On September 15, The 21st Century Business Herald interviewed Professor Yu Miaojie, a deputy to the 14th National People’s Congress, a member of the Standing Committee of the 14th People’s Congress of Liaoning Province, and the Deputy Secretary of the CPC Committee and President of Liaoning University. The original article and link are reprinted here.
Interview with Yu Miaojie, President of Liaoning University and Member of the Advisory Committee on Economic and Trade Policies of the Ministry of Commerce: Promoting Equalization of Production Factor Prices for Private and State-Owned Enterprises
During the meeting of the Central Political Bureau, while deploying economic work for the second half of the year, it was pointed out that it is necessary to intensify macroeconomic policy regulation and focus on expanding domestic demand, thus boosting confidence and preventing risks.
Subsequently, government departments including the National Development and Reform Commission (NDRC) and the Ministry of Housing and Urban-Rural Development (MOHURD) successively introduced relevant policies in monetary policy, fiscal policy, expanding domestic demand, and real estate policy. Especially in recent days, the news of the NDRC setting up a bureau for the development of the private economy internally has attracted significant attention.
The next step is how to effectively implement various policies that promote the development of the private economy and analyze economic trends in the second half of the year. In this context, The 21st Century Business Herald interviewed Yu Miaojie, a deputy to the 14th National People’s Congress, President of Liaoning University, and a member of the Advisory Committee on Economic and Trade Policies of the Ministry of Commerce.
During this year’s National People’s Congress and Chinese People’s Political Consultative Conference, Yu Miaojie suggested promoting equalization of production factor prices for private and state-owned enterprises. In the interview, he emphasized the need to implement the requirement of equal treatment of state-owned and private enterprises in terms of institutions and laws, and to encourage and support the development and growth of the private economy and private enterprises through policies and public opinion.
Regarding the current complex situation of foreign trade, Yu Miaojie believes that the promotion effect of RMB depreciation on foreign trade will lag behind, and the role of foreign trade in driving the economy will increase in the second half of the year. It is expected that China’s annual trade surplus will reach six trillion yuan.
Yu Miaojie, a deputy to the 14th National People’s Congress, President of Liaoning University, and a member of the Advisory Committee on Economic and Trade Policies of the Ministry of Commerce
Promoting Equalization of Production Factor Prices for Private and State-Owned Enterprises
The 21st Century Business Herald: After the release of economic data for the first half of the year, various sectors of society have higher expectations for policies promoting the economy. Recently, there have been intensive policy measures in various areas such as private economy and real estate regulation. What are you most concerned about?
Yu Miaojie: Although China’s economy still faces many challenges, the 5.5% economic growth rate in the first half of the year reflects an overall positive momentum of upward growth.
Of course, it cannot be denied that the current global economic weakness, shrinking external demand, and the impact of the three-year pandemic have indeed resulted in objective realities of inadequate supply and weakened expectations.
I am most concerned about two aspects of policies. On the one hand, it is important to expand and strengthen the state-owned economy, enhance its creativity, influence, and competitiveness. On the other hand, it is crucial to develop the private economy and promote its healthy growth, as it has a significant impact on the overall sound development of the national economy.
The 21st Century Business Herald: What are the real challenges faced by the development of the private economy?
Yu Miaojie: Overall, the current real challenges faced by the private economy are still primarily due to weak global external demand. The main difficulties lie in two aspects. On the one hand, there are restrictions on market access, and currently, some sectors do not allow private enterprises to enter. On the other hand, there is the issue of factor value. Although equal treatment for private enterprises has been emphasized, there is a need for further improvement in the environment for private economy in terms of accessing various factor resources, including land, capital, talent, energy, data, and others.
The 21st Century Business Herald: From your perspective, what should be done to promote the development of the private economy?
Yu Miaojie: Firstly, it is important to relax market access for the private economy and ensure equal treatment. Except for industries directly related to national security and people’s livelihoods that require the operation of state-owned enterprises, other sectors should allow the entry of private enterprises.
Secondly, it is crucial to implement the goal of equal access to various factor prices. Taking bank loans as an example, banks naturally aim to maximize profits, and private enterprises inevitably face higher business risks compared to state-owned enterprises. From this perspective, it is understandable that banks require higher loan interest rates due to the higher risks they face. However, objectively, this can have a negative impact on the development of the private economy. It is suggested to consider adopting a Public-Private Partnership (PPP) mode to address this issue. For example, in a large-scale project, the government can collaborate with social capital through a cooperation model involving government, state-owned enterprises, and private enterprises. Each party contributes funds in proportion, and through mixed investments by state-owned enterprises, private enterprises, and the government, or mixed investments by state-owned enterprises and private enterprises, the risks can be mitigated, ensuring equal access to factor prices for both state-owned and private enterprises.
Regarding land use, governments at all levels tend to focus on key projects and large-scale projects undertaken by state-owned enterprises during the process of attracting investment, which limits the participation of small and medium-sized enterprises.
The 21st Century Business Herald: The National Development and Reform Commission (NDRC) and other departments have recently issued a notice titled ‘Notification on Implementing Several Measures to Promote the Development of the Private Economy’. Each measure clearly designates responsible units to facilitate the development of the private economy. Additionally, a Bureau for the Development of the Private Economy will be established. What’s your opinion on this?
