Zeng Zheng: Coordinating the Relationship Between Optimizing Incremental Growth and Revitalizing Existing Assets
Existing stocks (cunliang) and incremental growth (zengliang) are interdependent, mutually reinforcing, and mutually transformative. Existing stocks form the foundation for incremental growth, while incremental growth represents the transformation of existing stocks; the two exist in a relationship of dialectical unity. The "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Advancing Chinese-path Modernization," adopted at the Third Plenary Session of the 20th CPC Central Committee, proposed to "optimize the allocation of all types of incremental resources and the structural adjustment of existing stocks." The Central Economic Work Conference also explicitly required that we "must coordinate the relationship between optimizing incremental growth and revitalizing existing stocks to comprehensively improve the efficiency of resource allocation." Against the background of the continuous expansion of China's total economic volume, and under the requirement of comprehensively implementing "promoting the effective improvement of economic quality and reasonable growth in quantity," this represents a systematic understanding of regularities [1] summarized by our Party through the deep study and application of dialectical materialism and contradiction theory [2]. It is a concrete manifestation of systemic thinking in China's economic work and an important aspect of improving the macroeconomic governance system. To this end, in the process of market-based allocation of factors, social asset management, and debt governance of macroeconomic sectors, we must focus on handling the relationship between optimizing incremental growth and revitalizing existing stocks—using increments to drive stocks and stocks to promote increments—thus promoting synergy between optimizing the structure of existing stocks and releasing space for incremental growth.
Coordinating the Release of Traditional Factors and the Cultivation of New Types of Factors
The reform of the market-based allocation of factors is an important part of upholding and improving the basic socialist economic system, and accelerating the improvement of the socialist market economy system and macroeconomic governance. Coordinating the revitalization of existing factor resources and the cultivation of new types of factor resources is of great significance for promoting high-quality development and facilitating the transition between old and new growth drivers.
Coordinate the revitalization of existing land and the excavation of incremental land. Land is an important carrier for China's accelerated industrialization and urbanization. Currently, China has entered a stage of deep integration between the "new type of industrialization" and the "new type of urbanization." Coupled with further strengthening requirements for coordinated comprehensive land use and land resource security, there is an urgent need to coordinate the optimization of land supply and the revitalization of existing land. On one hand, we must accelerate the construction of a unified urban and rural market for construction land, revitalize existing urban land and inefficiently used land, and orderly advance the reform of allowing rural collective operational construction land to enter the market, achieving economical, intensive, and efficient use of existing land. On the other hand, under the premise of strictly guarding the "red line" of arable land protection [3] and strictly controlling the total scale of urban development land, we should establish a mechanism that coordinates the allocation of new urban construction land indicators with the increase in the permanent resident population, reform and improve the system for balancing the occupation and replenishment of arable land, improve the quality of land supply, and continuously enhance the economic and social benefits of land output.
Coordinate the release of human capital dividends and the moderate elevation of birth rates. People are the subjects of social development, talent is the "primary resource," and economic and social development ultimately rests upon human development. Currently, China's demographic situation is changing, and we are in a critical stage of transitioning from a "populous country" to a "human resource power." There is an urgent need to promote long-term balanced population development by improving the quality of the existing population and releasing fertility potential. On one hand, we must advance the construction of a "powerhouse in education," a "powerhouse in talent," and a "skill-oriented society" in an integrated manner, increasing the volume of high-level human capital by improving the quality of higher education, and raising the level of existing human resources by establishing a modern vocational education system that serves lifelong learning for all. On the other hand, we must organize and implement the "three-child policy" and its supporting measures to smooth the downward trend of the total fertility rate, promote the gradual optimization of the population structure, and ensure China maintains its endowment advantage in human resources.
Coordinate the effective use of existing technical resources and the reinforcement of the supply of key core technologies. Science and technology are the primary productive forces, innovation is the primary driver leading development, and scientific and technological innovation is the core support for high-quality development. At present, China's technology market is underactive, the conversion rate of scientific and technological achievements is relatively low, and there is a shortage of technical supply in some high-precision and cutting-edge fields. There is an urgent need to promote the conversion of high-quality scientific and technological achievements, strive to achieve major breakthroughs in advantageous fields, and form a batch of key technologies that drive economic and social development. On one hand, we must integrate existing science and technology resources, establish technology-sharing platforms, accelerate the construction of a high-level technology trading market, revitalize existing patents, and improve mechanisms related to granting rights for service-related scientific and technological achievements. On the other hand, we must optimize the organizational mechanism for major scientific and technological innovation, coordinately strengthen the assault on key core technologies, and promote the systematization, institutionalization, and coordination of scientific innovation forces, factor allocation, and talent teams to enhance high-level technological supply capabilities.
