Observation of the Great Economic Cycle in China

As the autumn equinox approaches, the Chinese economy is about to end in the third quarter of 2023.

Continuing from the previous, the third quarter is a crucial period for achieving the annual economic and social development goals. The data released by the National Bureau of Statistics shows that the current major economic indicators continue to recover and show a positive trend. In August, the added value of industrial enterprises above designated size increased by 4.5% year-on-year, an increase of 0.8 percentage points compared to the previous month. Consumption steadily expanded, the service industry recovered quickly, and new driving forces continued to grow... Macro policies promoting economic recovery continue to show effectiveness, and the driving force of China's economic cycle continues to be released.

While the economy is showing positive signals, we also need to recognize the risks and challenges it faces: the current world's unprecedented major changes are accelerating, the international political and economic situation is complex and severe, the international economic cycle pattern is deeply adjusted, and the domestic economy still faces many difficulties. In this context, how can the Chinese economy continue to firmly grasp the initiative of development?

A major economy requires a strong and resilient national economic circular system.

Smooth the economic cycle, based on the domestic market, respond to external environmental uncertainties with the certainty of its own development, shape new competitive advantages in building a new development pattern, and firmly move forward with the high-quality development of the Chinese economy in the smooth circulation of the economic bloodline.

Accelerating the construction of a large circulation: a key measure to solidify the foundation of economic development

On August 4th, two domestically produced C919 large passenger planes received by China Eastern Airlines began their first "dual aircraft commercial operation" and jointly operated the "Shanghai Hongqiao Chengdu Tianfu" route on the same day.

As of now, the C919 has accumulated over 30 customers and 1061 orders, and commercial operations are steadily moving towards scale.

Large scale market - This provides strong support for the industrialization, scale, and series development of domestically produced large aircraft. According to COMAC's forecast, the Chinese aviation market is expected to receive 9084 new aircraft from 2021 to 2040, becoming the world's largest single aviation market.

The continuously improving R&D and manufacturing capabilities - the development and operation of domestic commercial aircraft models will drive China's aviation manufacturing industry to break through key core technologies and drive the overall upgrading of the industrial chain.

Demand drives supply, supply creates demand. In a higher level of dynamic balance between supply and demand, the Chinese economy is constantly presenting new patterns and exploring new spaces.

This is a strategic arrangement related to the long-term development of the Chinese economy and a key move to solidify the foundation of economic development——

Under the impact of the epidemic, foreign raw materials cannot be imported and domestic goods cannot be exported, which has affected this economically important province with an export-oriented economy.

In October of that year, the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China made a comprehensive deployment to build a new development pattern.

Having a broad vision and leading direction.

Doing a good job in the domestic circulation is an inevitable choice to follow the rules and adapt to the new stage of development——

Economic activity is not an isolated existence, but a dynamic and cyclical process.

Marx systematically discussed the four major links of social reproduction - production, distribution, exchange, and consumption - in his Introduction to Critique of Political Economy.

In 2006, 67%; In 2022, 35%.

The change in China's dependence on foreign trade reflects a profound transformation in the economic development model of major countries.

Since the reform and opening up, the market and resources have been at both ends of the world. To the implementation of the strategy of expanding domestic demand and responding to external shocks after the 2008 international financial crisis, the relationship between China's domestic economic cycle and the international economic cycle has undergone a profound transformation. In recent years, the contribution rate of domestic demand to economic growth has exceeded 100% in 7 years; In the first half of this year, the contribution rate of domestic demand still exceeded 100%.

This is an objective trend of development and a profound transformation in economic operation.

Major developed countries have strong domestic demand markets. In 2020, the dependence of the United States and Japan on foreign trade was 18.3% and 25.2%, respectively, significantly lower than the world average of 42.1%; The final consumption rates of the two countries reached 82.1% and 74.7%, respectively.

After years of development, the objective conditions for China's development have also changed: after becoming the world's second largest economy in 2010, China's total economic output has continued to rise, and now the per capita GDP has exceeded 12000 US dollars. The middle-income group continues to expand, achieving a historic leap from low-income countries to upper middle income countries.

The characteristics of major economies are dominated by domestic demand and recyclable internally. By prioritizing domestic demand, we can effectively mitigate the impact of external shocks and the decline in external demand; By being internally recyclable, the supply system can be effectively smooth and resilient.