Yu Miaojie: I noticed several important points in the notice. Firstly, it is emphasized that by reforming the negative list, efforts will be made to ensure fair market access for private enterprises, which has a significant impact.
Secondly, optimizing services for enterprises is also crucial. The suitability of a locality for the development of private enterprises primarily depends on its business environment. Therefore, optimizing the business environment is of utmost importance. This is particularly relevant in areas where the development of the private economy lags behind. The key focus of optimizing the business environment is to reduce transaction costs. Transaction costs can be divided into explicit costs, which include various labor factors, and implicit costs. In some areas, although explicit costs may be low, high implicit costs result in higher overall costs.
Effectively reducing transaction costs means promoting transparency in various transactions. It is crucial to advance the construction of government platforms that promote transparency, such as through open and transparent government affairs. By reducing rent-seeking costs through transparency, it fosters a genuinely favorable government-business environment.
Additionally, it is worth noting the emphasis on vigorously promoting the integration of domestic and international trade markets, or facilitating the fair development of domestic and international trade products. Achieving the ‘three sameness’ - same production line, same quality, and same standards - will greatly contribute to the healthy development of the private economy.
The key focus of adjusting the structure of foreign trade lies in shifting towards emerging countries.
The 21st Century Business Herald: Currently, the foreign trade situation is complex and severe. What is your assessment of the foreign trade situation in the second half of the year?
Yu Miaojie: Currently, there are some overly pessimistic judgments about the overall foreign trade situation in society. However, I still maintain my initial assessment that China's total foreign trade for the year can reach between 43 trillion to 45 trillion RMB, with a potential trade surplus of 6 trillion RMB.
Upon detailed analysis, China’s trade surplus for the first half of the year has already reached 2.8 trillion RMB, and the export situation in the second half is expected to be even better. One reason is the stimulating effect of the depreciation of the RMB in the first half of the year, which typically has a lagging impact of about six months. In other words, the depreciation of the RMB in March or April this year is expected to have a significant effect on exports by August or September. Therefore, after September, the depreciation of the RMB will have an increased boost on China’s export trade.
However, this does not imply that China’s foreign trade is without challenges. On the contrary, we should accelerate the deep-level structural reforms and promote the development of China’s foreign trade.
The 21st Century Business Herald: The Ministry of Commerce has repeatedly stated the need to stabilize the scale and optimize the structure of foreign trade. In your opinion, which areas require specific optimization in terms of structure, and what targeted recommendations do you have?
Yu Miaojie: The key focus of structural adjustment lies in first changing our mindset and recognizing new opportunities. In recent years, I have been advocating for enterprises to increase their exports to emerging industrial countries, as well as BRICS countries, including Russia, Brazil, South Africa, and the newly expanded BRICS country, Saudi Arabia.
At the same time, we are speeding up the construction of the “Belt and Road” initiative, promoting economic and trade cooperation in the Middle East, West Asia, and North Africa, and importing more raw materials from Saudi Arabia and Russia.
Furthermore, we should vigorously promote the development of trade in services, as evidenced by recent Service Trade Fairs. The overall trend of service trade in China is positive, but there are indeed some issues that need reform. Expanding the overall volume and adjusting the structure should go hand in hand. Currently, there is a relatively large trade deficit in service trade, particularly in the field of education. To reduce the deficit, we need to develop industries with Chinese characteristics.
Structural adjustment requires a reconfiguration of the global economic and trade landscape. For example, the land-based Silk Road should focus on the eastern direction and strengthen economic and trade ties with the Russian Far East in particular. In addition to the continued development of the maritime Silk Road to the south and cooperation in the Middle East, West Asia, and North Africa, it should also expand to the north, promoting economic and trade cooperation among China, Japan, and South Korea. We should also seize the opportunity of the BRICS expansion, which not only benefits economic and trade aspects but also serves as an important driver for the internationalization of the Chinese yuan.
The 21st Century Business Herald: The Ministry of Commerce has designated this year as the year to boost consumption. Although various regions have issued consumer vouchers, the results have not been ideal. In the current economic context of China, how can we truly reverse the sluggishness in consumption?
Yu Miaojie: Indeed, consumer vouchers issued this year have had limited impact on economic upliftment. It is generally considered more effective to distribute consumer vouchers rather than cash, as people are less likely to spend cash received, opting instead to save or invest it. However, consumer vouchers require additional personal expenditure at the time of use. Ultimately, if the sustainable income of the general population does not increase, even with the issuance of consumer vouchers, there will be limited utilization.
To stimulate consumption, it is essential to safeguard the sustainable income of the people. On one hand, we need to ensure employment by supporting market entities, particularly small and medium-sized enterprises (SMEs). SMEs have been significantly impacted by the pandemic, emphasizing the importance of supporting the real economy and private enterprises.
Additionally, industries most affected by the pandemic, such as transportation, tourism, and catering, should receive relatively more favorable policies. In terms of banking analysis, China’s financial structure used to involve major banks investing in large enterprises while small and medium-sized banks supported small and medium-sized enterprises. However, during the pandemic, banks of all sizes should support small and medium-sized enterprises.
By increasing the proportion of disposable income in overall income, people will have more money to spend. One crucial method is through tax reduction and fee reduction. However, continuous tax reduction and increased investment in new infrastructure and major projects can result in a severe fiscal deficit. Therefore, more proactive fiscal policies must be adopted.
Link to the interview: