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Text | Kaifeng

"Anti-involution" has begun.

A few days ago,Many places have abolished government internal investment promotion departments, some placesCancel the grassroots investment quotaAt the same time, an investment promotion company was established to conduct investment promotion in a more market-oriented manner.

In the past few years, there have been endless battles for talent and companies. Vigorous investment promotion was once seen as a symbol of "economic competition" and also as the key to economic growth.

However, the land, tax, and subsidy-based investment promotion has the problem of fair competition, while inefficient investment promotion and homogeneous investment promotion will bring seriousThe problem of internal friction and involution.

What signal does the anti-involution movement of investment promotion send?

01

Why are various places abolishing "investment promotion departments"?

One reason is thatInvestment promotion models such as financial subsidies, tax refunds, and land concessions are no longer feasible.

The reform document released recently pointed out that it is necessary to standardize the local laws and regulations on investment promotion.It is strictly prohibited to grant policy preferences in violation of laws and regulations.

The Fair Competition Review Regulations, which came into effect on August 1 this year, clearly statedNo tax incentives shall be granted to specific operators，Not to be givenSelective and differentiatedFinancial incentives or subsidies.

This is based on the construction“Unified Market”It is also the only choice to break the internal competition in investment promotion and overcapacity in some industries.

For a long time, the investment promotion in various places has been stuck in the rut of competing for policies, subsidies, and land, and constantly refreshing'Race to the bottom'The lower limit of .

The key to unifying the large market is to break down local protectionism and market segmentation, restrict unfair competition, and allow the normal flow of labor, land, data, and capital.

Another reason,The curtain of "anti-involution" has been raised, and internal consumption-based competition for investment promotion will no longer work.

An important meeting held recently emphasized:We must strengthen industry self-discipline and prevent vicious "involutionary" competition.Strengthen the market mechanism of survival of the fittest and smooth the channels for exiting backward and inefficient production capacity.

In terms of investment promotion, the People's Daily published an important article pointing out that it is necessary to promote the transformation of local investment promotion from competing for preferential policies to create "policy depression" to competing for business environment to create "reform high ground".Prevent vicious internal competition.

What is involutionary vicious competition?

An investigative report in Banyuetan once summarized:

Recruiting investors has turned into competing for investors, with each company "poaching" other's employees; there is a vicious competition in attracting policies, with "extraordinary preferential treatment" offered; and industrial planning has become homogenized regardless of development realities.

Obviously, such investment promotion can only stimulate growth in the short term. It not only disrupts the market order, but may not ultimately lead to real and lasting economic growth expectations.

In recent years, all regions have ignored their resource endowments or industrial bases and have rushed into hot tracks such as new energy vehicles and photovoltaics.Inefficient competition, duplicate construction, and overcapacitySuch problems are extremely prominent.

The "anti-involution era" has begun, and internal-consuming investment promotion and overly involutionary industrial investment are naturally included.

02

Merchants anti-involution, the cities in the Midwest may be the most affected.

As I said in my book "China's Great Urban Transformation", with the advancement of strategies such as domestic circulation, westward relocation of industries, and high-speed rail connection between all cities, the central and western regions have become the focus of a new round of large-scale construction and industrial transfer.

Compared with the eastern coastal areas, the central and western regions have no advantages in terms of economic strength, industrial foundation, scientific and technological innovation, or business environment.

In the investment competition,Midwest, the only thing that can be competed isTax policies, land resources and labor costs, and these dividends are disappearing.

First, tax incentives test the financial system’s ability to withstand pressure.

Most of the central and western provinces are net beneficiaries of the state's fiscal transfer payments. They are financially unable to be self-sufficient, and it is obviously problematic for them to spend money everywhere to attract investment.

Of course, the central and western regions themselves are exceptions to the policy bias.

likeEncouraged industries in the western region will be subject to a 15% corporate income tax reduction, while in the eastern region, except for a few free trade zones, the rate is almost 25%.

This is based on the considerations of the rise of central China and the development of western China. It is an inclination in the national top-level design and there is nothing wrong with it.

However, outside of national policies, the tax subsidies in some places far exceed those of developed coastal cities and exceed their own fiscal affordability, which is obviously unsustainable.

Second, land policy and the general trend of money following people and land following people have brought about a historic change.

The mentality that once restricted the development of large cities has come into conflict with the continued influx of population, resulting in insufficient allocation of land quotas in the east and a general dilemma of insufficient land resources.

Land resources in the central and western regions are relatively abundant, and land costs have always been an advantage in attracting industrial transfer. Some regions even sell land at preferential prices or at no price.

However, the new round of reform documents emphasizes: promoting transfer payments, factor allocation, etc. to be linked to the urbanization of agricultural migrant population.

in other words,Land quotas and fiscal funds will flow with the population, the Midwest will obviously be affected.

Third, the labor force advantage, not to mention the direct competition from Southeast Asian countriesMoreover, with more than 600 cities fully opening up their settlement policies, the battle for population will become increasingly fierce.

According to the latest policy, except for some megacities such as Beijing, Shanghai, Guangzhou, Shenzhen and Tianjin, almost all cities will relax restrictions on household registration. (See "Set the tone! More than 600 cities will relax restrictions on household registration")

This means that people will follow industries and move to higher places without any obstacles. The trend of population gathering in large cities will continue to accelerate.

Some areas in the Midwest that have experienced population loss are also facing new challenges.

03

It is easy to compete for land, taxes, fees and subsidies.It is too difficult to compete in the business environment.

Just as the important document sets the tone: Promote investment attraction in various places, and shift from competing for preferential policies to create a "policy lowland" to competing for business environment to create a "reform highland".

This means that future competition for investment will be more about the hard environment and soft environment. The former refers to economic industries or resource endowments, while the latter refers to the business environment.

However, it is not difficult to create a "policy depression", but building a business environment is not a one-day job, and"It is easy to destroy but difficult to build."

One sentence“Investment does not go beyond Shanhaiguan”The argument has cast the entire Northeast into a negative stereotype that has been difficult to reverse to this day.

Some places go to great lengths to create internet-famous cities, but one or two negative incidents are enough to destroy the city image that has been so hard to build.

There are some places that promise NInvestment subsidy or talent subsidypolicy, but ultimatelyDifficult to fulfill due to financial problems, which not only damages its own development, but also the local image and credibility.

In recent years, almost everywhere has placed business environment in an important position, but the actual environment is quite different.

After all, the business environment requires marketization, rule of law, and internationalization. It is not only a touchstone of local governance capabilities, but also a test of policy "patience."

according to"China's Rule of Law GovernmentAssessment Report (2023)", Shanghai, Shenzhen, Beijing, Hangzhou, Guangzhou, Nanjing, Ningbo, Xiamen and other cities are at the top.

According to the "Business Environment in Chinese ProvincesResearch Report 2023", Shanghai, Beijing, Zhejiang, Guangdong and Sichuan ranked in the top five.

The emergence of major changes in investment promotion means that there will be no shortcuts for local investment promotion in the future. The only way to break through is to expand industries and improve the environment in a down-to-earth manner.

Letting the market speak is the best way to compete.