On December 4th, the China Development Institute and the National School of Development at Peking University co-hosted a policy talk on China’s economic outlook amid the COVID-19 outbreak and the new international challenges. The event was also livestreamed on multiple media outlets.
CDI and NSD scholarsshared their insights on the economic challenges faced by China in a time of global uncertainty. These panellists suggested that China needs to continue its endeavours in scientific research, technological innovation, reform of state-owned enterprises and the finance industry.
Date: December 4, 2020
Host: CDI, NSD
Theme:China’s economic outlook amid the new international challenges
14:00-15:45 Keynote speech
Moderator: Huang Zhuo (Associate Professor, National School of Development at Peking University)
Fan Gang (President, China Development Institute)
Yao Yang (Dean, National School of Development at Peking University)
Tang Jie (Former Deputy Mayor, Shenzhen Municipal Government)
Zheng Shilin (Associate Research Fellow, National School of Development at Peking University)
Huang Yiping (Deputy Dean, National School of Development at Peking University)
15:45-16:30 Round table
“When competition is inevitable, it should be approached with rationality.”
At this time of great global uncertainty, the inevitability of global competition must continue to be acknowledged. As China’s economic development continues, external pressure isunavoidable. It is important to remain calm and objective to this reality and focus on the coping and management strategies required for global competition.
On one hand, under the ‘dual circulation’, we must overcome the shortcomings through technology innovation, which is indeed a ‘long shot’ due to the undeniable gap. At the same time, the history of economic development warrants import substitution industrialization and the overprotected infant industry by which serious economic and financial crisis can be induced. On the other hand, international circulation can be held up through persistence with international trade and exchange. How to better handle the relationship between domestic innovation and international market will remain a ‘head-scratcher’ in the upcoming decades.
Prof. Fan Gang (President, China Development Institute)
“The next 30 years entail both challenges and opportunities for China.”
The advantages are clear. China’s gross savings rate is still quite high, although it has dropped to 45% and will likely to hit 35% between the next twenty to thirty years. In terms of human resources, a total of over 8 million university graduates per annum implies a steady supply of abundant human capital. In addition, technological innovation can now be easily implemented because of China’s extensive industry chain, whilst production unit costs are substantially reduced thanks to China’s huge domestic market. It should also be noted that further urbanization and green development have been stressed in China’s 14th Five Year Plan, which implies that agglomeration effects will be seen in China’s major cities, whilst the green industry is set to boom.
Then again, challenges are multifaceted. For example, as well as the challenge of coping with the changing external environment, China is faced with two other domestic challenges. Firstly, the relationship between state owned enterprises and financial industry; due to the low costs currently of obtaining financial capital, SOEs tend to be productivity driven instead of profit driven, which can be greatly disruptive and dysfunctional for the rest of the market. Secondly, China’s increasing aging population requires an advanced and efficient social insurance and pension system, which is currently underdeveloped and insufficient.
Prof. Yao Yang (Dean, National School of Development at Peking University)
“Highly-efficient innovation is the result of the coherence of market system and government measures.”
Fundamentally, China faces three types of challenges for continued innovation. The first is the duality of innovation; the cluster effect and openness culture of innovation. The second is the inconsistency between innovation performance and investment in innovation. The third is that the current innovation policies are characteristically paradoxical.
To effectively face these challenges, Prof. Tang Jie proposed the following suggestions. Firstly, a comprehensive and effective national innovation system should be established to ensure the efficient implementation of relevant policies. Secondly, developing general purpose technologies (GPTs), networks and industry chains can engender solid foundations for improving innovation performance. Thirdly, the government should steer Chinese industry chain towards developing high-tech products, while providing support to SMEs by increasing R&D expenditures and professionals.
Prof. Tang Jie (Former Deputy Mayor, Shenzhen Municipal Government)
“The financial industry can support the innovative practices and Shenzhen can be a worth-learning model.”
Currently, the support to the real economy from the financial industry is weakening because economic growth has transformed from input-driven to innovation-driven. Thus, urging the bank-led financial structure to be transformed. A multi-level capital market should be established, and the proportion of direct financing should be increased. Secondly, market-oriented reforms should be put forward and market-oriented risk pricing should be implemented. Thirdly, financial supervision should be strengthened so as to identify and deal with risks.
Besides, the innovation progress in Shenzhen can shed some lights for the rest of China.For example, combining the online and offline financial services, with greater emphasis the online financial services; combining direct and indirect financing; and combining the government and market, with government playing an effective role in market failures.
Prof. Huang Yiping (Deputy Dean, National School of Development at Peking University).
With the regards to the future and the challenges of China with global technology and an innovation leader, China is already at the forefront of the world's scientific and technological innovation in terms of quantity but lags behind in terms of quality, systems and environment.
Looking towards 2049, China’s innovation quantity will mostly likely surpass the other competitors, as well as the total scale and scope across universities and enterprises. However, China will still be far behind the convergence goal of becoming a global science, technology and innovation leader in terms of basic research and patent quantity.
China should support the further development of basic research in the future, especially the proportion of basic research in enterprises, throughmeasures that cultivate, attract and encourage basic research talents.
Dr. Zheng Shilin (Associate Research Fellow, National School of Development at Peking University)