiscal and monetary policies and growth policies such as innovation policies. In addition, in addition to economic goals, the sector also has to pursue non-economic goals such as environmental protection, and non-economic policies may have an impact on corporate investment. Therefore, policy-making departments should also strengthen the coordination and cooperation between non-economic policies and macroeconomic policies.
The ** Economic Work Conference at the end of 2023 clearly emphasized the need to "enhance the consistency of macro policy orientation." Strengthen the coordination and cooperation of fiscal, monetary, employment, industrial, regional, science and technology, environmental protection and other policies, include non-economic policies in the consistency assessment of macro policy orientation, strengthen policy coordination, and ensure that efforts are made in the same direction and a joint force is formed". This provides new ideas for the next step to improve the investment environment. On the one hand, it is necessary to enhance the consistency of stability policies and growth policies, and enhance the core competitiveness and long-term viability of enterprises. For companies that are able to expand effective investment, it is necessary not only to provide support in the form of tax exemptions and subsidies through stabilization policies, but also to use growth policies to increase support in areas such as innovation. It is suggested that the first department should increase basic R&D investment, and further improve the innovation sharing platform between enterprises, so as to enhance the innovation ability and core competitiveness of enterprises, and dispel their worries, so as to effectively enhance the willingness of enterprises to invest. On the other hand, it is also necessary to enhance the consistency of the orientation of non-economic policies and macroeconomic policies, so as to avoid "accidental injury" caused by non-economic policies to enterprise investment, so as to further enhance the willingness and motivation of enterprises to expand investment.
The author is an expert in the evaluation of the National Natural Science Project and an associate editor of the Institute of Economics, Chinese Academy of Social Sciences