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cai fang, chief expert of the national high-end think tank of the chinese academy of social sciences

the following views are summarized from cai fang’s speech at the cmf quarterly forum (third quarter of 2024)

01

new requirements put forward by the third plenary session of the 20th cpc central committee

the new requirements put forward by the third plenary session of the 20th cpc central committee are closely related to these three focus points:

first, improve the macroeconomic governance system. the plenary session emphasized "enhancing the consistency of macroeconomic policy orientation."

second, we need to speed up the cultivation of a complete domestic demand system. the plenary session specifically mentioned "improving the long-term mechanism for expanding consumption." in the past, some people have proposed issuing one-time cash to stimulate consumption. although this short-term measure may be effective, its effect is limited to the short term. in contrast, the establishment of a long-term mechanism is to promote consumption growth in a long-term and stable manner through institutional construction, and it can also produce immediate results in the short term.

third, improve the employment priority policy and focus on solving structural employment contradictions. employment issues involve families and workers and affect residents' consumption. although the impact of the epidemic has gradually subsided, the economy has gradually returned to normal track, and the full employment state in the macro sense has been restored, due to structural employment contradictions, the current natural unemployment rate may be higher than before. therefore, solving the structural employment problem is not only an extension of the current macroeconomic policy, but will also have long-term effects.

fourth, develop the silver economy and create jobs suitable for the elderly. not only should we meet the growing needs of the elderly, but we should also create new job opportunities for them.

the current focus is on how the chinese economy can get back on track as soon as possible. it is worth noting that this track is not the high-speed growth of the past three decades. after 2012, china's economy entered a "new normal", that is, medium-high growth. as long as we can maintain a growth rate higher than the world average, even in the middle and late stages of medium-high growth, we will still be in a catching-up state, which also means that we will achieve our goal of becoming a moderately developed country in 2035.

the future growth capacity of the chinese economy, that is, the growth rate that can be maintained under normal conditions through factor growth and allocation and productivity improvement, is called the potential growth rate. according to our calculations, although china's potential growth rate is on a downward trend in the future, it can still meet the speed requirements for basically achieving modernization. due to the impact of the epidemic, there is a gap between the actual growth rate and the potential growth capacity. the potential growth rate represents the capacity of the supply side, that is, the fundamentals and resilience of the economy; while the actual growth rate reflects the situation on the demand side, reflecting whether there is enough demand to support economic growth. judging from the trend of the difference between the two, the gap between the actual growth rate and the potential growth rate is likely to widen. therefore, the key to taking measures to eliminate this unnecessary difference lies in breaking through the constraints on the demand side.among the traditional "three engines", external demand is no longer sustainable due to changes in the international environment and geopolitics, especially the trend of deglobalization; investment, whether infrastructure or industrial enterprises, is still important, but its role is also limited by consumer demand and no longer drives economic growth as strongly as in the past. therefore, it is fundamentally necessary to rely on consumer demand that is consistent with people's livelihood, which is the most sustainable driving force for economic growth.

02

policy focus and targets shift from investors and enterprises to households

previous macroeconomic policies often focused on lowering loan thresholds, improving the business environment, relaxing monetary or fiscal policies, and even directly subsidizing enterprises. although these policies can still exist at the industrial level, they are also necessary when encountering macroeconomic shocks in the future. however, to solve the current macroeconomic difficulties, more attention should be paid to residents' consumption, so the implementation method should be transformed into a "family-oriented" orientation. "family-oriented" is crucial at present, because family income and employment have been severely impacted during the epidemic, and short-term subsidies are needed, but more attention should be paid to establishing a long-term mechanism.

china is facing the superposition of "double new normal". on the one hand, since 2012, the economy has entered a new normal, the growth rate has slowed down, and the growth capacity of the supply side has declined; on the other hand, since china entered the stage of moderate aging in 2021 and the population began to decline in 2022, whether it is the weak consumption capacity and low consumption willingness of the elderly population, or the absolute decrease in the number of consumers due to the decrease in the total population, it has the potential to lead to a weakening of residents' consumption in the future, becoming a long-term factor restricting economic growth. therefore, under the combined effect of long-term and short-term factors, the focus of policy should be shifted to family consumption, which we call "family-oriented".the core of "family-oriented" is to solve the "scar effect" caused by the impact of the epidemic, and to deal with the long-term adverse effects of population aging, low birth rate and negative population growth. in this context, the importance of family has become more and more prominent, not only in stimulating consumption, but also in encouraging childbirth. therefore, turning to "family-oriented" should become a policy focus.

