Editor's note: Recently, He Weiwen, former economic and commercial counselor of the Consulates General in San Francisco and New York, executive director and chief expert of the expert committee of the China Association of International Trade, and senior researcher of the Chongyang Institute for Financial Studies of Chinese University, pointed out in an exclusive interview with the 21st Century Business Herald that in order to achieve the second centenary goal, we must vigorously develop new quality productive forces and vigorously promote reform. The current challenges facing China's economy are multifaceted, and under the conditions of the deterioration of the external political environment, it is necessary to continue to unswervingly open the country to encourage foreign investment. The content of the interview is forwarded as follows:
Comprehensively deepen reform and promote the development of new quality productive forces
21st Century: How do you view the significance of the Third Plenary Session of the 20th CPC Central Committee to China's economic development?
He Weiwen: The Third Plenary Session of the 20th CPC Central Committee will be a meeting of great historical significance on China's journey to achieve the second centenary goal. The 20th National Congress of the Communist Party of China (CPC) made a comprehensive strategic plan for further deepening reform in an all-round way and promoting Chinese-style modernization. The report of the 20th National Congress of the Communist Party of China clearly stated: "From now on, the central task of the Communist Party of China is to unite and lead the people of all ethnic groups across the country to build a great modern socialist country in an all-round way, realize the second centenary goal, and comprehensively promote the great rejuvenation of the Chinese nation with Chinese-style modernization." The first step is to basically realize socialist modernization by 2035, and the per capita GDP should reach the level of moderately developed countries. Last year, our per capita GDP was $12,700, while the average per capita GDP of the three lowest countries in the Organization for Economic Co-operation and Development (OECD), Czech Republic, Slovakia and Slovenia, was $25,600, exactly twice as much, and will grow in the future. Therefore, by 2035, how we can achieve a per capita GDP of 30,000 US dollars, that is, more than double the current level, will be a very serious and difficult task. In order to achieve this, it is not enough to simply continue the growth of the past, because our industrial added value now accounts for 30% of the world's total, and the growth space is limited, so we must vigorously develop new quality productive forces and look for new economic growth points. In order to develop new quality productive forces, it is necessary to vigorously promote reform. In December 1978, the Third Plenary Session of the 11 th CPC Central Committee proposed to liberate and develop the social productive forces through reform and opening up, focusing on the adjustment of production relations, thus giving a strong impetus to the process of socialist modernization. At present, we need to further emancipate our minds, be determined to innovate, and promote the comprehensive deepening of reform with greater political courage and wisdom, reform all production relations that are not suitable for the development of productive forces, and reform and adjust the superstructure that is not suitable for the development of the economic base. From this point of view, the reform of the economic system is the focus of comprehensively deepening reform. We need to provide strong support for the liberation of productive forces and the expansion of the growth of new productive forces by further deepening reforms, and provide a fundamental guarantee for the basic realization of socialist modernization by 2035.
We will continue to boost domestic demand and stabilize the momentum of economic recovery
21st Century: This year's government work report puts forward a growth target of about 5.0%. Halfway through 2024, do you think China will be able to achieve this growth target? Combined with the recently released economic data, how do you see the current situation of China's economy?
Ho Weiwen: In the first quarter, the mainland's economic growth rate of 5.3% exceeded market expectations, and the growth rate accelerated by 0.1 percentage points compared with the previous quarter, achieving a good start. From the perspective of the "troika", in the first quarter, final consumption expenditure contributed 73.7 percent to economic growth, driving GDP growth by 3.9 percentage points, and gross capital formation contributed 11.8 percent to economic growth, driving GDP growth by 0.6 percentage points. In other words, the total contribution of domestic consumption and investment to GDP growth is 4.5 percentage points, and the contribution of imports and exports to GDP growth is 0.8 percentage points. Against the backdrop of strong external demand and weak domestic demand, GDP grew by 4.7% year-on-year in the second quarter, slowing down by 0.6 percentage points from the first quarter. Imports and exports increased by 7.4% year-on-year in the second quarter. As external demand continues to pick up, export growth is much higher than import growth, and the contribution of net exports to GDP has further increased. According to data released by the National Bureau of Statistics, preliminary calculations show that GDP increased by 5.0% year-on-year in the first half of the year. In the first half of the year, final consumption expenditure contributed 60.5 percent to economic growth, driving GDP growth by 3.0 percentage points, gross capital formation contributed 25.6 percent to economic growth, driving GDP growth by 1.3 percentage points, and net exports of goods and services contributed 13.9 percent to economic growth, driving GDP growth by 0.7 percentage points. This indicates that the momentum of the troika has adjusted, but the overall growth momentum remains stable. It is expected to maintain a good momentum in the second half of this year. However, it should also be noted that at present, the mainland's economy is still facing many challenges and difficulties. In June, the manufacturing PMI recorded 49.5, unchanged from the previous month, and continued to remain below the boom and bust line, which was weaker than seasonal. The CPI rose 0.2% year-on-year and fell 0.2% month-on-month. Against the backdrop of weak domestic consumer demand, how to boost demand and achieve sustainable growth is the main issue we face. Therefore, we should not just be satisfied with achieving the 5.0% growth target, but also maintain the good momentum of the recovery.
