"It's entirely possible that the economy will grow 6% this year"

　　What is the key to China's steady economic growth?

　　At this year's National People's Congress, Lin Yifu, member of the Standing Committee of the National Committee of the Chinese People's Political Consultative Conference and dean of the Institute of New Structural Economics at Peking University, brought a proposal related to "stabilizing growth".

　　Justin Yifu Lin said that in the past, foreign institutions and others' forecasts of China's economic growth rate have always been low. In fact, China's development is higher than their forecasts, and this year's situation may be the same.

"For example, the International Monetary Fund predicts that China's growth rate may drop to 4.8% this year, which I think is low. It is entirely possible for China to achieve a growth rate of around 6% or even more than 6% this year," said Justin Yifu Lin.

　　Where does Lin Yifu's confidence in China's economy come from?

China's development has "two major advantages"

　　Justin Yifu Lin believes that China's economic development has two major advantages - "advantage of latecomers" and "advantage of changing lanes and overtaking".

In his view, no matter how the international situation evolves, as long as China maintains its determination, has confidence in the future, and makes good use of these two major advantages, its economic development can still be maintained at a reasonable and relatively high speed.

　　First of all, as a country in the catching-up stage, China has the "later advantage", which is an important space for China's development.

In some traditional industries, there is still a gap between China and the world frontier.

Lin Yifu said, for example, at the Frankfurt Industrial Exhibition, almost every exhibition hall has Chinese products, but many products are still far from Germany, Switzerland, Japan and other countries.

The gap represents room for growth, and we can continue to use introduction, digestion, and absorption as a source of innovation.

　　In addition, it is the "advantage of changing lanes and overtaking" in the new economic field.

The characteristic of the fourth industrial revolution is that the development cycle of many new products is very short: as long as 12 months or 18 months, the products can be iterated, and their research and development investment is mainly human capital.

China is a big country with a population of 1.4 billion and is very rich in human capital.

of a large domestic market.

The world is the most complete. By making good use of these advantages, China will have the advantage of changing lanes and overtaking.

6% economic growth this year is entirely possible

　　Justin Yifu Lin said that in the past, foreign institutions and others' forecasts of China's economic growth rate have always been low. In fact, China's development is higher than their forecasts, and this year's situation may be the same.

"For example, the International Monetary Fund predicts that China's growth rate may drop to 4.8% this year, which I think is low. It is entirely possible for China to achieve a growth rate of around 6% or even more than 6% this year," said Justin Yifu Lin.

　　In 2020, China's economy was hit by the epidemic, and the growth rate was reduced to 2.3%. There was a rebound last year.

As long as confidence is boosted and favorable conditions are taken advantage of, "after removing the rebound part, I personally think it is entirely possible for this year's normal (economic) growth to reach around 6%," said Justin Yifu Lin.

　　Confidence building is a positive cycle.

He pointed out that people will invest when they see the room for industrial upgrading and technological innovation in China.

With investment, employment can be created, employment increases, household income and consumption will also increase, and both investment and consumption will increase, and the economy will come alive.

The key to "steady growth"

　　Since the second half of last year, the downward pressure on China's economy has increased, and the GDP growth rate in the fourth quarter has dropped to 4%.

In 2022, what is the key to the steady growth of China's economy?

　　Justin Yifu Lin pointed out that economic growth mainly depends on technological innovation and industrial upgrading. In this regard, China has the "advantage of latecomers" and the "advantage of changing lanes and overtaking vehicles".

In addition, when the economic cycle is down, the government also has room to make efforts in fiscal and monetary policy.

　　From the perspective of fiscal policy, Justin Yifu Lin pointed out that China's savings rate accounts for more than 45% of GDP, and there is a lot of private savings.

From the perspective of the world, China's government debt is relatively low - now the central and local debt plus local investment platforms, etc. account for less than 60% of GDP, while other developed and developing countries generally exceed 100% .

　　Moreover, China's government debt is different from other countries. Most of it is used for investment and has assets, while the vast majority of government debt in other countries is used to support consumption, and it will be gone after consumption.

If assets are included, China's net debt is lower than its current nominal debt ratio, so there is still considerable fiscal space.

　　In addition, Justin Yifu Lin pointed out that the fields of government investment are also very broad.

The first is infrastructure, such as investment in infrastructure such as the new economy and 5G communications.

As early as more than ten years ago, after the 4G investment network was rolled out, there were many opportunities for innovation.

The emergence of platforms such as Alibaba, Tencent, JD.com, and Didi has benefited from this. It is believed that infrastructure investment in the 5G field will also bring such opportunities.

In addition,

　　From the perspective of monetary policy, Justin Yifu Lin said that monetary policy must be prudent of course, but it must also be flexible.

As the economic cycle fluctuates, there is room for China's deposit reserve ratio to be lowered. In addition, there is room for interest rates to be lowered.

Local governments should be allowed to run a certain deficit

　　Regarding the issue of local government debt, Justin Yifu Lin pointed out that this is a characteristic of China.

Because it was previously stipulated that local governments cannot have fiscal deficits.

However, when implementing a counter-cyclical fiscal policy, it is mainly realized by local governments borrowing through investment platforms, resulting in the problem of high local invisible debt leverage.

　　However, Lin Yifu said that

.

The biggest problem with local investment platforms is short-term debt and long-term investment.

The investment is in the infrastructure field with a long cycle, but it relies on bank loans with a short term, so there is a problem that the term does not match.

　　How to solve this problem?

Justin Yifu Lin pointed out that since the local government implements the function of fiscal policy and invests in long-term projects, it should be supported by the system.

　　There are some workarounds now, but in the long run, local governments should be allowed to run deficit finances under certain conditions.

When counter-cyclical investment is required, as long as legal procedures are followed, local governments should be allowed to issue bonds and be included in the deficit.

In this way, local governments can make some necessary active fiscal policies according to the needs of economic development.

If these policies are done well, they can eliminate bottlenecks in economic growth and improve the quality of economic development, killing two birds with one stone.

　　Author: Pang Wuji, Wang Shibo, Shi Rui