the adverse impact of breaking demand constraints on economic growth
2024-10-04
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two important concepts in china’s economic growth process
since the reform and opening up, china's economy has experienced rapid growth of about 10% for more than 30 years.in this process, two concepts are very important. one is the historical demand peak.that is, in the process of industrialization and urbanization for decades or hundreds of years, the point or interval where demand grows the fastest or the demand is the largest. at this point or range, economic growth begins to slow down.the other is demand structure.behind the demand structure is the income structure. simply put, it is the distribution structure of middle- and high-income groups and low-income groups. there are two main situations: one is a structure with a low proportion of middle- and high-income people and a high proportion of low-income people; the other is a structure with a high proportion of middle-income groups and a low proportion of low-income groups, which is commonly known as the "olive type" structure. the historical demand peak determines the turning point from high speed to medium speed, and the demand structure determines the duration of medium speed growth after the turning point.
judging from international experience, economies that maintain medium-speed growth for a long time generally have a relatively low gini coefficient, below 0.4, a relatively small income gap, and a large middle-income group. such middle-income groups can release larger-scale and longer-term demand, thus supporting medium-speed growth for a longer period of time. on the contrary, if the income gap is large and the size of the middle-income group is small, when the demand potential of this group is generally released, growth is likely to slow down significantly, leading to a dilemma of low speed or even stagnation.the basic situation in our country at this stage is that the middle-income group roughly accounts for one-third, or about 400 million people. the gini coefficient has remained above 0.4 for many years, and some studies suggest it is at 0.45 or higher. the current lack of demand is directly related to this demand structure.
effective consumption demand is divided into survival consumption and development consumption.
to increase effective consumption demand, we must first distinguish between survival consumption and development consumption.including low-income groups, survival consumption, which mainly includes food, clothing and other daily basic consumption, has stabilized, or in other words, the problem of food and clothing has been basically solved. survival consumption is dominated by individual consumption. developmental consumption mostly takes the form of collective consumption or public services. for example, medical insurance and social security adopt the form of mutual aid, and school education is a collective learning form, which is directly related to the government's level of equalization of basic public services. expanding development-oriented consumption alone is not enough to rely on individual efforts. it requires the government to set up a platform, establish a system, and provide funds. it is a combination of government consumption expenditure and household consumption expenditure.
the level of equalization of basic public services lags behind, directly dragging down the growth of development-oriented consumption. at this stage, urban residents complain or worry more about the pressure on education, medical care, and housing. the shortage of basic public services among nearly 300 million migrant workers and nearly 200 million migrant workers in cities is even more prominent.therefore, it is necessary to identify the pain points to expand consumption: first, development-oriented consumption based on basic public services, and second, the middle- and low-income groups focusing on migrant workers.
reforms to unlock structural potential should be shifted to the demand side
china has experienced more than 30 years of rapid growth and more than 10 years of medium-speed growth, both of which were significantly higher than the growth rates of developed countries during the same period. the growth momentum mainly comes from china’s catch-up potential as a rising country. by 2035, from the current per capita level of us$14,000 to us$35,000-40,000, there is at least a us$20,000 catch-up potential, mainly due to the development of the service industry driven by the upgrading of the consumption structure, the stabilization and upgrading of manufacturing and agriculture, etc.
during this period, the importance of macroeconomic policies lies in maintaining stability and balance in the economic process. to make an inaccurate metaphor, if the potential growth rate is 5% at this stage, macroeconomic policies will probably affect 1%, and the remaining 4% depends on structural potential. the extent to which structural potential is released depends on whether there is a suitable institutional policy environment.reform is aimed at creating such environmental conditions.
it is necessary to clarify the difference in the role of macro policies between my country and developed economies at this stage.developed economies are also mature economies that are in a period of low-speed growth, which is a maintenance and depreciation growth with little new growth potential. changes in macroeconomic policies can often determine the overall direction of economic growth. if china's economic growth really relies mainly on macroeconomic policies, it should have entered a period of low-speed growth. as china's economy shifts from supply constraints to demand constraints, reforms to unlock structural potential will accordingly shift to the demand side. while continuing to promote necessary supply-side structural reforms, the focus will shift to demand-side structural reforms.
the adverse impact of breaking demand constraints on economic growth
a package of stimulus and reform economic revitalization plans should be launched to substantially expand end demand and drive the economy back to an expansionary growth track.we will implement the reform measures on integrated urban and rural development introduced at the third plenary session of the 20th cpc central committee, focusing on fiscal policy and closely cooperating with demand-side structural reforms to produce a comprehensive effect of expanding consumption, stabilizing growth, and preventing risks.specifically, it includes a 10 trillion stimulus scale, two major breakthroughs and an important goal.
economic stimulus package size:the main purpose is to raise funds through the issuance of ultra-long-term special treasury bonds, forming an economic stimulus scale of no less than 10 trillion within one to two years.
two major breakthroughs:first, we will vigorously improve the level of basic public services in affordable housing, education, medical care, social security, and elderly care for new citizens, mainly migrant workers in cities. the short-term focus is for the government to acquire unsaleable housing and convert it into affordable housing to provide it to new citizens. the second is to accelerate the construction of small and medium-sized towns within the metropolitan area, drive china's second wave of urbanization, and form a high-quality, sustainable and modern urban system based on the integrated development of urban and rural areas.
an important goal:it is to take the implementation of this economic revitalization plan as an opportunity to strive to achieve the goal of doubling the middle-income group in about ten years, from the current 400 million people in the middle-income group to 800-900 million. proposing and promoting the realization of this goal is of fundamental significance to extending the period of medium-speed growth as much as possible and breaking the negative impact of demand constraints on economic growth.
proposing and implementing the above-mentioned economic revitalization plan will help to quickly fill the gap in aggregate demand at the margin in the short term and drive economic growth into an expansionary cycle. at the same time, using stimulus and reform methods to spend money to build new systems will also provide create conditions for high-quality and sustainable economic and social development in the medium and long term.
(the author is the former deputy director of the development research center of the state council)
source: beijing daily client
author: liu shijin