From the current situation of China's economic development, insufficient total demand has become a prominent contradiction in economic operation, and the contradiction of supply structure not adapting to changes in demand structure has become prominent. Since the beginning of this year, despite the overall economic recovery, in the second quarter, indicators such as investment, consumption, exports, and industry have fluctuated, and the economy has continued to rebound and face new difficulties and challenges.

The Central Political Bureau meeting held on July 24th pointed out that the current economic operation is facing new difficulties and challenges, mainly due to insufficient domestic demand, operational difficulties for some enterprises, multiple risks and hidden dangers in key areas, and a complex and severe external environment.

Since August, under a series of policies and measures to expand domestic demand, boost confidence, and prevent risks, China's industrial and service industry production has accelerated, domestic demand continues to expand, positive factors have accumulated and increased, and the national economy has recovered and improved. However, at the same time, the international environment facing China's economy remains complex and severe, with structural contradictions and cyclical factors overlapping in the domestic economy. The foundation for sustained recovery still needs to be consolidated.

"The Chinese economy is experiencing a shift in growth rate, and the problem of insufficient power in the traditional development model has become more prominent after the epidemic." Wang Changlin, Vice President of the Chinese Academy of Social Sciences, said that stimulating economic growth through resource input and simple expansion of demand is difficult to sustain, and it is necessary to continuously enhance the endogenous power of the domestic circulation to provide sustained support for stable economic growth.

Doing a good job in the domestic circulation is a proactive measure to prepare for the future, coordinate development, and ensure security——

The sixth Chinese Farmers Harvest Festival is approaching. On the vast fields, a colorful autumn harvest painting slowly unfolds. During the critical period of autumn grain production, various regions and departments are making every effort to ensure the goal of maintaining an annual grain production of over 1.3 trillion kilograms.

Autumn grain is the mainstay of annual grain production. Fu Linghui, spokesperson for the National Bureau of Statistics, said that summer grain has achieved a bountiful harvest, and early rice has also increased production, laying a solid foundation for a bountiful grain harvest throughout the year. At present, the overall stability of autumn grain production is conducive to stable and increased grain production throughout the year.

Stabilizing China's rice bowl and ensuring food security provide strong support for promoting sustained economic recovery and accelerating the construction of a new development pattern.

The world's unprecedented great changes are accelerating, and the characteristics of world changes, era changes, and historical changes are becoming more apparent.

On the one hand, economic globalization is facing a backlash, with some countries showing an increasing tendency towards internal consumption. The COVID-19 pandemic and the Ukrainian crisis are intertwined, leading to frequent risks such as global industrial and supply chain disruptions, fluctuations in commodity prices, and energy supply shortages; On the other hand, a new round of technological and industrial revolution is rapidly advancing, the global innovation landscape is accelerating reconstruction, and the international power balance is undergoing profound changes.

This is the largest import commodity in China last year: the import value of integrated circuits was about 2.77 trillion yuan, accounting for 15.3% of the total import value; The import value of crude oil is about 2.44 trillion yuan, accounting for about 13.5%.

From 2010 to 2021, the proportion of imported components in China's intermediate goods decreased from 26.2% to 18.4%, reflecting the steady improvement of China's level of independent innovation. However, the bottleneck problem of key core components remains prominent, with high dependence on primary products such as crude oil, iron ore, natural gas, and soybeans.

"Taking the domestic circulation as the main body is not only a simple quantitative comparison, but also refers to a country or region's strong resilience and control over the social production process. The most essential feature is to achieve high-level self-reliance and self-improvement. The initiative in innovation and development must be firmly held in one's own hands," said Wang Changlin.

Doing a good job in the domestic big cycle is the path choice for foresight and promoting Chinese path to modernization——

The construction of a new development pattern has clarified the path choice for China's economic modernization.

The modernization theory holds that as a latecomer country, in order to catch up and become a modernized country, it is necessary to fully utilize its comparative advantages and explore economic modernization paths and strategies that are suitable for its own national conditions.