03

the policy benchmark shifts from the phillips curve to the beveridge curve

the phillips curve describes the trade-off between inflation rate and unemployment rate. economic theory generally believes that when the demand side encounters a shock, the implementation of stimulating macroeconomic policies can push the economy back to the normal growth track and achieve full employment, that is, eliminate cyclical unemployment. this idea is still valid. at present, china's urban unemployment rate has returned to normal, that is, the level of full employment. however, compared with historical levels, the natural unemployment rate has risen, which reflects the intensification of structural employment contradictions. first, with the changes in the population structure, especially the aging, low birth rate and changes in the structure of the working-age population, the employment ability of workers has weakened. secondly, the rapid changes in technological progress and industrial structure make it difficult for the creation speed of new jobs to offset the loss speed of employment. in addition, some institutional and mechanism factors have also reduced the matching efficiency of the labor market. all these determine that policies must pay attention to structural employment contradictions. therefore, we must apply the reasons for the formation of the natural unemployment rate revealed by the beveridge curve and then deal with it.

according to estimates, china's natural unemployment rate tends to rise slowly. although the actual unemployment rate fluctuates periodically, in the long run, the rise in unemployment is a trend that cannot be ignored. this is closely related to factors such as changes in industrial structure, accelerated technological progress, aging of the population, and institutional factors. both cyclical unemployment and natural unemployment represent the underutilization of labor resources, which is not only a loss on the supply side, but also a loss on the demand side. therefore, different countermeasures must be taken to solve the problem of natural unemployment. the macroeconomic policy toolbox needs to introduce means to deal with natural unemployment, enrich existing policy means, and open up the links between various policies.

the natural unemployment rate is also closely related to institutional and systemic factors, one of which is the adverse impact of the household registration system on the efficiency of labor allocation. in the past, people thought that the household registration system mainly affected the migrant worker group, but in fact its impact far exceeds this group of people. according to the seventh census data, among the permanent urban population, about 38% of the population do not have local household registration, and this proportion among the young population is much higher than the average. this not only involves migrant workers, but also includes college graduates, demobilized soldiers, etc., all of whom are the focus of the third plenary session of the party.providing public employment services to these groups is certainly a beneficial and necessary approach, but a more fundamental solution is to promote the reform of the household registration system. this will not only have a positive impact in the long run, but also bring immediate and practical reform dividends. from the perspective of supply-side reform, household registration system reform can bring millions of new workers; from the demand side, it can drive trillions of new consumer demand.

04

redefine the demographic dividend and adapt to the new normal of population development

under the new normal of population development, we need to redefine the demographic dividend.from the traditional definition, the demographic dividend usually refers to the advantages of rapid growth, high proportion of the working-age population, low dependency ratio, abundant labor resources, rapid improvement of human capital, high return on capital, and high labor productivity. with the aging of the population, the demographic dividend in the traditional sense is gradually disappearing. at this time, we should focus on the population groups of higher age groups. for example, in 1980, the largest labor force was mainly young people; by 2000, china had entered an aging society, and the age center of gravity of the working population began to increase; in 2021, it entered a moderately aging society, and the older labor force groups were further concentrated in the older population; it is expected that by 2032, it will enter a deeply aging society, and it is necessary to tap into the older labor force groups.the general trend is that policy focus should gradually shift to population groups that are gradually growing in size and getting older. on the one hand, these groups can be used as important human resources; on the other hand, the concept of demographic dividend can also be extended to the demand side, transforming the elderly population into an effective consumer group, which is also a new demographic dividend that emerges with population aging.

in terms of policy, we have deployed the development of the "silver economy" and have tried to redefine and expand the connotation of the "demographic dividend" in terms of concept. a typical example is the expansion of the care industry that the "silver economy" may bring. by analyzing the data of various countries, we can see that the proportion of time spent by chinese women on housework is slightly more than 10%, which is not significantly higher than that of other countries. however, the labor participation rate of chinese women is the highest in the world, which means that they not only undertake a similar amount of housework as women in other countries, but also undertake these housework outside of employment.

this situation makes it difficult for women to improve their income level and employment quality, and they also lack time to improve themselves (such as human capital cultivation), give birth, raise and educate their children. if we transform these housework into industries and make them socialized service supply, it will have the following effects: first, increase the labor participation rate. this can not only directly increase the labor participation rate of women, but also provide employment opportunities for more people by creating new demands and new jobs, thereby alleviating structural employment contradictions. second, expand the supply of social services and increase the total gdp. at present, about one-third of personal labor is unpaid labor, which is not included in gdp. if these housework is transformed into socialized supply, the scale of gdp will be significantly expanded. third, improve the balance between family development and career development, and increase family fertility intentions and the fertility rate of the whole society.