[Great country and strong chain] Peng Wensheng: Why should high-quality development take into account the efficiency and safety of the industrial chain?

　　Editor's note:

　　The reconstruction of the global industrial chain and supply chain is accelerating, and the China New Observation column of Chinanews.com launched a series of reports on "Great Powers and Strong Chains" to gather wisdom from all parties for supply chain reform and industrial security development.

　　Chinanews.com, December 9th, Question:

Peng Wensheng, Chief Economist of CICC and Executive Director of CICC Research Institute

　　Author Peng Wensheng Chief Economist of CICC, Executive Director of CICC Research Institute

　　Since the COVID-19 pandemic, the global supply chain has experienced three rounds of shocks. The global industrial and supply chains have suffered shocks, exacerbating the impact of the pandemic and geopolitics on the world economy, and bringing reflections on supply stability in both the private and public sectors.

　　At the micro level, enterprises pay more attention to the stability of the supply chain. At the macro level, governments of various countries emphasize the resilience of the industrial chain, and look at the competitiveness of the industry not only from the perspective of efficiency but also from the perspective of safety.

　　After 40 years of reform and opening up and rapid economic growth, China has played a key role in the global industrial chain. Now it is also facing new challenges. High-quality development requires both the efficiency and safety of the industrial chain.

The driving force of anti-globalization has expanded from the economic level to non-economic factors

　　In the past 40 years, neoclassical economics has occupied a mainstream position. At the policy level, it is reflected in the promotion of economic marketization and financial liberalization on a global scale, bringing about trade in goods and services, and a substantial expansion of cross-border capital, technology, and information flows.

With technological progress reducing the cost of transportation and information communication, the division of labor is becoming more and more specialized, and the global industrial chain has become an important carrier of efficiency improvement and economic prosperity.

　　However, from the beginning of the global financial crisis in 2008, the rise of trade protectionism, to the new crown epidemic and the crisis in Ukraine, the driving force of anti-globalization has expanded from the economic level to non-economic factors.

Although the new crown epidemic has a great short-term impact on the supply chain, there are more and more signs that geopolitics has once again become a more far-reaching factor affecting the allocation of global resources, reducing the risk of the industrial chain as a geopolitical competition tool and becoming a national security strategy. important requirements.

　　History will not simply repeat, but it often moves forward with the same rhyme.

Today's deglobalization is also driven by the pandemic and the crisis in Ukraine.

For a long time, economics regarded national security as another discipline away from market analysis, but now it has changed, and economics needs to re-understand the interaction of factor endowments, economic integration, and geopolitics.

　　In the past 30 years, the two major economies of China and the United States have played a key role in global technological innovation and industrial chain development.

The United States has advantages in invention and innovation and has led the development of some key technologies. China has advantages in production and market scale. By rapidly increasing the scale of commercial applications and reducing costs, it has increased global supply capacity and benefited consumers all over the world. .

China has shortened the distance from the technological frontier by participating in international competition and learning from the upstream and downstream of the industrial chain. At the same time, the profits brought by the Chinese market support the innovation capabilities of American companies and help them maintain their leading positions.

Other countries are also participating in the division of labor in the industrial chain to improve the efficiency of economic operation. Some small economies focus on a few fields and become important producers of such products in the world.

　　But now, this model has encountered challenges, and the influence of geopolitics on scientific and technological cooperation and competition between countries has increased significantly.

The U.S. government is increasingly using administrative power-based industrial policies, and the external environment China faces in terms of technological hardware, especially semiconductors, has undergone fundamental changes.

In the new geopolitical situation, the importance of independent innovation has increased.

The return of industrial policies in various countries has a major impact on the global industrial chain

　　In the past two years, the response to the COVID-19 epidemic has greatly increased the role of the government in social and economic activities. Coupled with the rising momentum of geopolitics and protectionism, governments of various countries have increased special policies for some industries. The return of industrial policies has become a consensus and will surely It has a major impact on the development of the global industrial chain.

　　Under the new situation, how do you see the role of industrial policy?

There are three dimensions that deserve attention.

The first is protectionism, which aims to promote domestic employment and income. From the perspective of developed countries, a popular view is that globalization has led to a decline in employment in industries with higher incomes such as manufacturing. The previous thinking was through social policies such as improving education Training and social security to deal with, now pay attention to policies for individual industries to change the competitive landscape.

The second is policies aimed at externalities and market failures. The two prominent aspects are government investment and support measures to promote scientific and technological innovation, and policies to promote carbon emission reduction and green transformation.

The third is geopolitical competition, of which technological competition is the key.

These three dimensions are intertwined. For example, geopolitics is easily intertwined with protectionism, and industrial policy has distinct foreign characteristics, and is directly or indirectly related to international trade and investment.

　　As far as policies related to scientific and technological innovation are concerned, developed countries, especially the United States, have three recent features that deserve attention.

First, the government is deeply involved, increasing research and development funding, and at the same time providing subsidies for the production of some high-tech products.

Second, countries are exploring different funding models for R&D and innovation support, often combining industrial policies with incentives to promote risk-taking by private firms.

Third, the government took measures to try to make its own country obtain more benefits from innovation and technological progress, including restricting high-tech exports and encouraging domestic production.

Obviously, the industrial policy of the United States is extending from upstream R&D investment to targeting specific industries in the middle and lower reaches.

　　More and more signs also show that the industrial policies of various countries are developing in an all-round and systematic direction.

Among them, major economies have set a clear timetable for carbon neutrality in the future. Correcting global externalities such as carbon emissions requires both technological innovation and the transformation of traditional industries. It may be the biggest industrial policy in the next few decades. .

With the help of large-scale local demand markets, major countries can gain an advantage in international industrial competition

　　Under the background of anti-globalization, the importance of geopolitics and national security has increased, which has also increased the friction of countries using the international market. Countries need to rely on the initial scale of their own markets to participate in international competition.

　　With the help of the local large-scale demand market, a big country can occupy an advantageous position in the international industrial competition, and expand the original economies of scale effect by serving the global market. leading position.

In the era of anti-globalization, compared with small economies, the ability of major countries to influence the global industrial chain and economic structure may actually increase.

　　The report of the 20th National Congress of the Communist Party of China stated: "Relying on the advantages of my country's ultra-large-scale market, attract global resource elements through the domestic cycle, enhance the linkage effect of the two resources in the domestic and international markets, and improve the quality and level of trade and investment cooperation."

　　China is the second largest economy in the world, with the largest population in the world, and its labor force is equivalent to the sum of the three populous countries of India, the United States, and Indonesia. It has the potential to give full play to its advantages of scale, which is also expected to become a new growth of China's economy in the future. point.

　　For China, promoting market competition under deglobalization requires reducing the “fragmentation” of the internal market and addressing the new challenges brought about by the shift to non-tradable sectors and the development of the digital economy.

　　In terms of the internal market, promoting the equalization of public services and reducing the income distribution gap will help increase consumer demand and create a large domestic consumer market.

In terms of non-tradable sectors, it is necessary to avoid the distortion of resource allocation caused by land and the expansion of income differentiation.

The development of the digital economy needs to balance economies of scale and production relations such as anti-monopoly, privacy protection, and cross-border digital governance cooperation.

(This article is one of the series of columns of "Big Country and Strong Chain" launched by China New Finance and Economics and CICC)