At the Qinzhou Port Terminal in Guangxi, a series of rail sea intermodal trains loaded with cross-border goods enter the inland market from Qinzhou Port East Station. In the first eight months of this year, the rail sea intermodal freight trains of the Western Land Sea New Channel transported a total of 562000 TEUs of goods, a year-on-year increase of 12.8%; At present, the transportation scope covers 18 provinces in central and western China, and goods flow to nearly 400 ports in over 100 countries and regions worldwide.

Through the China Europe freight train and the Western Land Sea New Corridor, the Guanzhong Plain urban agglomeration, Chengdu Chongqing urban agglomeration, and Beibu Gulf urban agglomeration complement each other. Provinces such as Xinjiang, Yunnan, Guangxi, Sichuan, and Chongqing are interconnected, and the golden waterway of the Yangtze River is horizontally coordinated. In the past, the inland has become the forefront of opening up. In the first half of this year, the total import and export value of China's central and western regions increased by 2.8% year-on-year, which is 0.7 percentage points higher than the overall national growth rate.

The significant characteristics of a super large-scale economy, such as high real demand and potential, strong production and supply capacity, obvious advantages in total factor endowment, high degree of political and economic integration, and accelerated convergence of innovative factors, are the most unique comparative advantages and driving force for achieving long-term positive development of the Chinese economy.

Huang Qunhui, Director of the Institute of Economics at the Chinese Academy of Social Sciences, said that only by continuously strengthening the dominant position of the domestic circulation and transforming the comparative advantages of a large country's economy into competitive advantages, can we continuously consolidate the foundation of China's economic development.

Technological support continues to strengthen - China's total number of R&D personnel remains the world's largest, and the intensity of R&D investment exceeds the average level of EU countries. The global innovation index has risen to 11th place, with major scientific and technological achievements such as Chang'e lunar exploration, Tianwen fire exploration, and China's space station continuing to emerge. Beijing, Shanghai, and the Guangdong Hong Kong Macao Greater Bay Area, the three major international science and technology innovation centers, have entered the top 10 global science and technology innovation clusters.

The supply and demand sides are steadily increasing - China, with a total retail sales of 44 trillion yuan of consumer goods, has remained the world's second largest consumer market and the largest online retail market, and has become the world's second largest import market for 14 consecutive years; The added value of China's manufacturing industry accounts for about 30% of the world's total, with increasing emphasis on high-end, intelligent, and green manufacturing.

The domestic and international "dual circulation" has become more smooth - urban-rural integration development and regional coordinated development are advancing simultaneously, the construction of a unified national market is accelerating, and the ratio of total social logistics costs to GDP has decreased from 18% in 2012 to 14.7% in 2022. China has become a major trading partner for over 140 countries and regions, ranking first in the world in terms of total trade in goods and services.

Based on domestic demand, expanding domestic demand, and promoting smooth circulation, it has become an inevitable choice for the Chinese economy to overcome difficulties and move forward in the new era and new journey.

Enhancing Endogenous Motivation: Winning Competitive Advantage with a Strong Domestic Market

On July 19th, a heavyweight document was released to the public——

Focusing on private enterprises that account for over 90% of China's total operating entities, the Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Development and Growth of the Private Economy provide support for further stimulating the vitality of the private economy and enhancing the endogenous driving force of the Chinese economy.

The Central Compilation Office has officially approved the establishment of the Private Economy Development Bureau within the National Development and Reform Commission as a specialized working organization to promote the growth and development of the private economy; 28 measures have been introduced to promote the development of the private economy; Continuing the value-added tax reduction and exemption policy for small-scale taxpayers... With a series of measures being intensively introduced, the development expectations of various business entities have stabilized, and the development index of small and medium-sized enterprises has rebounded for three consecutive months in August.

The Central Political Bureau meeting held on July 24th pointed out that after a smooth transition in epidemic prevention and control, economic recovery is a process of wave like development and tortuous progress. China's economy has enormous development resilience and potential, and the long-term positive fundamentals have not changed.

"Smooth domestic circulation is a timely choice for China's high-quality economic development under the impact of the epidemic, and it is also a choice for China to achieve more efficient and high-quality allocation of resource factors in the context of changes in the global order. The core driving force is the improvement of total factor productivity," said Cheng Shi, Chief Economist of ICBC International.

