Chapter 11 The dangers of "new nationalization"

China's economic achievements over the past 30 years of reform and opening up are recognized by the world.However, because the reform of the political system lagged behind, various problems began to appear. For example, a new nationalization in the economy - the state advances and the private retreats, and in macro-control, many government actions have returned to compulsory administrative means, including Direct control over price increases in some competing industries.What are the consequences of these policies? ◎Reporter: A few years ago, everyone emphasized the concepts of "retire the country and advance the people", and "small government and big society", but now China's economy seems to be heading in the opposite direction.How do you feel about this situation?

Chen Zhiwu: Previous discussions on whether state-owned enterprises should be privatized and privatized only focused on the criteria of whether state-owned enterprises or private enterprises have a higher return on assets and which has higher efficiency. It seems that as long as the efficiency of state-owned enterprises is as high as that of private enterprises.But that's a very narrow standard.For example, many people today complain that China's economy is growing so fast, but the income and living conditions of ordinary people have not changed much, and they have not shared enough of the fruits of reform and opening up.

Why is this so?Everyone likes to focus on the distribution system, saying that capitalists take too much.But who is the biggest capitalist in China today?It is the state, specifically, the State-owned Assets Supervision and Administration Commission and the Ministry of Finance.While the Chinese economy is still dominated by the state-owned system, the result of growth is that the country is getting richer and the people get a very small portion, which not only inhibits the growth of domestic demand, but also distorts the industrial structure.The gap between the rich and the poor in society is indeed widening, but the gap between the rich and the poor between the state and the people is widening at a far more exaggerated speed.

How to understand this?Take the United States as an example. In the past ten years, American households have accumulated savings of 1.5 trillion US dollars, which is not a small figure.However, if we look at US land, business assets, real estate, etc., and add up the appreciation of all assets, then the total cumulative asset appreciation of US households over the past 10 years is 35 trillion US dollars.Putting these two numbers together for comparison, you find that the ratio of asset wealth growth to labor income savings is about 22:1.From this, we can easily understand why Americans basically spend all their labor income and save very little money, because with so much asset wealth growth, Americans do not need to save.This is why the domestic consumption demand in the United States is so high, which can provide impetus for the economic growth of the United States, China, Japan, South Korea, etc.Among them, the very key point is that all productive assets in the United States are privately owned, and land is also privately owned. The income and value-added of these assets belong directly to private individuals. Through the development of capitalization and financialization, Americans can use land and productive assets at any time Cash can be converted into consumption or reinvested at any time.Private ownership makes the consumption growth of Americans not only directly linked to labor income, but more importantly, it is also directly linked to asset income and asset appreciation. The distance between asset wealth and private consumption is almost zero.Private ownership is the basis of the domestic demand-driven economic growth model.

In contrast, under the institutional arrangement where land is publicly owned and major productive assets are also state-owned, the consumption of ordinary people in China has nothing to do with land appreciation, asset wealth appreciation, or asset income.If China's GDP grows rapidly at an average annual rate of 10%, the value of land and assets should grow at a rate of more than 10%. It is not private and cannot be spent or reinvested by individuals.According to preliminary calculations, the total value of state-owned land is about 50 trillion yuan.What about state-owned enterprise assets?Li Rongrong, director of the State-owned Assets Supervision and Administration Commission of the State Council, said in the "Seeking Truth" magazine in August 2007 that by the end of 2006, there were 119,000 state-owned enterprises in the country, with an average asset of 240 million yuan, and the total assets of all state-owned enterprises were worth 29 trillion yuan. .In other words, the total value of state-owned land plus state-owned enterprises is 79 trillion yuan.Based on a population of 1.3 billion, the per capita wealth of state-owned assets is 60,000 yuan.If the value of these assets grows at the rate of GDP every year, it will increase by 7.8 trillion yuan a year. If this part of wealth appreciation is distributed to individuals, then the annual income of each Chinese person will increase by 6,000 yuan. Children, the elderly, etc. All Chinese citizens are counted.That is to say, if each family has a husband and wife, elderly parents, and an only child, and there are five people in each household, then, if these wealth increases are counted at the family level, the annual income of each family will increase by 30,000 yuan!

