陈宪：中国经济的韧劲源于哪里？ - 2020-08-31

(Chen Xian: Professor, Antai College of Economics and Management, Shanghai Jiao Tong University)
When the financial crisis broke out in 2008, it was said to be the biggest crisis since the Great Depression in the last century. By using macroeconomic policies and accelerating transformational development, we have not only weathered the crisis, but also brought China’s economy to a new normal and opened up a new model of innovation-driven development. In April 2018, the US was stirring up trade frictions, and we were dealing with it calmly, minimizing the damage it’s done to China’s economy.
At the beginning of this year, the COVID-19 epidemic broke out suddenly. Although China’s epidemic prevention and control efforts have achieved initial success, the pandemic is still spreading around the world. It is difficult to predict by which extent it will affect the Chinese economy and the global economy. However, judging from the economic data and activity recovery since March of this year (the impact of the epidemic is characterized by activity restrictions and economic shutdown), China's economy is regaining its vitality and momentum, and the long-term upward trend remains intact. Therefore, people often use “resilience” to summarize the major feature of China’s economy.
What is resilience? Resilience is a physical concept that represents the ability of a material to absorb energy during plastic deformation and rupture. The better the resilience, the lower the possibility of brittle fracture. Applying this concept to economic activities usually refers to the ability of an economy to resist fluctuations, risks, and crises. Under the impact of volatility, risks and crises, the economy is still able to grow and develop against the trend, which is considered resilient.
Where does the resilience of China’s economy come from? I have seen some discussions on this issue in the past, focusing on China’s national conditions. For example, the population is large, the market is large, and the potential is endless; the region is vast, and the development is unbalanced, often being referred as “the East is not bright, the West is bright”. These views have certain truths. This article focuses on systems and policies, discussing how the resilience of the Chinese economy has emerged and worked since the reform and opening-up.
First, the resilience of China’s economy stems from its unique institutional advantages. Under the influence of economic or non-economic factors, the economic operation will experience large fluctuations and even encounter systemic risks. Under such a scenario, a country’s government will have its ability tested in responding to the issues. This ability is based on the existing system. Take the impact of this epidemic as an example. From the overall perspective of epidemic prevention and control, China’s institutional advantages have been fully demonstrated. The Party and the government adopt centralized and unified leadership, by effectively mobilizing and organizing resources. With smooth delivery of government orders and concentration of superior resources, China has been leveraging all forces to combat the epidemic. Cross-functional coordination, targeted support, and efficient implementation all contribute to the success. When the economy and society were severely impacted, the Party and the government can “turn the tide”, vividly showing the advantages of the system. Once the fluctuations stabilized, the risks faded, and the crisis was resolved, the economy and society would return to normal conditions and gain momentum.
Second, the resilience of China’s economy stems from its adherence to market-oriented reforms. The reform started at the end of 1978. Although it was not until the 14th National Congress of the Communist Party of China in 1992 that the reform goal of establishing a socialist market economic system was established, at the very beginning of the reform, market-based orientation was set by gradually introducing the markets and market mechanisms. In the past over 40 years, the process of marketization has not been smooth. There have been ups and downs during this period, but we have persisted in this reform direction. Today, we have discovered that this is one of the biggest sources of power for China’s economic development over the past 40 years.
At the time when the epidemic broke out and was raging, the Central Committee of the Communist Party of China and the State Council successively issued the “Opinions on Building a More Established Market-based Factor Allocation System and Mechanism” and “Opinions on Accelerating the Improvement of the Socialist Market Economic System in the New Era”, which once again demonstrated the Communist Party of China and the Chinese government are determined to adhere to market-oriented reforms.
Third, the resilience of China’s economy stems from the persistence of a high level of openness. From the establishment of 7 special economic zones and 14 coastal open cities, to 19 national-level new districts that started with Pudong New Area, to the 18 pilot free trade zones that have been established, the open space has continued to expand; from trade, investment to finance, the open fields continued to expand. At the beginning of opening-up, we stood at a high starting point. In 2018, General Secretary Xi Jinping pointed out at the first China International Import Expo, “China’s pace of promoting a higher level of opening up will not stop! China’s efforts to promote an open world economy will not stop! China’s efforts to promote a community with a shared future for mankind will not stop!” He pointed out: “Holding the China International Import Expo is a major decision made by China focusing on promoting a new round of high-level opening-up to the outside world, and a major move by China to actively open its market to the world.”
Opening-up is the main way for us to achieve additional growth and contribute to the world; with high-level openness, we can obtain high-quality additional growth and at the same time make greater contributions to the world. Promoting reform through opening-up has been our basic experience for more than 40 years.
Fourth, the resilience of China’s economy stems from the persistence of endogenous development. Reform is a transition from a planned economic system to a market-based economic system. One of the most profound and important changes is the incentive mechanism. Under the planned economic system, the mobilization and organization by the state can generate incentives for concentrating efforts on major events. There were many examples in this regard. However, under the condition of information asymmetry, centralized decision-making on lots of scattered resource allocation activities could inevitably lead to the lack of effective incentives for enterprises and households, which in turn led to low efficiency or even inefficiency of economic activities. The socialist market economic system has formed a wide range of micro-incentive mechanisms, and endogenous independent development has become the dominant force to ensure the smooth operation of China’s economy. Especially in the past decade or so, a wide range of entrepreneurial and innovation-driven activities were reshaping the micro-foundation of China’s economy. The internal driving force of China’s economy has become increasingly abundant, and its ability to withstand fluctuations, risks and crises has become stronger.
Fifth, the resilience of China’s economy stems from continuous optimization of macro-control. As external shocks caused more serious economic fluctuations, necessary counter-cyclical adjustments must be made to prevent risks and crises. Here, countercyclical adjustment is composed of a series of macro-control policy measures. Since the reform and opening-up, China’s macro-control has addressed many economic fluctuations, especially after the Asian financial crisis, the US financial crisis, as well as several major shocks such as price reforms and economic overheating. In the process of practicing, summarizing, and re-practicing, it has been relatively mature, showing sufficient determination. Just like this epidemic, the impact and shock it has caused is unprecedented, huge, and will last for a long time. This is the consensus of experts from all walks of life. Moreover, based on the previous experience in dealing with shocks in aggregate demand and aggregate supply, we would either fail or find it difficult to respond to the shock of this epidemic. However, we still correctly grasped the general direction of macro-control and adjusted a series of specific operations dynamically and flexibly. Not only did the economy pick up in a short period of time, but it also vigorously accelerated innovation-driven and transformational development.
Of course, while affirming China’s economic resilience and institutional advantages, market-oriented reforms, high-level opening-up and endogenous development, as well as the role of macro-control on the formation of resilience, we must also fully realize that China, as the largest developing country, still lags far behind developed countries in terms of economic strength and technological capability. We still have many shortcomings and bottlenecks in terms of governance, systems, and policies. We must make full use of the resilience of China’s economy, and in the event of external shocks, we can quickly reverse the situation and return to the track of normalized development. We should continue to maintain medium-to-high-speed economic growth and high-quality development during normal periods to further make up for our weaknesses, break bottlenecks, and narrow the gap with developed countries.