Based on high-level self-reliance and self-improvement, to effectively supply and penetrate domestic circulation bottlenecks——

At the current stage of development in our country, the main task of smooth economic circulation is to effectively smooth the supply side. Strong effective supply capacity can penetrate circulation bottlenecks, eliminate bottleneck constraints, and promote the generation of effective demand, achieving dynamic balance of the economy at a higher level.

General Secretary emphasized the integration of technological innovation resources, leading the development of strategic emerging and future industries, and accelerating the formation of new quality productive forces.

New quality productivity is different from traditional productivity, involving new fields and high technological content, and relying on innovation driven development is the key.

Currently, there have been changes in the economic development environment of our country, especially in the relative advantages of production factors, and the importance of science and technology has comprehensively increased.

Establish a sound new national system, strengthen national strategic scientific and technological capabilities, and optimize the allocation of innovative resources; Effectively linking the strategies of revitalizing the country through science and education, strengthening the country through talent, and driving development through innovation, adhering to the integration of education development, technological innovation, and talent cultivation, and forming a virtuous cycle; Adhere to the integrated design of original innovation, integrated innovation, and open innovation, and achieve effective integration; Adhere to the integrated deployment of innovation chain, industry chain, and talent chain, and promote deep integration

To achieve high-level self-reliance and self-improvement, it is urgent to strengthen basic research and solve key technical problems from the source and bottom. According to foreign media evaluations, China's strength is effectively improving in the basic research field that determines its medium - and long-term technological research and development capabilities.

"The future development of the Chinese economy will rely more on fundamental and disruptive innovation and industrial upgrading from scratch, which will accelerate the upgrading of industrial structure and the transformation of innovative achievements, and help effectively smooth the supply side," said Wang Yiming, Vice Chairman of the China International Economic Exchange Center.

Adhere to the strategic starting point of expanding domestic demand and enhance the driving force of domestic circular demand——

In 2023, the box office of summer films in China exceeded 20 billion yuan for the first time, with 505 million viewers; This summer, the number of domestic tourists reached 1.839 billion, achieving a revenue of 1.21 trillion yuan, and the tourism popularity was significantly higher than the same period in 2019; The upcoming Mid Autumn Festival and National Day holiday have seen an increasing demand for travel.

Although the current domestic consumption recovery still faces pressure, the astonishing consumption scale and constantly upgrading consumption demand constantly demonstrate the huge potential of the domestic circulation.

Introduce policies and measures to promote private investment, boost bulk consumption such as automobiles, electronic products, and home furnishings, and issue tax preferential policies such as increasing the standard for special personal income tax surcharges for the elderly and the young. A series of policies to expand domestic demand have been intensively introduced, and efforts have been made to coordinate the demand, supply, and circulation sectors to consolidate the positive trend of economic recovery.

This is a vivid reflection of China's national conditions: in 2022, the per capita GDP of Beijing exceeded 190000 yuan, which is 4.2 times the per capita GDP of Gansu Province; In Guangdong, the largest economic province, the nine cities in the Pearl River Delta account for more than 80% of the total economic output of Guangdong, while the 12 cities in western, eastern, and northern Guangdong account for less than 20%.

Only by achieving coordinated development between urban and rural areas and regions can the space for the domestic circulation be broader and the quality be more sufficient.

Since the new era, according to the central deployment, the income distribution reform measures of "lowering, expanding, and raising" have continued to work. From resolutely winning the battle against poverty to comprehensively promoting rural revitalization, from focusing on promoting residents' income to supporting Zhejiang's high-quality development and building a demonstration area of common prosperity, the whole country has been building a sustained momentum for the domestic cycle in the process of constantly narrowing the income gap and promoting common prosperity.

The top-level plan of the Strategic Plan for Expanding Domestic Demand aims to continuously promote coordinated development between urban and rural areas by increasing household income and expanding consumption; Taking the "14th Five Year Plan" major project as the driving force, build a modern infrastructure system; Upgrade the industrial and supply chains to optimize the supply of goods and services; Seizing new circular elements such as digitalization, extending the circular chain, and improving circular efficiency... Taking meeting domestic demand as the starting point and foothold of development, accelerating the construction of a complete domestic demand system.