What about property income?Even if land income and local state-owned enterprise income are not taken into account, the profit of central enterprises alone last year was 980 billion yuan, which was distributed to 1.3 billion people, which is an additional 753 yuan.Each family of 5 people has an additional 3765 yuan per year! However, we know that the asset appreciation and income of 33,765 yuan per year is conceivable, but because it is state-owned, it cannot be obtained, and it cannot be spent by private individuals.No normal Chinese would say, "Because these state-owned assets and land have increased in value, so according to the concept of ownership by the whole people, I also have a share, so I can spend more money today, and I can spend more this year money", no normal Chinese would think so.Because everyone knows that under the state-owned system, the appreciation of these assets and land has nothing to do with the money you can spend.This is why as long as the state-owned and public-owned systems play the leading role in the Chinese economy, the domestic demand brought about by economic growth will be far lower than it could have been, and future growth must rely on the export market.Under private ownership, asset appreciation and asset income can be transformed into new domestic demand growth, but under state ownership, this chain is stuck.

◎Reporter: One of the popular sayings in China is that state-owned enterprises should reduce the resources controlled by state-owned enterprises by increasing dividends, so as to avoid the trend of "second nationalization" becoming more and more intensified.What do you think of this statement? Chen Zhiwu: There is some truth to this.Because transferring more money from companies such as PetroChina, Sinopec, and China Mobile to the Ministry of Finance can at least limit the blind expansion of these companies in many related and unrelated industries to seize the income growth opportunities that originally belonged to the private sector.However, doing so does not solve the problem fundamentally. If the income of state-owned enterprises is transferred to the Ministry of Finance through dividends, how will the Ministry of Finance spend it?What mechanism is used to monitor it?This kind of dividend does not distribute any penny to the hands of Chinese citizens, and has no impact on domestic demand. It is a change of soup but not medicine.It's not that the Ministry of Finance has no money to spend. Last year's fiscal revenue rose by 31% to 5.1 trillion yuan. They have too much money, while ordinary people have too little money.Therefore, the best way is to privatize all public land and state-owned assets, and distribute these property rights back to Chinese citizens, so that they can not only share the fruits of reform and opening up from labor income, but also share in asset appreciation and asset income. Only in this way can we correct the current situation of "the country is getting richer and the people are getting poorer" and the growth of domestic demand is insufficient.

◎Reporter: Regarding the issue of privatization, I am afraid that it is not just an obstacle in understanding.When the economy is growing rapidly, is it feasible for the decision-makers to carry out privatization reforms? Chen Zhiwu: For China's long-term sustainable development, this kind of reform is very necessary.In fact, the pressure or the need for such a privatization is already high. First, because the US subprime mortgage loan problem may lead to stagflation or depression in the US and the global economy, this will have a relatively large negative impact on the Chinese economy, which is highly dependent on the export market.In order to ensure domestic employment and income growth, we must try to stimulate the growth of domestic demand.Just like the housing market reform and the introduction of housing mortgage loans in 1998 fundamentally stimulated China's economic growth and enabled China to emerge from the Asian financial crisis smoothly. This time, if the privatization of state-owned assets can be distributed to ordinary people, It will definitely stimulate the domestic demand of China's economy, and will further drive a new industrial upsurge.

Second, China's industrial structure must also be transformed. The heavy manufacturing industry is too heavy, and the service industry is too light.Take the former Soviet Union as an example. Under the state-owned planned economy, the Soviet Union’s economy also grew very fast, but it grew in manufacturing and military industries instead of service industries.Today's China is still basically like this. When most of the asset appreciation and asset income belong to the state and are spent by state-owned enterprises and government agencies, of course they prefer the visible and tangible manufacturing and heavy chemical industries.In contrast, if the state-owned property and land are returned to the common people through asset privatization, the consumption of ordinary families will increase after the asset appreciation, and their consumption demand will definitely drive the development of the tertiary industry.Therefore, what the state-owned economy supports is one kind of industrial structure, and what the private economy supports is another kind of industrial structure.Who gets to decide how the money is spent ultimately determines the industrial structure of the economy.