We will unswervingly open the door to the country and actively encourage foreign investment
21st Century: How do you see the prospects for the mainland's medium- and long-term economic development? What are the main drivers of the economy? What are the challenges?
Ho Wai-man: Our medium- and long-term prospects are to work towards achieving the "two-step" goal. The goal is very clear, but it is difficult to follow the current growth model, and there must be a leap in new qualitative productivity. So what's the problem now? The first is the lack of demand, and the second is the overcapacity of some industries. Therefore, we need to increase demand through profound reforms, and fundamentally adjust production capacity, eliminate some backward production capacity, and vigorously develop new production capacity in artificial intelligence, big data, new energy, quantum computing, quantum communication, etc.
21st Century: How to expand opening up to the outside world is one of the focuses of this conference at home and abroad. What do you think of the significance of China's opening up to the outside world under the new situation? In the face of the rise of anti-globalization ideology, how can we form new advantages in international competition and cooperation through high-level opening-up?
Ho Wai Man: President Xi Jinping pointed out that Chinese modernization has not only the common characteristics of the modernization of other countries, but also the distinctive characteristics based on its own national conditions. The general law of modernization is to increase the productive forces by a large margin. Looking back at the past four industrial revolutions, we can see that it is certainly impossible to achieve a technological leap behind closed doors, and we must open up the supply chain and industrial chain of the world's advanced science and technology, and attract and encourage enterprises with advanced technology to invest and cooperate in China. Against the backdrop of anti-globalization, rising protectionism, and even geopolitical fragmentation, we must resolutely oppose bloc confrontation politically; Economically, it is necessary to open wider to the outside world, improve the investment environment, and vigorously encourage foreign businessmen to invest. This not only has huge economic benefits, but also has great political significance. Since the beginning of reform and opening up, the mainland has made tremendous achievements in attracting foreign investment. China has become the world's second largest economy, accounting for more than 17% of the world's total economy, and foreign investment has played an important role. But there is still a lot of room for development. The mainland's total GDP is comparable to that of the EU, but the stock of foreign capital is only one-fifth of that of the EU. Therefore, unswervingly opening the door to the country and actively encouraging foreign investment remains a long-term task for us.
What are Europe and the United States afraid of imposing tariffs on China?
"21st Century": Recently, Europe and the United States have imposed tariffs on China's electric vehicles and other products, hyping up the "overcapacity" of China's new energy products. What will be the impact of recent actions by the US and Europe on China? How should China respond?
Ho: The United States has imposed tariffs on $18 billion worth of Chinese goods, including tariffs on electric vehicles from 25% to 100%. This is not really an economic issue, it is political hostility and exclusion. China's EV exports to United States are only more than 10,000 units, but the United States wants to cut off the entire Chinese EV export. Since July 5, the European Commission has officially imposed temporary countervailing duties on pure electric vehicles imported from China, with tax rates ranging from 17.4%~37.6%. However, it will not be until four months before the temporary tariffs will be formally determined whether they will be permanent or eliminated, so it is now a window period in which China and the EU are negotiating. The term "overcapacity" is incorrect. Globally, the global production of electric vehicles last year was 14.35 million units. According to Bloomberg data, by the end of 2023, there will be only 40 million electric vehicles in the world. To achieve the energy transition, 20 million new electric vehicles will be added every year between now and 2026, and 40 million electric vehicles will be added every year from 2027 to 2040. However, last year, the global production of electric vehicles was only 14 million, of which China's production was more than 9.5 million, so there is no overcapacity in terms of the world's large demand. Now the question is the division of the existing cake. Take the European Union as an example, the entire EU car market is saturated, last year the number of new car registrations was only 10.5 million, the car penetration rate has reached 84%, the population is not expanding, and the economic growth is also very slow, so it is so big a cake. At the same time, China's exports of electric vehicles to the EU are growing very fast, so the EU thinks that this will affect its cake. So how do we do it? On the one hand, we must resolutely oppose unilateral protectionism, and we must not wantonly violate WTO regulations according to our own standards. On the other hand, on this basis, the two sides need to give due consideration to the concerns of the EU itself, and then carry out some coordination through consultations to achieve an arrangement that is mutually beneficial. In response to United States' attitude towards China's blockade, we do not need to be polite, and we can take reciprocal measures.
