Chapter 16 The second dialogue with Zou Hengfu and Cao Jianhai: How China became a first-class country

Ye Chuhua: Against the background of the financial crisis, the United States, which is at the top of the first-class developed countries, is the birthplace of the crisis. I am still more interested in the current situation and future of the United States. What is going on in the United States? Is the United States really failing this time?I would like to ask Mr. Zou for advice. Zou Hengfu: This question is very good. In this crisis, if China does not do stupid things, it must first recognize the United States.First of all, it is unavoidable that this crisis is caused by the greed of financial capital.Marx said that "every pore of capital drips with blood and filth", which is not outdated.This financial crisis has shown us that from Bear Stearns to Fanfang, to Lehman Brothers, and then to Merrill Lynch, AIG is all about financial capital exploitation, competition, deceit, irrational speculation, financial corruption, false accounts, and manipulation. The inevitable outcome of the market, which is no different from the collapse of Enron a few years ago.However, don't overestimate the impact of this crisis on the United States. The financial crisis has affected the US's dominance in the global financial services industry, but it is conducive to the small and medium-sized financial institutions in the United States becoming a part of the US financial market in this fierce speculative competition. It will become an important member of the international financial services industry.This is extremely similar to the development of the US aviation industry and the computer industry. The collapse of Northwest, UnitedAirline and other companies has given the US aviation industry a more competitive advantage and improved services.What can be concluded is that the U.S. economy will still resume stable and healthy development, which is determined by the soft and hard power of the United States.

The use and exploitation of natural resources in the United States, such as land, oil, coal, forests, etc., is less than 2% or 20%; the United States is far ahead in science and technology and human capital; Leading and irreplaceable; American movies, entertainment, singing, fashion, etc. are far ahead, and the whole world will continue to willingly contribute their wealth to Hollywood; American business management is changing with each passing day; , tanks, missiles, munitions, transportation, etc.) have never been in decline; American social and political democracy has effectively contained the extent to which crony capital is corrupt (although this crisis has also exposed its problems); American immigration Policies, property rights protection, legal mechanisms, comprehensive dynamic competition mechanisms, etc. have attracted outstanding talents from all walks of life around the world; American social welfare (education, health, medical care, social security, etc.) is also catching up with European and Canadian welfare capitalism.

The United States is still a "high-quality stock", and the Chinese government still sees this clearly. The good phenomena we have seen recently include: Chinese official and private funds flow to the United States to buy bottom, Chinese small and medium-sized human capital flows to the United States to study and train at their own expense, and Chinese funds buy the United States Real estate, real estate, financial companies, industries, etc., of course, there are uncountable corrupt funds flowing into the United States. Because these factors have increased the Chinese people's demand for dollars, and even the short-term depreciation of the renminbi.In the foreseeable future, China will not go wrong in sticking to this direction.

Ye Chuhua: Yes, I have also noticed that the Chinese government recently announced that it will increase the purchase of US treasury bonds.In addition, I think that compared with the United States, China's real economy is facing a more severe situation.According to the forecast of the National People's Congress "China's Macroeconomic Analysis and Forecast", the potential GDP gap will further expand in 2009, and the imbalance between aggregate supply and aggregate demand will further worsen. The level will further expand. In 2009, the unemployment rate in China will be close to 32 million, and the adjusted unemployment rate will rise from 7.1% in 2007 to around 9.3%.The world economy will be in deep decline.

This will deal a serious blow to China's exports, making the decline in China's external demand far exceed the level of 2008.At the same time, due to the high elasticity of China's export income, exports are more sensitive to the growth of national income of major trading countries.The simultaneous sharp decline in the three major economic sectors of Europe, the United States, and Japan will have a direct and deep impact on China's exports.Therefore, China's current economic impact on the export and import growth will both continue to decline, of which the export growth rate will decline more sharply. It is expected that the export growth rate will drop by 6.9%, and the import growth rate will drop by 6.1%.This resulted in a decrease of USD 14.6 billion in the trade surplus in 2009 compared with 2008, and the growth rate of the trade surplus was -5.5%.

Since China's industry is at the lowest end of the global economic value chain, low-tech companies have too little profit, do not have bargaining power externally, are highly sensitive to cost changes internally, and are unable to carry out research and development to achieve industrial upgrading to withstand demand shocks.What does Mr. Cao Jianhai think about this? Cao Jianhai: My point of view is that the global economic imbalance model has come to an end. The collapse of the US excessive consumption model means to a large extent the collapse of China’s excessive saving and excessive export model. There has been a structural and total simultaneous decline in interaction.