Third, the greater the weight of the state-owned economy, the greater the threat to the rule of law.In other words, for the development of the rule of law, China should also be privatized.How to understand this?Based on my research on the situation of dozens of countries, I found that the higher the proportion of a country's state-owned economy, the worse its level of rule of law.Why it came out like this?People in the private business community may have a strong feeling for this point, because as long as state-owned enterprises intervene in any industry, there will be no equal competition in that industry, and there will be no rule of law in that industry.The reason is simple. The shareholder behind state-owned enterprises is the state, and the state is the only institution that can legally use violence, amend laws and regulations at will, and interpret laws and various policies according to its wishes.Therefore, with such a shareholder with absolute privileges behind it, as long as state-owned enterprises enter any industry, private enterprises, joint ventures, and foreign-funded enterprises in that industry will not be able to compete on an equal footing. Once there is a legal dispute, the judge will be on the same side as the state-owned enterprise. They are both state institutions, do you think that judges will treat state-owned enterprises and private enterprises equally?What's more, the State-owned Assets Supervision and Administration Commission directly greeted the courts, asking them to pay attention to protecting state-owned assets.

For example, a few years ago, PetroChina and Sinopec squeezed out private gas stations. These two state-owned enterprises issued some regulations through the State Council, requiring that there should be no more than a few gas stations within a square kilometer, and finally forced private gas stations. The station must be sold to PetroChina and Sinopec at a symbolic price.The same is true for other industries. As long as state-owned enterprises appear, they can pass laws and regulations to crowd out private enterprises. Recently, I learned that in the shipbuilding industry, the National Development and Reform Commission stipulates that ship engines with more than 100,000 horsepower must be approved by the Development and Reform Commission before they can be built.On the face of it, if it needs to be approved by the National Development and Reform Commission, wouldn't it be enough to apply for it?But in fact, what the National Development and Reform Commission has done in recent years is to basically leave the manufacturing and shipbuilding opportunities of such large engines only to large state-owned enterprises, not to private enterprises.Therefore, the existence of state-owned enterprises will fundamentally destroy the rules of the game in various industries. The rule of law can only be a wish, but it cannot become a reality, because the first principle of the rule of law is that everyone is equal before the law, and private enterprises and state-owned enterprises cannot equality. ◎Reporter: Then, in terms of specific operations, how to privatize state-owned assets? Chen Zhiwu: Part of the state-owned assets held by the State-owned Assets Supervision and Administration Commission should be allocated to the social security fund, and the rest should be put into one or several large funds together with some state-owned land held by the Ministry of Land and Resources. Citizens get the same amount of fund shares and allow individuals to freely trade these fund shares, just like stock funds can trade now. I know many people will say, isn't that what Russia and Eastern European countries did back then?Isn't this shock therapy?actually it is a kind of misunderstand.First, the shock therapy at that time referred more to the reform path of reforming the political system and legal system first, followed by economic reform, rather than the practice of privatizing funds.Second, Russia at that time had no fund industry, no experience in operating the stock market, and no supporting securities laws and courts.In contrast, China's fund industry, stock market size, securities law and regulatory framework have many years of development and experience, there is no operational vacuum, fund trading and securities supervision have a strong foundation, and the public has years of Therefore, there will be no problem in operating privatization funds in China today. ◎Reporter: The establishment of the state-owned economy back then was mainly based on the ideal of making the people prosperous together and a welfare state.So, if all state-owned assets are privatized now, how will the state provide social security, medical care, education and other services in the future? Chen Zhiwu: There are many misunderstandings, even misleading.First of all, I want to emphasize that when private property and private land were fully nationalized in the 1950s, there was a promise to the common people: You will return your land and property to the public and to the state. This is your contribution, but you Future work, life, medical