Coordinate the effective utilization of existing data resources and the expansion of the scale of data factors. Data is the foundation of digitalization, networking, and intelligence, and is a key factor in building a modern industrial system. Currently, China is accelerating the cultivation and development of new quality productive forces, necessitating the excavation and release of the potential and efficacy of data factors to comprehensively drive a leap in social productive forces. On one hand, we should improve the mechanism for opening and sharing public data, lead the integrated application of data resources across society, promote the development and utilization of enterprise data resources, establish and improve rules for data circulation and transactions, steadily proceed with the capitalization of data, expand standardized data development and utilization scenarios, and stimulate new vitality in existing data. On the other hand, we should actively promote industrial digitalization, explore the application of the digital economy in economic and social scenarios, and continuously expand the scale and enrich the types of data.
Coordinating the Revitalization of Existing Assets and the Expansion of Effective Investment
With the continuous expansion of the total economic volume, China has accumulated a considerable scale of social assets in manufacturing, infrastructure, and real estate, providing important support for economic and social development. At the same time, some fields have seen idle or "sleeping" assets. Promoting a virtuous cycle between existing assets and new investment is of great significance for improving the operation and management of equipment and facilities, broadening social investment channels, reasonably expanding effective investment, and continuously increasing investment efficiency.
Balance the integration of traditional industrial assets and the expansion of emerging industry investment. China is a major manufacturing power. In 2023, China's manufacturing value-added accounted for approximately 30% of the global total, with total manufacturing assets exceeding 150 trillion yuan and fixed asset investment in the secondary industry reaching 16.2 trillion yuan—both currently ranking first in the world in terms of both stock and increment. At present, China is accelerating the development of new quality productive forces, transforming and upgrading traditional industries, cultivating and strengthening emerging industries, planning and constructing future industries, and improving the modern industrial system. This requires the comprehensive revitalization of assets such as traditional manufacturing equipment, while simultaneously coordinating industrial investment in emerging fields to continuously improve the efficiency and benefits of manufacturing investment. On one hand, we should leverage the role of policies related to large-scale equipment updates, increase medium- and long-term financial support from the government and financial institutions for the technical transformation of manufacturing enterprises, and promote the high-end, intelligent, and green development of traditional manufacturing. Simultaneously, we should encourage enterprises to revitalize existing assets through mergers, reorganizations, and the transfer of property rights. On the other hand, we must establish a mechanism for increasing investment in emerging and future industries, improve support policies for long-term capital to "invest early, invest small, invest long-term, and invest in hard technology," constantly spawn new industries, new formats, and new business models, and promote the transition between old and new growth drivers.
Balance the revitalization of traditional facility assets and the acceleration of new type infrastructure investment. Through long-term investment and construction, China has accumulated a large amount of high-quality existing assets in the field of infrastructure, with the total exceeding 120 trillion yuan in 2023, a figure that is still steadily increasing. Currently, China has entered a stage of high-quality development and faces the dual tasks of improving the investment and operation levels of existing infrastructure and moderately advancing the layout of "new type infrastructure" [4] investment. To this end, we must adhere to the "parallel development of the new and the old," "equal emphasis on quality and quantity," and "simultaneous construction and operation," continuously improving the sustainable development of infrastructure. On one hand, we should effectively adopt the PPP (Public-Private Partnership) model, transferring asset ownership, equity, operating rights, and toll rights of completed projects to social capital. We should encourage the exploration of qualifying infrastructure REITs (Real Estate Investment Trusts) projects, promote the "vacating the cage for new birds" [5] and the quality upgrading of industrial parks, and revitalize existing infrastructure in key fields and regions. On the other hand, we should coordinately use fiscal funds such as local government special bonds and ultra-long-term special treasury bonds along with social capital to broaden financing channels. We should focus on implementing the "new type of urbanization" strategy, the rural revitalization strategy, and the "Dual Carbon" [6] strategy—basing these on the development goals of autonomous and controllable industrial chains and responding to the new round of information technology revolution and aging trends—by increasing infrastructure investment in related fields, steadily improving investment efficiency, and striving to achieve a virtuous interaction between infrastructure construction and economic and social development.