In order to expand the attraction of foreign investment, it is necessary to continue to improve the business environment
21st Century: In recent years, China has continuously optimized its business environment and introduced a series of laws and policies. What is your assessment of these initiatives? Compared with the international advanced level, is our regulatory and policy system complete enough? Are there some areas of ambiguity or blank spots that need to be further clarified and added?
Ho Wai-man: In recent years, the Chinese government has been actively expanding the opening up, opening the door wider and wider, and constantly improving the business environment to attract foreign enterprises to invest in China. According to the 2024 Global Foreign Direct Investment Confidence Index report released by A.T. Kearney, a United States management consulting firm, China's ranking jumped from seventh last year to third place, ranking first in the special ranking of emerging markets. Of course, there is still room for improvement in our business environment. First, under the suppression and banning of China by the United States and Western countries, the deterioration of the external political environment is not conducive to foreign investment in China, because they are worried about the risks of investing in China. Second, although we have continued to introduce policies to expand opening up, in the process of implementation, some local enterprises and government departments have acted inappropriately or inappropriately in some aspects, and need to be improved.
"21st Century": On June 26, the State Council held an executive meeting of the State Council to study the use of foreign capital. The meeting pointed out that foreign-funded enterprises play an important role in building a new development pattern, and it is necessary to increase efforts to attract and utilize foreign investment, and take multiple measures to stabilize foreign investment. Where to start with the next step to stabilize foreign investment?
Ho Wai-man: First, we need to continue to unswervingly open our doors and show the world our stance of openness and cooperation. In recent years, we have been strengthening practical cooperation with countries in the Global South, and at the same time, we will continue to seek cooperation with multinational corporations from developed countries. Second, we need to attract investment according to the needs of the supply chain, especially in key industries such as artificial intelligence, semiconductors, electronics, and new materials, and we need to attract leading enterprises to develop in China, so as to participate in the global supply chain of these industries, so that China can achieve docking and integration with the world market.
Seize the window before the US election to stabilize Sino-US relations
21st Century: Against the backdrop of the upcoming general election in United States, the future direction of China-US relations has attracted considerable attention. How has the relationship between China and the United States changed since the San Francisco meeting? Will there be a change in United States' attitude toward China after the new United States administration is formed?
Ho Wai Man: At present, we have two important tasks to do. First, we must make full use of the current window period to unswervingly stabilize Sino-US relations. The San Francisco Vision gives a one-year window for U.S.-China relations, from the end of last year to the end of this year, with a new United States president taking office in January. Since the San Francisco meeting, Sino-US relations have been generally stable and are improving slightly, economic and trade relations between the two countries are also picking up, and China's exports to the United States have recovered to 93 percent of the highest level in history. Of course, we also need to make various plans for the outcome of the United States election, but we must not let this affect our current efforts. Second, and more importantly, we should not just focus on Washington, but also look downward, and strengthen ties with local governments and enterprises in United States to promote people-to-people exchanges in various fields. Sino-US relations are not entirely determined by Washington, we have a lot of non-governmental work, and the more and more fully this work is done, the more stable Sino-US relations will be.
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Established on January 19, 2013, Chongyang Institute for Financial Studies of Chinese University of China (Renmin University Chongyang) is the main funding project donated by Chongyang Investment to Chinese University and set up an education fund for operation.
As a new type of think tank with Chinese characteristics, Chongyang has hired dozens of former politicians, bankers, and well-known scholars from around the world as senior researchers, aiming to pay attention to reality, advise the country, and serve the people. At present, the Chongyang National People's Congress has 7 departments and 4 operation and management centers (the Center for Ecological Finance, the Center for Global Governance, the Center for China-US People-to-People Exchange, and the China-Russia Center for People-to-People Exchange). In recent years, the Chongyang National People's Congress has been highly recognized at home and abroad in the fields of financial development, global governance, major-country relations, and macroeconomic policy.