care, elderly care, and children's education will all be covered by the state.That's a symmetrical transaction.However, during the reform process in the past 30 years, the state has thrown back the responsibilities of ordinary people's work, housing, medical care, education, etc. to the ordinary people, and the state has basically ignored them. Return private property and land to the common people.This is equivalent to saying that after 50 years of state-owned economy, in the end, ordinary people lost their property and gave it to the state, but they still have to be responsible for their own lives. So, in the current situation that these state-owned assets have not been privatized and are still in the hands of the state, do Chinese citizens really receive a lot of government benefits?We can look at the government's expenditures on medical care, social security, and employment benefits that directly affect the common people. According to Mr. Xie Xuren, Minister of Finance, the total expenditure on these three items in 2007 was about 600 billion yuan, which is equivalent to the total fiscal expenditure 15% of the total, which is 2.4% of the annual GDP, is distributed to 1.3 billion people, with an average per capita of 461 yuan (equivalent to 3% of the annual income of an ordinary worker).In the United States, where there is no state-owned economy, the expenditure on the same three items last year was about 1.5 trillion US dollars, equivalent to 61% of the total federal government expenditure, 11.5% of the US GDP, distributed to 300 million Americans, and the average per capita was 5,000 US dollars. (Equivalent to one-sixth of the annual income of an average American). Regardless of whether it is calculated in absolute terms or in relative terms, the medical and social security provided by the US government to the people is much higher than that in China, even though the US is a completely private economy.According to the original intention of the nationalization movement, state ownership should have brought more social welfare, and we should have seen the exact opposite. Many people say that China is still in the initial stage of development, so it cannot be compared with the United States and other market economy countries. ——This statement is untenable.Last year, the U.S. fiscal revenue accounted for only 18% of GDP, while China’s fiscal revenue of 5.1 trillion yuan accounted for 20% of GDP.Therefore, even if the income of state-owned enterprises and the appreciation of state-owned assets are not included, the relative income of the Chinese government is higher than that of the United States in terms of fiscal and taxation alone. There is no reason for the expenditure on people's livelihood to be lower than that of the United States.If China is not as rich as the United States, so fiscal expenditures will be considered differently, then shouldn't China put fiscal expenditures on people's livelihood?It is not that there is no money, but that there is no substantive supervision of the budget process, so that when the government has more money, it is more inclined to waste it on image projects and government office buildings, which of course provides a breeding ground for corruption. China's legislature - the National People's Congress, local legislatures at all levels, as well as the media and other oversight mechanisms, have very little supervision and accountability of the budget, only the ten days of the national "two sessions" every year when everyone symbolically raises Hand, passed the 5 trillion yuan budget.What exactly is the logic behind these budgets?Are there places that should spend more and others that should spend less?Should we transfer more money from administrative expenses and other wasteful expenses to the welfare of ordinary people, and provide more social security, medical security, and education investment? Since growth came too easily in the first few years of opening up, there was no substantive development in the supervision of government power and budget supervision, which made the way of spending national finances unclear and the interests of disadvantaged groups could not be reflected in the budget process.People seem to think that democracy is just an abstract appeal of a few people.In fact, the necessity of democracy is not abstract, it involves how taxpayers' money and people's property are spent and distributed. In my opinion, China must carry out substantive reforms of the constitutional system now to lay the foundation for the rule of law and allow the government to assume due responsibilities instead of allowing the "disadvantage of latecomers" to continue.At the same time, land and state-owned assets should be returned to private hands, so that Chinese people can enjoy the benefits of land appreciation and asset appreciation in addition to wage income, driving the growth of domestic demand, and fundamentally transforming China's economic model , reducing dependence on exports.Only in this way can we end the current situation of "the country is too rich and the people are too poor".