Opportunities outweigh challenges in building a new development pattern —— An interview with Lin Yifu, honorary president of National Development Research Institute of Peking University

　　Facing the severe and complicated situation, the CPC Central Committee with the Supreme Leader as the core has profoundly grasped the general trend of the world and the law of development, scientifically analyzed the new changes of opportunities and challenges faced by China’s development, focused on the medium-and long-term development of China’s economy, and made a strategic decision to accelerate the formation of a new development pattern with domestic macro-cycle as the main body and domestic and international dual-cycle promoting each other.

　　How to understand the background and significance of building a new development pattern? How to build a new development pattern? On these issues, our reporter interviewed Lin Yifu, honorary president of the National Development Research Institute of Peking University.

　　It is inevitable for China’s economy to turn to the domestic circular economy as the main body.

　　Reporter: What is the background of proposing to build a new development pattern? How does it relate to the current domestic and international situation and the development stage of China?

　　Lin Yifu: Building a new development pattern is a strategic decision made by the CPC Central Committee with the Supreme Leader as the core according to the changes in China’s development stage, environment and conditions.

　　There are short-term reasons for this. The global epidemic of COVID-19 has greatly impacted the economies of many countries and hindered international trade. According to the forecast of the World Trade Organization, global trade is expected to shrink by 13% to 32% in 2020, which may exceed the level during the 2008 international financial crisis. Coupled with the increasing uncertainty in the international market, China’s exports will inevitably be affected. In the case of sluggish demand in the international market, we need to accelerate the release of domestic demand potential and stimulate the vitality of the domestic cycle.

　　More important is the long-term reason. In the past, some people always regarded China’s development model as "export-oriented", which was not accurate. From the experience of countries around the world, the domestic market of large economies is large, the industrial categories are complete than those of small economies, the proportion of import and export trade in GDP will be lower than that of small economies, and the proportion of domestic consumption and investment in GDP will be higher.

　　In 2006, China’s per capita GDP was around 2000 US dollars, accounting for 5.3% of the world’s GDP and 35.4% of exports. By 2019, as the second largest economy in the world, China’s per capita GDP has exceeded 10,000 US dollars, accounting for 16.4% of the world’s GDP, while the proportion of exports to GDP has dropped to 17.4%. The reason behind it is not complicated: with the continuous improvement of the income level of a country’s residents, the increase of economic volume and market scale, domestic products are more used to meet domestic needs, and the industrial structure is constantly changing, the proportion of the tertiary industry in GDP will become larger and larger, and many of the tertiary industries are non-tradable.

　　According to the law of economic development and the experience of developed countries, the proportion of exports in China’s GDP will gradually decrease in the future, and it is a historical necessity and a development necessity for China’s economy to transform into a large domestic cycle. In this situation, the CPC Central Committee with the Supreme Leader as the core put forward that "accelerating the formation of a new development pattern with the domestic macro-cycle as the main body and the domestic and international dual-cycle promoting each other" is conducive to rooting out the root cause, avoiding the outside world from simply treating China’s development model as "export-oriented", and also helping to lead the people of the whole country to accurately grasp the current development environment and stage, thus strengthening their confidence and building a new development pattern.

　　China can seize the precious opportunity of high-quality development and have sufficient ability to meet various challenges.

　　Reporter: What are the favorable and unfavorable factors for China to build a new development pattern under the current complicated and severe situation, and how should we seize the opportunities and meet the challenges?

　　Lin Yifu: To build a new development pattern, China has unique advantages and also faces some challenges. Generally speaking, opportunities outweigh challenges.

　　As a developing country, China has the advantage of catching up. Whether in manufacturing or service industry, we still have a certain gap with developed countries, and the international "frame of reference" provides us with development goals and paths that we can learn from. By deepening reform, strengthening innovation and improving per capita labor productivity, it is expected to steadily improve and catch up.

　　What is more valuable is that a new round of scientific and technological revolution and industrial transformation is in the ascendant, which brings us a valuable opportunity to change lanes and overtake. The new round of scientific and technological revolution and industrial transformation is characterized by the fact that human capital is the main input and financial capital is relatively small. As a country with a large population and a large number of talents, China has a large number of high-quality talents. As the largest market in the world, China also provides a broad application scenario for new technologies, new products and new formats. In addition, China also has the most complete industrial system and the strongest industrial supporting capacity in the world, which is conducive to accelerating the pace of innovation. Last year, among the 494 unicorn enterprises in the world, there were 206 in China, ranking first in the world, which fully proved our advantages.