For China, the potential of the export-oriented economy hovering in the cheap labor model has been fully released, and the low-tech economic development model has come to an end. Ye Chuhua: Indeed, it is time for China's economic growth to shift to relying on human capital instead of exploiting labor.Krugman, a Nobel laureate in economics, made a judgment in 1994: "East Asia's economic growth model cannot be sustained." At that time, his words were aimed at the "four tigers" in Asia.Why?Because 75% of their 8% to 9% GDP growth consumes manpower and material resources.Fortunately, the transformation of the technology of the Four Little Dragons was successful and maintained continuous development. From the late 1980s to the early 1990s, the Japanese economic crisis was mainly a financial crisis, and the manufacturing industry was not greatly affected.Due to Japan's first-class technological capabilities, not only has there not been a large number of bankruptcies in the manufacturing industry, but it has accumulated huge industrial capital overseas.Taking the sun as a teacher is a good way for China today.

In addition, regarding the sustainable development of China's economy, many scholars have mentioned that hiding wealth for the people is an experience proved by the history of all developed countries in the world. Lang Xianping mentioned this issue earlier, and recently Xie Guozhong, Chen Zhiwu and Zhang Weiying advocated the development of state-owned enterprises. Distributing to the common people, returning wealth to the people, Mr. Zou seems to have paid attention to this, what do you think? Zou Hengfu: In order to maintain sustainable economic and social development, one of the necessary conditions is to keep wealth among the people. On this issue, I agree in principle with Chen Zhiwu, Xie Guozhong and Zhang Weiying’s proposal to privateize state-owned enterprises, that is to say, part of the state-owned assets The equity is allocated to the social security fund, and the rest is injected into the civil rights fund and distributed equally to the common people, so as to return the production to the people and store wealth among the people.

In addition, China still needs to make great efforts in social security and people's livelihood projects. At present, it is necessary to make good use of the 4 trillion yuan of investment. The government can consider increasing efforts in people's livelihood issues, taking education, medical care and pension insurance as the three Said, the data I have seen is that in the past 30 years, we have invested a total of less than 170 billion yuan, accounting for only 1/6 of infrastructure and 1% of GDP. From this ratio, our social welfare work still needs to be improved. Increase investment.I work at the World Bank, and the data I know is that the investment in these three items generally accounts for 18% to 24% of GDP in the United States, 36% to 46% in Canada, and even more in the Nordic countries, as high as 40% to 50%.What our central government advocates is to build a harmonious society, so how to build it?

This requires eliminating the polarization of the rich and the poor, and increasing the welfare of the people.The global economic slowdown caused by the financial crisis triggered by the United States may be an opportunity for China to increase economically and build a harmonious society. As long as economic justice is established, China will be able to achieve long-term sustainable economic and social development in the crisis . Ye Chuhua: To sum up, that is to say, China's sustainable economic and social development requires at least three basic necessary conditions, namely, technological progress, storing wealth for the people, and promoting people's livelihood projects.However, economic development is also inseparable from political and institutional issues, and it would be biased to talk about the economy only in terms of the economy.What worries does Mr. Zou have about China's institutional problems?