Building a high-level socialist market economy system to enhance the driving force for smooth domestic circulation——

Located in the Shanghai Lingang Songjiang Science and Technology City next to the G60 Expressway, the two buildings of Nanxun Talent Science and Technology Innovation Center are eye-catching. Since its opening in 2020, this "enclave" has become the forefront of integrating into the Yangtze River Delta in Nanxun District, Huzhou City, Zhejiang Province.

Puhe Intelligent Technology Co., Ltd., which has settled in the Nanxun Talent Science and Technology Innovation Center, is mainly engaged in the development of testing and testing equipment. "We can not only acquire talents and research resources from Shanghai, but also enjoy industrial support policies in Nanxun and other places. In the future, we plan to acquire land and build a factory in Nanxun," said Chen Bing, the founder of the company.

In recent years, the "industrial enclave" and "scientific and technological innovation enclave" in the Yangtze River Delta region have been continuously upgraded, promoting the flow of talents, technology and other factors, injecting vitality into the integrated development of the Yangtze River Delta.

By deepening reforms and breaking through the bottlenecks that hinder economic circulation, the efficiency of resource allocation will be effectively improved, leading to a reasonable growth in economic volume and an effective improvement in quality.

Build a unified national market, deepen the market-oriented reform of factors, and build a high standard market system. In the report of the 20th National Congress of the Communist Party of China, "Building a High Level Socialist Market Economy System" ranked first in the special chapter "Accelerating the Construction of a New Development Pattern and Focusing on Promoting High Quality Development" to improve the basic system of market economy such as property rights protection, market access, fair competition, and social credit.

2023 marks the 45th anniversary of reform and opening up and the 10th anniversary of the Third Plenary Session of the 18th Central Committee of the Communist Party of China. To achieve the goals and tasks of the new era and new journey, we should take the comprehensive deepening of reform as the fundamental driving force to promote Chinese path to modernization, and as an important starting point to stabilize the overall situation, respond to the situation, and start a new situation.

Shanghai University of Finance and Economics President Liu Yuanchun said that continuously deepening reforms will release sustained momentum for the smooth circulation of domestic economy. To further unleash the dividends of reform, we need to make more progress in the design of key institutional reforms.

Improving reliability: filling the gaps, strengthening the weak points, and guarding the safety bottom line

On July 3rd, as a pure electric sedan slowly drove off the GAC Aion production line, China's new energy vehicle production reached the milestone of 20 million vehicles.

In September 2020, the cumulative production exceeded 5 million vehicles, and in February 2022, it exceeded 10 million vehicles. One year and five months later, the second 10 million vehicles were achieved. After three years of the pandemic, China experienced production shutdowns and chip supply bottlenecks. Despite the global automotive industry facing growth difficulties, China's new energy vehicles rose against the trend. In the first half of this year, China became the world's largest exporter of automobiles. From January to August, the production and sales of new energy vehicles in China increased by 36.9% and 39.2% year-on-year, respectively. The sales of new energy vehicles accounted for 29.5% of the total sales of new vehicles.

Behind the dual growth of the domestic and international markets for new energy vehicles is the continuous breakthrough of key core technologies and the continuous consolidation of the industrial foundation.

Starting from the supply side and focusing on solving bottlenecks and problems that constrain development is a major issue related to China's overall development and the key to strengthening the domestic circulation as the mainstay.

Breaking through the bottleneck of the big cycle, focusing on eliminating bottleneck constraints, and mastering key core technologies in one's own hands——

The key core technology cannot be obtained, bought, or obtained. For a rising major developing country, this is even more so.

China has the most complete industrial system in the world, with its manufacturing industry ranking first in the world for 13 consecutive years. However, the problem of being large but not strong, comprehensive but not precise still exists.

In March, the "Reform Plan for Party and State Institutions" was released, and China established the Central Science and Technology Commission and reorganized the Ministry of Science and Technology. According to foreign media evaluations, facing increasingly fierce international competition, this is an important step for China to seek greater technological independence.

Establish and improve a laboratory system led by national laboratories and supported by national key laboratories, continuously consolidating scientific and technological basic capabilities; Guided by national strategic needs, gather forces to carry out original and leading technological breakthroughs; Strengthening the position of enterprises as the main body of technological innovation, improving market-oriented mechanisms such as "unveiling and leading"

Seize every moment to break through the bottleneck problem and focus on developing products with a first mover advantage