　　The increasing uncertainty in the international market, the impact of global industrial chain supply chain due to non-economic factors, and the "stuck neck" problem in the field of science and technology have also brought challenges to the construction of a new development pattern, but in the long run, we can successfully cope with these challenges.

　　On the one hand, China has a strong ability of independent innovation. In the past, the domestic output of some products was less, some because they did not have relevant technology, and more because the domestic technology was not mature enough, the production cost was higher and the yield was lower. In the future, with the expansion of domestic demand, related technologies will mature, the cost will gradually decrease, and the gap with the world advanced level will become smaller and smaller.

　　On the other hand, we should also see that the global market is a big "cake". Although some countries are pursuing protectionism and unilateralism, the general trend of economic globalization will not change, the charm of China market will not diminish, and there are still many countries, regions and enterprises willing to cooperate with China. The CPC Central Committee’s proposal to build a new development pattern is by no means to close the door and close the operation. While releasing the potential of domestic demand and strengthening independent innovation, China will also comprehensively improve the level of opening up, create a good external environment, and make good use of both international and domestic markets and resources as much as possible. In this way, we can continue to reap broad market space and cooperation opportunities, share the dividends of China’s economic development and globalization with friendly countries, and realize the "domestic and international dual-cycle mutual promotion".

　　Deepen reform, expand domestic demand, and start with production, distribution, circulation and consumption to smooth the national economic cycle.

　　Reporter: General Secretary of the Supreme Leader pointed out that a new development pattern should be built with the smooth circulation of the national economy as the main task. In your opinion, what are the "blocking points" and "breakpoints" in the current national economic cycle, and how should they be unblocked?

　　Lin Yifu: The most important and effective means to smooth the national economic cycle is to deepen reform. Focusing on "making the market play a decisive role in resource allocation and giving better play to the role of the government" put forward by the Third Plenary Session of the 18th CPC Central Committee, and adhering to and improving the socialist basic economic system, we can continuously promote technological progress, industrial upgrading and residents’ income, thus achieving high-quality economic development.

　　The key point of deepening reform in the next step should be the factor marketization reform. Over the past 40 years of reform and opening up, China’s commodity and service markets have developed rapidly, but the development of factor markets is still insufficient and the allocation of resources is still distorted. Specifically, in the financial market, farmers and small and micro enterprises should be given greater financial support through reform; In the talent market, we should clear the obstacles of cross-regional talent flow through measures such as household registration system reform; In the land market, we should deepen the reform of rural collective land system. In addition, we must adhere to the "two unwavering", break all kinds of unreasonable market access restrictions, and break the blocking point for private enterprises to invest and start businesses.

　　To smooth the national economic cycle, we must also seize the strategic basis of expanding domestic demand, so that production, distribution, circulation and consumption rely more on the domestic market.

　　In production, we should ensure the safety and stability of the industrial chain supply chain and promote the development of regional integration. In the future, China’s manufacturing industry will gradually turn to capital-intensive and technology-intensive, and the industrial chain will be more complex and higher-end. In order to make the industry competitive enough, it is necessary to give full play to the comparative advantages of various regions in large enough regions such as Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area and Chengdu-Chongqing Economic Zone, build industrial clusters, form scale effects, and drive the technological level to jump.

　　In distribution, we should give consideration to efficiency and fairness, and further narrow the income gap. Economic development is a process of structural change, and relevant departments should provide necessary support such as vocational skills training for workers.

　　In circulation, it is necessary to further reduce transaction links, reduce transaction costs, improve circulation efficiency, and make production factors efficiently circulate and rationally allocate between regions and urban and rural areas.

　　In terms of consumption, it is necessary to improve the income level of residents and improve the social security system to enhance their ability and confidence in consumption.

　　Generally speaking, China has great development potential and strong resilience. Let the effective market and the promising government combine organically and work together, so that we can continuously release the development potential, improve the quality of development and accelerate the formation of a new development pattern.