Zou Hengfu: Not only institutional issues, but also moral issues. The market economy cannot be separated from the legal system, nor can it be separated from the moral system. Therefore, from a perspective other than economics, I have two concerns about China's long-term development. The first is the issue of institutional imbalance. The state of contemporary China has a strong spirit of materialism and tends to pursue state control over material wealth.Before the 1980s, it was manifested as the state’s direct possession of materials, and since then it has manifested itself as an obsession with the rate of economic growth, thus forming an official performance evaluation index system centered on GDP.Officials at all levels pursue high-speed economic growth, and the operation of government power deviates from the reasonable functions of the normal government, which leads to an institutional imbalance between government power and people's rights in the process of economic activities.The government has also systematically adopted a "pro-business" policy, instinctively leaning toward the former in the relationship between enterprises and consumers, investors-operators and labor.For the sake of economic growth, the government can also sacrifice public welfare and ecology. Because of the imbalance between government power and people's rights, and in an institutional environment where the rights of different people cannot be equally guaranteed, the prosperity that occurs must be manifested as an unfair distribution of wealth.The process of economic prosperity is also the process of accumulation of dissatisfaction and resentment among some people.Once the boom is over, these resentments are vented in some destructive way.This is where the real risk of China's economic slowdown lies. The second worry is a moral crisis. The Sanlu milk powder incident in 2008 not only reflected the current situation of the Chinese food industry, but also exposed the moral crisis of the entire Chinese enterprise.This kind of behavior that does not pay attention to the quality of products and services, but only pursues short-term profits will deeply hurt the hearts of consumers and seriously damage the image of Chinese enterprises.How to form a healthy moral paradigm is a difficult problem in China's economic development. Ye Chuhua: Speaking of system imbalances and officials, what I think of is the issue of local governments and real estate. Now the facts are clear, and local governments take more than half of the high housing prices.The All-China Federation of Industry and Commerce submitted a speech titled "Why my country's Housing Prices Are So High" at this year's National Committee of the Chinese People's Political Consultative Conference.The All-China Federation of Industry and Commerce Real Estate Chamber of Commerce conducted a survey on the "development costs of real estate companies" in 9 cities across the country last year, showing that in the total expenditures, the part that flows to the government (that is, land costs + total taxes) accounted for 49.42%. Among the three first-tier cities, Shanghai has the highest share of development projects going to the government, reaching 64.5%; Beijing 48.28%; Guangzhou 46.94%.Land finance makes the government the biggest beneficiary. Under the conditions of the economic crisis, external demand has shrunk severely, while China’s domestic demand has not increased. The lack of domestic demand may be largely related to the local government’s exploitation of the wealth of ordinary people through land. The wealth accumulated by people for decades is taken away by the government at once. Half (the real estate developer takes the other half), and there is no money in the pocket, so how do you spend it? Mr. Cao Jianhai is an expert in real estate. He has a deeper investigation into this issue. Please analyze it. Cao Jianhai: You don't have to be so euphemistic at all. You can just say that the local government itself is a real estate developer.Of course, to be precise, local governments are land dealers, and they sell land but not houses.Who is the largest land supplier in our country?It is the local government.The current local government is a typical land dealer.From the perspective of the industrial chain, the local government can be attributed to an upstream link of the real estate industry. The current land market in our country can be attributed to the market monopolized by the government.This kind of market can be divided into three links: land acquisition, reserve and transfer. The reason why local governments can be attributed to real estate developers is because there is now a huge profit mechanism of land acquisition, storage, and transfer, which motivates local governments to buy land for sale.Land expropriation refers to the government’s expropriation of land collectively owned by farmers, including commercial land, at a relatively low price in the name of public interest and using urban planning as a tool.Just as merchants purchase goods for sale, the purpose of land expropriation is for sale.As the party whose land is expropriated, rural land lacks self-protection ability due to its vacant ownership and dependence on government power, forming a huge scissors gap for the government to deprive farmers of their interests.It is estimated that from the beginning of reform and opening up to the end of 2003, this scissors gap has accumulated as high as 2.5 trillion yuan.The government reserves land, nominally to carry out macro-control, but in fact the reserve stage is often a process of land appreciation, and the length of the reserve cycle depends on the profit between the sale proceeds and the land reserve cost. Land transfer is the final stage of the government's early stages.In my opinion, at the transfer stage, if corruption factors are removed, the government still has the motivation to adopt bidding and auction methods. However, considering the long-term nature of industrial land and its impact on comprehensive interests such as political performance and employment, adopting differential land prices is beneficial to local governments. The statement is reasonable, which will inevitably promote the construction activities led by the local government. Now some people regard the sale of land by agreement as a market-oriented behavior, and regard bidding and auction as a market-oriented behavior of land. This is a major misunderstanding of marketization. The premise of marketization is the marketization of production factors, that is, the ability to institutionally guarantee the free trading of ownership of production factors.The real contradiction is that if the local government adopts the strictest way to auction land, it will lead to the rapid concentration of social wealth at the government level, developers and social classes with multiple houses. When the tax increase exceeds the GDP growth rate, It will increase the operating costs of enterprises and the living costs of residents, and induce macroeconomic problems such as skyrocketing land prices and increasing unemployment. This is what a rational market economy government should avoid most. Ye Chuhua: I admire Teacher Cao very much, unlike some real estate experts who only point their fingers at real estate developers and avoid talking about the bigger dealers—local governments.This is indeed the case. Not only do people in big cities suffer from it, but even in