[Vision] China's catch-up path under low growth

Author: Shiya Juan July 15, National Bureau of Statistics of China's economy in the first half economic data show: 2016 second quarter GDP growth rate of 6.7%; 1-- June, consumer prices rose 2.0 percent, industrial added value increased 6.2% achieved the first stabilization of China's economic growth rate after three consecutive quarters of decline.
Yao Yang, dean of the National Development Research Institute of Peking University and director of the China Center for Economic Research of the National Development Research Institute of Peking University, believes that China's economy has entered a period of deep adjustment, providing a strong impetus for China's manufacturing transformation and upgrading: China's rapid "industrialization" in the past 20 years It provides a solid material foundation for manufacturing innovation. At present, relying on cheap labor and extended expansion alone, it is difficult for enterprises to obtain rich returns and even be eliminated.
On the road of looking for technology and product updates, China Manufacturing can learn more from Germany's continuous and stable innovation model, from 1 to N, from to perfect, continuous improvement, the pursuit of the ultimate, and use the manufacturing industry to improve employment and increase resistance to finance. Risk.

Behind “Low Growth”, China still has potential advantages. “Chinese and Foreign Management”: You predicted at the “Learning China Forum” in January 2016 that the whole 2016 will be the most difficult year for China’s economic adjustment; the second quarter economy Beginning to bottom out, how should we deal with the relationship between “economic restructuring and growth”?
Yao Yang: From the end of 2015 to the beginning of 2016, the real estate market picked up, which indirectly boosted the economic growth index in the second quarter of this year: the PPI turned from negative to positive, and the prices of bulk products began to rise. These are signs of economic improvement.
However, it cannot be ignored that starting from 2012, the new round of economic slowdown has just begun. In 2016, China’s economy entered a period of deep adjustment, and the chain showed a gradual improvement. The key is to deal with the “economic restructuring and growth”. relationship:
First, we must recognize that the economic downturn is a necessary process to eliminate backward production capacity and productivity. The emergence of the economic cycle is largely due to “expectation”. When the economic situation is good, it will often over-invest. When the “expectation” reaches its peak, it will encounter a big shock, and there will inevitably lead to overcapacity and debt accumulation. . The “Central Economic Conference” proposed in 2015 “to de-capacity, de-stocking, deleveraging, and maintaining growth (referred to as “three reductions and one supplement”) policy is very correct and will be an arduous process.
Second, we must quickly find the "economic restructuring and growth" combination. It may be useful to learn from the “state-owned enterprise reform and bank reform linkage” approach in the previous round of economic cycles. At that time, four major asset management companies divested most of the bank’s bad debts, which enabled the state-owned enterprises at that time to “lightly install” and achieve profitability. It also created the prosperity of the rapid economic growth between 2003 and 2012. When private investors turn into state-owned asset owners, they can indirectly avoid the loss of state-owned assets.
"Chinese and Foreign Management": The British referendum "Brexit" success, at the cost of national splitting to resist globalization, one of the driving forces behind is also the economic situation of low growth. China’s concerns about low economic growth also exist. What is the correct attitude toward “economic growth slowdown”?
Yao Yang: From a macro perspective, the slowdown in world economic growth will be the best opportunity for China to achieve catch-up. China's economic growth has the following potential advantages:
Despite the current slowdown in China's economic growth, but in East Asia, we will regard economic growth as the norm, but looking at the world, economic growth is a small probability event. Realizing this is a good thing for us to judge the current economic situation. The second advantage of China's economic recovery will come from the re-advancement of China's financial reform: four or five years ago, the number of private equity firms was large, but venture capital firms were almost zero; now PE is flying, only lacking good projects. Now that there is a foundation for investment, technology investment has already accounted for 2.1% of GDP. We must know that China’s GDP is only half of that of the United States, and per capita income is only one-seventh of that of the United States. This means that despite the disparity in economic strength between China and the United States, China The strength of scientific research is more advantageous. In addition, the spatial advantage is also an important reason for our optimism about China's economic growth potential: in the past 20 years, China's development has basically been coastal development. According to the “convergence theory” of economics, if two countries adopt the same economic policy, income The growth rate of the lower countries will be faster than that of the countries with higher incomes; the theory applied to the reality of China is that the economic growth rate of the inland areas will be faster than that of the coastal areas when the investment is appropriate, which is not only a huge driving force for the future of the Chinese economy. It is also a huge market for innovation.
"Chinese and Foreign Management": Comparing financial reform and spatial advantages, China's manufacturing industry is more developed, what is its potential in the period of low economic growth?
Yao Yang: There are many kinds of manufacturing in China, ranging from screws to high-precision machine tools. Any manufacturing industry engaged in intermediate technology cannot leave the Chinese market. This has a lot to do with the government's persistent development of manufacturing. Up to now, the proportion of added value of GDP in China's secondary industry (including manufacturing, construction and transportation) has remained above 40% for a long time. The economic prosperity brought by manufacturing industry is undeniable. China's industrial and technological upgrading in the future. We must strengthen manufacturing as the core. In this regard, South Korea and Germany set an example for us: South Korea began industrialization as early as the 1960s, and its manufacturing sector still accounts for more than 30% of GDP; Germany is the most valued manufacturing industry in developed countries. The manufacturing industry has employed a quarter of the country's workforce, and the Germans are obsessed with improvements in existing products and technologies, firmly occupying the highlands of traditional fields such as machinery manufacturing, automobiles and chemicals.
The Chinese economy has entered a new normal, providing a strong impetus for the transformation and upgrading of traditional industries. First, manufacturing companies have realized that relying on cheap labor and extensional expansion will not continue to receive substantial returns, and will even be eliminated. Second, the large amount of funds accumulated by rapid industrialization also provides a solid material basis for manufacturing innovation. .

