陶涛：把握新机遇，谋中国经济长期发展新局   2021-05-27

 

In response to the current international and domestic economic situations, China has established meeting domestic demand as the starting point and goal of development and developed a new strategy for constructing the new development paradigm featuring dual circulation, in which domestic and overseas markets reinforce each other, with the domestic market as the mainstay. At the Opening Ceremony of the Third China International Import Expo, President Xi Jinping pointed out, "The COVID-19 pandemic has added to the instability and uncertainty facing the world economy. However, looking back at history, humanity has always been able to forge ahead despite risks, disasters and headwinds, and humanity shall and will continue to stride forward. The overwhelming trend for countries to move toward openness and cooperation remains unchanged. All countries need to come together to jointly tackle risks and challenges, strengthen cooperation and communication, and embrace greater openness." This shows once again that in the face of the turbulent international situation, China is not closing its doors for development, but giving play to its existing advantages such as its super-large market, complete industrial system and strong production capacity, to further increase the breadth and depth of its opening up and cultivate new advantages in international competition, so as to seek a new paradigm of China's long-term economic development.

From the perspective of production and consumption in the domestic market, China already has a strong foundation for economic internal circulation 

Firstly, individual consumption has become the main driver of China's economic growth, and the dependence of economic growth on external demand is gradually declining. The rapid rise in income levels has increased the disposable income of residents, and the middle class has continued to expand. The consumption scale has expanded year by year, and the consumption structure has been continuously upgraded. As a result, individual consumption has become an important driver of China's economic growth.

Secondly, China has completed industrialization and has a relatively complete industrial system and strong production and supporting supply capacity. China's textile and garment, iron and steel, chemical, household appliance, mechanical and automobile industries have reached advanced technology levels, with strong manufacturing capacity, and its industrial structure and export structure have been upgraded to different degrees. High-tech products such as high-speed trains and smartphones have been produced domestically and mass-produced, and large aircraft have also been produced domestically. With new comparative advantages including ample domestic capital, active investment and financing markets, massive human capital, and skilled engineers who replace simple labor, China is capable of ensuring sufficient supply to meet the economic circulation with the domestic market as the mainstay.

Thirdly, the innovation capacity of Chinese enterprises has greatly improved, and technological progress is becoming a driver of economic growth. China has global leading technologies in emerging industries and new-generation information technologies, such as high-speed trains, power batteries, communications, big data, and artificial intelligence, where many global industry leaders have emerged.

Fourthly, while China's dependence on the world market is declining, the world's dependence on the Chinese market is going up. China's growing consumer market, complete supply chain system and large number of skilled engineers have attracted considerable global manufacturers to enter China. Production in areas such as automobiles, machinery, and smartphones continues to converge in China. China is now the world's largest producer and consumer of automobiles. China is also a major producer and consumer of smartphones. The penetration of multinational companies in the Chinese consumer market has even become higher than that in the U.S. market.

Advantages of and opportunities for China's deep involvement in the global industrial chain 

In the global industrial chain, developed countries have the advantages of R&D and innovation and rely on low-cost countries for processing. China's advantages are a long industrial chain and strong processing capacity. China can promote industrial upgrading more effectively only by integrating more deeply into the global industrial chain and continuing to learn and innovate in the division of labor and cooperation. The more turbulent or even deteriorating international economic relations are, the more favorable it is to continuously strengthen industrial collaboration through closer ties instead of severing ties.

In terms of technological progress, China is striving to advance the new technological revolution. The progress in the new-generation information technology will push the global industrial chain to become shorter, reduce the importance of labor, and increase the importance of new factors such as services and data. In the past decade, the U.S., Europe, Japan, China, etc. have developed national support strategies for the new-generation information technology and industrial revolution, which has intensified the competition among multinational companies and industries in each country. Whichever is ahead in the competition can seize the initiative in product innovation and production processes, thus leading the industrial chain structure and spatial layout direction. China is striving to advance the new technological revolution and informatization process, and a head start in a wider context will greatly improve the innovation ability and production efficiency and make the Chinese supply chain an indispensable link for multinational companies.

In terms of domestic industries, China has a complete industrial chain and supply chain. China has a complete industrial chain and large-scale processing capacity. The more competitive Chinese production is, the more costly it will be for multinational companies to transfer production out, and the longer the transfer period will be. The key to improving the competitiveness of China's supply chain is to promote a higher level of opening up to the outside world and the domestic market. A higher level of opening up to the outside world will attract innovative multinational companies to enter, while a higher level of opening to the domestic market will allow private enterprises to compete with state-owned enterprises, and the innovation incentives to state-owned enterprises should be especially increased so that they can fully participate in global competition.

In terms of the domestic market, China's super-large market has become enormously attractive to multinational companies from around the world. By raising the level of disposable personal income, increasing the overall consumption level and consumption grade of society, and promoting the domestic demand structure to become closer to that of developed countries, China will attract more multinational companies to produce and sell their products in China and promote cooperation and competition in domestic industries.

(Author: Tao Tao, professor and doctoral supervisor, School of Economics, Peking University)

 

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