Further enhancing development confidence, promoting innovation and upgrading of business entities, capital | business | entities

Core viewpoint: Qiao Ruiqing, a columnist on China Economic Net, believes that technological exploration is a night journey on the unknown road, with great difficulty and high risk. It requires both the courage of business entities to move forward and the provision of "street lights" for the government. Although the road is far, the journey is approaching; Although things are difficult, they must be done. As long as there is active interaction, collaborative cooperation, and joint progress between an effective market and a promising government, the path of innovation and upgrading for billions of business entities in China can become wider and wider, and the development prospects will also become better and better.

Confidence is more important than gold, and with development confidence, there is development momentum. On the one hand, the business entity integrates resources, produces goods, and enriches supply, while on the other hand, it creates employment, distributes income, and supports demand. The number, scale, and operational status of business entities are related to both demand and supply. Enhancing development confidence, the most important thing is to enhance the development confidence of business entities. According to data recently released by the China Association of Small and Medium sized Enterprises, the development index of small and medium-sized enterprises in July was 89.3, an increase of 0.2 points from the previous month, marking the second consecutive month of recovery. This shows that the confidence of the operating entities is gradually recovering. Next, we need to take advantage of the situation and further enhance the confidence of business entities in their development.

Facing the future is the key to creating the future. Only when future business opportunities emerge and expected returns are substantial, can business entities be willing to actively expand investment and pursue their dreams for the future. British economist Keynes used the marginal efficiency of capital to express the discount rate of expected returns on capital investment by business entities, and used investment incentives to express the difference between the marginal efficiency of capital and interest rates. He believes that when the marginal efficiency of capital is higher than interest rates, the expectations of business entities are optimistic, business confidence is enhanced, and investment is further expanded; When the marginal efficiency of capital decreases until the same interest rate is equal, the investment of the operating entity will stop. Therefore, to further enhance the development confidence of business entities, efforts should be made to enhance investment incentives, which need to be achieved by reducing interest rates and improving capital marginal efficiency.

Reducing the financing costs of the real economy is a powerful measure to support its development. Undoubtedly, the reduction of interest rates has been significantly implemented. The first quarter 2023 Chinese monetary policy execution report released by the central bank shows that the weighted average interest rate for newly issued corporate loans in March was 3.95%, a decrease of 0.41 percentage points from the same period last year. On June 20th, the new loan market quotation interest rate was announced, with a 1-year LPR of 3.55% and a 5-year and above LPR of 4.20%, both of which were 10 basis points lower than the previous period. Considering the sustained strong support of finance for the real economy and the low prices, there is still room for interest rates to decrease.

By contrast, improving the marginal efficiency of capital is more important and more difficult. Since the marginal efficiency of capital is decreasing, how can we improve it? In fact, the diminishing marginal efficiency of capital is based on the premise that technological constraints remain unchanged. In other words, the diminishing marginal efficiency of capital occurs under the condition that technology remains unchanged. In the case of continuous technological improvement or innovation, the diminishing marginal efficiency of capital will be delayed. Every technological revolution will trigger a wave of investment and give birth to an industrial revolution. In some extreme cases, such as after experiencing the process of technological creativity destruction, the marginal efficiency of capital may even reverse and soar. Of course, continuous and minor technological improvements are a more common situation. For micro business entities, a slight technological advancement may take them a big step forward. In this sense, encouraging and supporting business entities to strengthen technological research and development innovation, promote transformation and upgrading, will ignite the hope and entrepreneurial passion of business entities. Therefore, we must closely focus on the construction of a modern industrial system, promote the integration of data and reality, high-end, green, and intelligent industries, persistently implement various policy measures to support the technological transformation and innovation of business entities, and open up market space for future business entities through technological breakthroughs, quality breakthroughs, and brand breakthroughs.

The future is unknown. Technological exploration is a nocturnal journey on the unknown path, with great difficulty and high risk. It requires both the courage of the business entity to move forward and the provision of "street lights" for the government. Although the road is far, the journey is approaching; Although things are difficult, they must be done. As long as there is active interaction, collaborative cooperation, and joint progress between an effective market and a promising government, the path of innovation and upgrading for billions of business entities in China can become wider and wider, and the development prospects will also become better and better.

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