Manufacturing innovation, focusing on learning the "German model"
"Chinese and Foreign Management": When it comes to innovation, the industry believes that there are two benchmarks of "German model" and "American model". Combining China's national conditions and the current situation of the real economy, which benchmark is more usable for us?
Yao Yang: In the critical period of China's economic transformation and upgrading, innovation is the source of power. There are currently two innovation paths to learn from: “from 0 to 1” and “from 1 to N”.
Let me start with "from 0 to 1". The characteristics of American immigration culture determine that the path of innovation must be “from 0 to 1”. This innovative approach is also known as the “American model”. It has a certain creative destruction - the winners take all the time, that is, new technologies will spawn new industries, and they will also fight the old industry. The "American model" is a "super-capitalist" model that has created the polarization of American society. There are only a few rich people, most of whom are poor. This model is more suitable for BAT, a monopolistic Internet giant, because BAT has already reached the forefront of industrial development and can only take the road of innovation from 0 to 1.
Say "from 1 to N". It is from 1 to more, from to perfect, continuous improvement, and the pursuit of the ultimate. Compared with the United States "from 0 to 1", "from 1 to N" is also called "follow-up" innovation. Germany is often considered to be the most industrious nation in the world. They are rigorous and realistic, and they are constantly improving. This innovative approach is also known as the “German model”. In the long run, it is not as good as the "American model", but it has a good employment base. At present, the German manufacturing industry has successfully promoted the employment rate of 25%. The existence of a strong middle-class group is very conducive to the stability of the society and the improvement of people's well-being. Strong anti-financial risk. Compared with the “breaking-edge innovation” of the “winners in the United States”, the German manufacturing industry’s continuous and stable innovation model is worth learning from. In addition, only the manufacturing industry is the backbone of China. If this part is defeated, it will lose the foundation of economic development.
Therefore, "Chinese-style innovation" may take two paths - both to learn the United States and to learn from Germany. In particular, the manufacturing industry should not be neglected, and the "artisan spirit" should be promoted. China's supply-side reforms, China's middle-income population consumption, China's domestic demand expansion, China's social stability, not the same can leave the manufacturing industry, able to leave the "from 1 to N" innovation.
"Chinese and Foreign Management": Following the country's goal of "Made in China 2025", the "artisan spirit" first proposed by the government work report in March 2016 once again gave the manufacturing industry a "reassuring", how to achieve a manufacturing power to a manufacturing power Transition? What is the biggest difficulty in advancing the "artisan spirit"?
Yao Yang: The "German model" is a continuous improvement based on the existing technology after following the United States. It is also an example for China to learn from the transition from a manufacturing power to a manufacturing power. Take the German "Merck Factory" as an example. It started with pharmaceuticals and has been focusing on the development of liquid crystal products, but it does not produce any display screen, only liquid crystal and a small number of prescription drugs. With the help of bit by bit, Merck's factory has continuously occupied the market and has monopolized 70% of the world's LCD market. Now, the Merck factory has begun to focus on the development of OLED (organic light-emitting diode). Once successful, the future LCD screen can be made thinner, the graininess is minimal, and even can be bent to make any shape.
The “artisan spirit” was included in the 2016 government work report, which is a new requirement of the state for the manufacturing industry and is very timely. The spirit of craftsmanship is a spirit of dedication, precision and product quality. The biggest difficulty in promoting China is how to implement it:
First, to promote the spirit of craftsmen, we must first improve the social status of workers. Unlike the polarization of the United States, the middle class in Germany, the workers, is very strong, which is closely related to its perfect technical school system, the higher social status of workers and the level of compensation. Still taking the “Merck Factory” as an example, it implements a talent training model with equal emphasis on “cultural theory and professional technology”. It runs jointly with local high schools. After graduation, most of them enter the Merck factory and can work after several years of work. Continue to further study at Merck University and develop professional skills in a targeted manner. China may wish to set up similar pilot schools to give workers the relevant technical level so that they can achieve the corresponding social status while achieving a high level. Second, it can adopt certain policy inclinations to the real economy, especially the manufacturing industry, such as reducing the value-added tax and some social security costs.

