Caixin: Discussions on the “New Real Economy”
The ultimate goal of developing a good new real economy has several folds: increase the supply of premium products and services, generate tax income for national economy, and change the perception on employment in the virtual and real economies and provide sufficient jobs.
“We are ultimate goal of developing a good new real economy has several folds: increase the supply of premium products and services, generate tax income for national economy, and change the perception on employment in the virtual and real economies and provide sufficient jobs.entering the era of the ‘New Real Economy’, where intangible things also can be considered real economy.” CSC Group Chairman and President of Chinese Academy of Supply-Side Economics – Wang Guangyu said during the Academy’s 2017 Annual Gala, “Real economy is not limited to production and manufacturing, but also services and distribution. The most critical supply side factor is the entrepreneurial spirit.”
Premier Li clarified “real economy” on several occasions: the concept of “real economy” vs. “virtual economy” includes not only manufacturing, but also primary / secondary / tertiary industries. He gave examples of online shop and express delivery. These new economic sectors are actually all ‘manufacturing-related services’ serving the real economy and thus are part of the real economy.
The New vs. Old Real Economy
Wang Guangyu believes that the new real economy is the lifeline and foundation of national economy, the world’s major economies all place real economy development on a national strategic level. Developing real economy does not mean opening more factories. For parts of the real economy with excess capacity, Wang Guangyu believes that they should be removed altogether.
Drawing from his experience in finance, Noah Holdings branch office Chief Research Officer Jin Nianhai said that manufacturing is not always real, and finance is not always virtual. China’s problems – pollution, excess capacity, high consumption etc. all come from manufacturing. In comparison, modern services can raise income, reduce emission, and create jobs, so it is actually more real. He also thinks the reduced growth under the new normal is actually the process of getting rid of virtuality, especially in manufacturing.
Wang Guangyu suggests not to use “virtual” and “real” to categorize businesses, just “good and bad.” Good companies create value for the society and generate tax income and jobs. Enterprises that provide inclusive finance for SMEs, continuously promote technological innovation, and develop new paths for traditional industries should receive full support.
On“what is considered a good new real economy,” Wang Guangyu mentioned sectors such as IT, biotechnology, and internet; which changed many traditional industries and discovered new directions for the new real economy. Jin Hainian also pointed out that: the criteria in real vs. virtual is not whether tangible products are being produced, but whether customer consumption needs are satisfied.
Government’s Role in developing “new real economy”
On this topic, Jin Hainian thinks that we need to realize “market and government supply equilibrium,” i.e.: First, the government provides public services and system supplies, including transforming pollution emission externalities into resources and pollution tax mechanism; financial regulators should emphasize on the balance between risk and innovative production. Secondly, the market should perfect its own adjustment mechanism of production capacity and inventory excess while ensuring environmental protection; remove both excess production and pollution; and provide incentives to talents and direct private investments to achieve the successful transformation of Chinese economic structure.
Managing Director and President of China Gas – Liu Minghui thinks that while everyone thinks that new real economy is a good thing, the traditional administrative order only treats manufacturing as real economy and not everything else. We need to expand the concept of real economy.
Boosting the Entrepreneurial Spirit
Wang Guangyu believes that entrepreneurs play the important roles of allocating production factors, and innovating technology / organization / rules etc.. Therefore, great entrepreneurs and excellent entrepreneurial can create evergreen companies and high quality products.
He also shared that during the course of supply-side reforms, in order for entrepreneurs to set off market innovations and revitalize the real economy, there are three areas of considerations:
First, the role of entrepreneurs needs to adapt and focus on four things: 1. Focus on R&D. 2. Focus on resource allocation. 3. Focus on partnership development, optimize IP and governance. 4. Focus on organizational culture.
Second, four entrepreneurial abilities need to be enhanced. 1. Innovative ability is the key in leading companies to transform. 2. Strategic ability is crucial for facing business crises. 3. Management ability is the basic requirement for an entrepreneur especially during the transformation of businesses. 4. Capital ability is a magnifier, enterprises need to integrate industry and finance resources, and entrepreneurs must learn to use financial tools.
Lastly, social reforms need to reposition entrepreneurs. 1. The legal system must recognize contributions made by entrepreneurs, protect IP and value laws. 2. Strengthen credibility with social credit system, and crack down on dishonest behaviors. 3. Significant reforms on commercial system and taxation system. 4. Give entrepreneurs extraordinary compensation, encourage more young and outstanding talents to become entrepreneurs, provide tax cuts and other support for startups.