counties, those wage earners have worked hard to save money for 20 years, and finally come to the city to buy a house of 100 square meters (the house price in the county is generally around 2,000 yuan per square meter). It was all spent in one go, and more than 100,000 yuan of it went to the pockets of the local government, which is equivalent to working for the local government for ten years. Chinese laborers are really hard-working and exploited by both capitalists and local governments. Having talked about so many domestic issues, now I would like to change my perspective. China has gradually moved towards a large open economy. From a global perspective, what kind of positioning should China have?Mr. Zou also talked about the United States just now, and talked about China’s need to learn from the United States, Japan and Europe. I think that in addition to learning their welfare and social security systems, learning their technological innovation and hiding wealth for the people, it is more important to learn from them. The spirit of "exploitation" of China - to base one's own prosperity on the basis of siphoning material resources and products from other countries. This is a common feature of all developed countries, and it is also a necessary condition for a country to be developed. Without this point, It is impossible to become a developed country. The high proportion of the tertiary industry is regarded as a sign of developed countries. Behind this is actually a problem of international division of labor on the basis of unbalanced global economic development. It is a false proposition to increase the proportion of a country's tertiary industry behind closed doors.For example, the population of country A in a developed country is 10 people, 20 people in country B, a developing country, 7 people in country A are engaged in the tertiary industry, 3 people are engaged in the primary and secondary industries, and 14 people in country B are engaged in the primary and secondary industries. Then, it is precisely because of its advanced brand, technology, financial service industry, etc., that country A has exchanged the material products of country B on a large scale at a monopoly price far exceeding its value, and country A has become a developed country with rich material and well-off people. To put it bluntly, the reason why rich countries are rich, the reason why most people can engage in non-material industries and the material products are extremely rich is because developed countries have exchanged a large amount of monopolistic, scarce, and intangible things for development. Competitive low-priced material goods in China.This is not only used between countries, but also within a country, farmers are poorer than urban residents. The main reason is that the products of urban residents are more monopolistic and scarce than those of farmers, and farmers can only produce similar products. For agricultural products in perfect competition, economics tells us that the market price in perfect competition is the lowest, as low as zero profit.Now assume that country B is China. If China wants to transform into a country like country A, it must meet two conditions. The first is that China has advantages in brand, technology and service industry, and the second is that China has successfully found a successor in country C. Production of physical form products for China. China has these two conditions to a certain extent, and needs the guidance of the national will.This point should be in line with Japan and the "Four Little Dragons" in Asia. That's how they came over the past, and China is their successor. To this day, they are still parasitic on countless laborers with material products in mainland China. We cannot live forever. I am content to be parasitized by others, but I want to find the next family to take over. Africa would be a good choice.Under the conditions of economic crisis, developed countries are withdrawing funds from emerging markets. This is an opportunity for China. Our investment in Africa can transfer domestic excess production capacity on a large scale.Under the background of the financial crisis, the global mining industry will enter a new round of recession, and the price of mineral products will enter a low level, which will make the foreign exchange funds of the countries whose main source of foreign exchange is the export of mineral products more scarce.Africa has a more urgent need for foreign capital and foreign aid.This provides an opportunity for Chinese domestic enterprises to invest in Africa.On the other hand, the current surplus of production and processing capacity in some domestic industries has increased the motivation and pressure for Chinese enterprises to enter the international market. Judging from the current situation, Africa is an ideal investment destination for my country.In recent years, China's investment in emerging markets such as Africa and Latin America has grown rapidly.By the end of 2008, the stock of China's direct investment in Africa had exceeded US$5 billion.In addition, if North Korea can implement an open policy in the future, it will also produce tens of millions of high-quality laborers.I also ask Mr. Cao Jianhai to correct me. Cao Jianhai: This is a good idea. China really needs to find the next company.According to your statement, looking for successors is to use our monopoly, scarcity, and intangible things to exchange their material products in large quantities. This point can basically be agreed.However, the search for successors cannot be attributed to neo-colonialism, nor can it be simply defined as the exploitation of poor countries. This should be a win-win situation. China’s development since its reform and opening up has also been achieved by taking over from developed countries. Having endured so many years of being exploited, it is also a form of economic justice for China to find the next successor. China's development is thanks to being exploited. If China's next family wants to develop, it also needs to be exploited. Besides this, what better way do they have? The reason is very simple. They only have labor, material resources and other things that are available everywhere. That is what you call competitive things, it is impossible to get a good price with these. There is a convergence theory in macroeconomics, which means that the economies of all countries in the world will eventually converge. The economies at the initial stage rely on the comparative advantage of labor force and are willing to accept the exploitation of other countries. When they develop to a certain level, they will lose this advantage. advantage, the economic growth rate will slow down, and if it can achieve technological and brand transformation, it can still maintain stable growth. Similarly, at this time, the next economy it is looking for with labor advantages begins to develop rapidly. In the end, this This transitivity will make the world economy converge.Of course, this convergence is only a trend. If it is affected by factors such as political turmoil, the link of world economic convergence will be destroyed, and some politically unstable countries may always be in a state of poverty and backwardness. Ye Chuhua: In short, if China wants to become a first-class country, it must have a first-class system, a first-class development strategy, and learn from the first-class experience of a first-class country.