"Internet +" is not as good as "+Internet"
"Chinese and Foreign Management": Since 2014, "Internet +" is a hot word, and even become a good medicine for all diseases. What are the advantages and disadvantages brought by the Internet era to the real economy, especially the manufacturing industry? How to treat "Internet +" correctly?
Yao Yang: "Internet +" has two meanings: First, the traditional industry should actively embrace the Internet, which is its obvious meaning and maximum value. The meaning of "Internet +" for macroeconomics is that it can revolutionize other industries, but the main body of China's economy is manufacturing. It cannot rely on Silicon Valley like the US, relying on cutting-edge technology, and China's manufacturing industry can't stick to the old staleness of the past. The idea is to use the Internet to transform. Second, don't become discouraged by the advent of the Internet age. For example, many entrepreneurs suffer from "Internet anxiety." Entrepreneurs do not think that leaving the Internet will be difficult to survive, or out of touch with the times. On the contrary, they still need to focus on their own advantages and do a good job in industry.
Rather than saying "Internet +", it is better to say "+Internet", which means that traditional industries should make good use of the Internet to serve the real economy and create social and economic value; especially in the second round of the Internet boom, many people are keen to use the App. Accumulating traffic, but not thinking about the final profit point, the "Internet +" that cannot be realized does not have a meaning of survival.
"Chinese and Foreign Management": In response to the impact of the Internet, Germany proposed "Industry 4.0", the core is to use the Internet to transform traditional industries, to achieve flexible production, zero inventory and Internet marketing, in a word, to achieve "cloud manufacturing." At present, “cloud manufacturing” is also widely mentioned in Chinese manufacturing. What do you think?
Yao Yang: The “Industry 4.0” being implemented in Germany puts all the processes “in the cloud”, emphasizing individualized production and flexible production. It is based on the development of the whole society is very stable, and people have the ability to pursue personalized consumption. In contrast, China's market demand is far from this level, and it is still in the stage of mass consumption; from the infrastructure of enterprise Internet construction, most companies do not establish internal data systems, and managers are not even aware of capital flows, material flows, etc. Data, what about "cloud manufacturing"?
At present, China's industry is in the 2.0 to 3.0 stage, and some have not even reached 2.0. Only when they enter the 3.0 stage can they achieve automated production. "Made in China 2025" is targeted at Industry 3.0, and it will take at least 20 years for China to achieve "Industry 4.0." Fortunately, China has begun to leap to the forefront of the world in the field of medium technology. For example, China's household appliances are now ranked first in the world. Haier, Midea, Gree and other excellent manufacturing companies are constantly learning new technologies. It is possible to defeat "Made in Korea" and "Made in Japan" in a few years. China Industry 4.0 will also take the lead in making breakthroughs in the field of home appliances.

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