Balance the absorption of existing commercial housing and the stabilization of real estate investment. Since the reform and opening up, along with the marketization of housing reform, China has become the world's largest market for the construction and sale of housing, with the value of existing real estate accounting for about 40% of total social net assets. The healthy development of the real estate market is vital to the overall situation of economic operation and financial stability. To better promote urban-rural integrated development and deeply implement the people-centered "new type of urbanization" strategy, there is an urgent need to accelerate the digestion of existing commercial housing, promote the construction of a new model for real estate development, promote the balance of supply and demand in the real estate market, and further meet the rigid and diversified improvement-oriented housing needs of urban and rural residents. On one hand, we must advance the disposal of existing commercial housing, continue to use special bonds and subsidies for government-subsidized housing projects to acquire existing commercial housing for use as local affordable housing, increase efforts to implement the renovation of "villages in the city" [7] and dilapidated houses, and revitalize existing land and commercial/office buildings. On the other hand, we should further improve the basic systems related to real estate development, promote the steady and healthy development of the real estate market, optimize the supply of affordable housing, vigorously implement urban renewal actions, and fully release the potential of rigid and improvement-oriented housing demand.
Coordinating the Governance of Existing Debt and the Improvement of Liability Capacity
Since the reform and opening up, China's economy has experienced more than 40 years of continuous and rapid development; the debt balances of households, enterprises, and government sectors have increased significantly. Efficiently managing social debt has become an important part of China's macroeconomic governance. Steadily revitalizing the debt of macroeconomic sectors and continuously improving liability capacity is of great significance for smoothing the national economic cycle and expanding domestic demand in all directions.
Coordinately advance government debt governance and the stabilization of government investment. According to public data from the Ministry of Finance, at the end of 2023, the total debt of the Chinese government on a "full-caliber" basis reached 85 trillion yuan, with a government debt-to-GDP ratio of 67.5%, significantly lower than that of major economies and emerging market countries. To maintain stable economic growth, we need further to enhance the government's liability capacity on the basis of effective governance of existing debt. On one hand, we must promote the implementation of a "package" of debt-reduction plans, accelerate the replacement of existing hidden debt, gradually reduce debt risk levels, and enhance the continuous liability capacity of local governments. On the other hand, we should actively leverage the central government's debt-borrowing function, expand the scale of the issuance of ultra-long-term special treasury bonds, increase the issuance and use of local government special bonds, improve the government debt management system, and actively expand effective investment.
Coordinately advance enterprise debt restructuring and the enhancement of enterprise investment. According to data from the National Institution for Finance & Development (NIFD), at the end of 2023, the total scale of China's non-financial enterprise debt relative to GDP reached 168.4%. Currently, China is promoting a continuous economic recovery; we need to leverage the role of enterprises as investment subjects based on revitalizing enterprise liabilities to continuously promote investment that expands domestic demand. On one hand, we should accelerate the reform and transformation of local financing platforms, use market-oriented and law-based means to promote the bankruptcy, merger, and debt-to-equity swaps of state-owned enterprises, and encourage real estate and industries with overcapacity to accelerate enterprise mergers and debt restructuring, thereby continuously releasing the potential for enterprises to further incur debt and expand investment. On the other hand, we must take multiple measures to improve the financing capabilities of state-owned enterprises, standardize the development of equity investment by state-owned enterprises, strengthen financing support for private investment, and encourage state-owned and private enterprises to conduct equity integration, strategic cooperation, and resource integration to invest in new key field projects, continuously improving the investment willingness and benefits of all types of enterprises.
Coordinately advance the restructuring of household balance sheets and vigorously boost consumption. According to data from the People's Bank of China, at the end of 2023, the ratio of China's household sector debt to GDP reached 72.4%. Among this, mortgages account for a high proportion, while consumer credit still has room for growth. Currently, China is gradually improving the long-term mechanism for expanding consumption; there is an urgent need to optimize the debt structure of the household sector, release the consumption potential of the household sector, and focus on boosting household consumer demand. On one hand, we should moderately lower mortgage rates, accelerate the establishment of a housing system that encourages both renting and purchasing, increase the construction and supply of affordable housing, and gradually reduce the proportion of mortgages in household leverage. On the other hand, we should support the standardized development of consumer finance companies, continuously improve the personal credit reporting system, and encourage local governments to increase fiscal interest subsidies for consumer credit to better leverage the role of consumer credit in promoting the qualitative upgrading of consumption.
(The author is a researcher at the Market and Price Research Institute of the China Academy of Macroeconomic Research)
Source: Economic Daily (January 15, 2024)
Web Editor: Hui Hui