Why is it difficult for China to digest the "four trillion" sequelae?

At the time of the two financial crises, China was at a different stage of development. Instead of choosing to return to the potential growth rate of the past, we should try to return to the new potential growth rate. In this case, we will encounter the following two problems: First, the aftermath of excessive stimulation, such as overcapacity, high leverage, zombie companies and so on. Second, we are still trying to adopt an economic stimulus policy, but it is not as strong as pushing the rope.
Why is it difficult for China to digest the "four trillion" sequelae?

The external shocks on the supply side and the demand side are worthy of study first. We are now in the new normal of economic development. For the problems we face, we should start with the adjustment of structure, transformation mode and transformation of economic growth momentum, but in this process. In the mean, external shocks are inevitable, so we must also be prepared - not to mention that some crises may also be caused by their own causes. Therefore, we need both internal and external considerations to prevent systemic risks. Therefore, a retrospective study of the two oil crises and the financial crisis, after comparative analysis, refining its policy implications, I think it is necessary and valuable.
Second, I think the oil crisis and the financial crisis are different. In general, the oil crisis is a typical supply-side external shock, and the financial crisis is a demand-side external shock. In the oil crisis, we are mainly the bearers of the supply side impact. For example, we have just experienced price shocks from bulk products. Although the direction is just the opposite of the oil crisis that erupted in the past, studying the problem from one direction, after giving the opposite and reverse thinking, can still bring targeted policy lessons. This is also necessary. For example, the so-called "cost reduction, transfer mode, adjustment structure" is often caused by the external impact of the supply side. For the demand side crisis, we are affected by it, and the crisis itself may be made by ourselves. We also need to be vigilant.
In the past, we have had a lot of discussions about the financial crisis. It is worthwhile to go back and focus on the external shock on the supply side. A comparative study of the two types of crises is needed to point out the respective policies and their implications.

The impact of the oil crisis on the Japanese economy can be a foregone conclusion. Economists often study to give policy advice, so it may be more important to understand the different effects of the crisis caused by the external shocks on the supply side and the demand side.
I think the oil crisis has had a profound impact on Japan's economic trends. Some scholars have concluded that the oil crisis "breaks" the process of Japan's economic growth, but I think that in terms of terms, "impact" is more relevant to "breaking" than "breaking." In the 1970s, Japan had completed the development stage of the initial catch-up. That is to say, the 1950s-70s was Japan's typical demographic dividend harvest period, and the population dependency ratio dropped significantly. This is just like China's situation before 2010— - The population dependency ratio has declined faster.
But since the early 1970s, Japan’s dependency ratio has fallen to its lowest point and has remained at a low point for nearly 20 years – in contrast, China’s population dependency ratio data is V-shaped, which is the lowest Immediately after the point, it turns to rise, that is, the loss of the demographic dividend is instantaneous.
Japan’s economic buffer period was from the 1970s to the 1990s. When the population dependency ratio no longer declined, all factors were affected, including labor supply, human capital supply, return on capital, and resource allocation efficiency, thus affecting total factor productivity. And will inevitably lead to a decline in potential productivity. Thus, between the 1950s and the 1970s, Japan’s economic growth rate was basically 9.3%; in the 1970s and 1990s, the economic growth rate fell to 3.8%, of course, there was volatility between the years; after the 1990s, Japan entered The "stagnation of 30 years" (or "lost 30 years"), the economy is close to zero growth.
In the meantime, in response to the oil crisis, Japan adopted measures to formulate new energy policies, cultivate national energy conservation awareness, and adjust industrial structure, so that economic growth will be resource-saving and environmentally friendly. That is to say, after the 1970s, Japan was already a high-income country, with energy consumption approaching zero growth, still maintaining economic growth, and living standards have not declined. Japan's economy is considered to be “roman club-style growth”.
But from another point of view, the Japanese economy also had a supply-side problem at this time. Perhaps Japan did not realize it at the time, but the crisis provided a false signal, which also responded to this signal. In this sense, I feel that Japan has achieved "cost reduction, restructuring and transfer methods."
But we can also see that because the signal itself has problems, and the cost reduction is “standard”, the transfer mode and the adjustment structure are “this”. Japan is more successful in the “transfer mode”, and the relatively weaker one is “tune structure”. . It still believes that it is the oil crisis rather than the problems on the supply side that affects economic development, and accordingly adopts economic stimulus policies, thus taking a detour in “adjusting the structure”.

The two financial crises China's development stage is different from the causes and backgrounds of the two financial crises. The academic circles have various viewpoints. These views are not mutually competitive but complementary. Combining them can explain the financial crisis better. s reason. However, the Asian financial crisis was induced in developing countries, and the global financial crisis was triggered by the US subprime mortgage crisis. There are many differences between the two. Some scholars believe that China is in a different cycle in two crises. I think this is worth noting, but it should not be said that it is in different stages of the cycle, because if it is in different cycles, it is easy for us to harmonize the Asian financial crisis and China's response policy after 2008.
I think it is clear that China was at a different stage of development when two crises occurred. Although we have always been a developing country and a middle-income country, according to the supply-side factors affecting the potential growth rate, that is, the increase in the supply of production factors, the rate of return on capital, and the rate of productivity increase, it is clear that after 1998 and after 2009, we are faced with The stage of development is different. Therefore, in the face of the demand side crisis, although the economic stimulus policy has been adopted, the result will be different. The purpose of stimulating economic growth is to return the impact of economic growth to potential growth rates.
However, the potential growth rate of China in 1998 and 2009 is different. Obviously, in the second financial crisis, our potential growth rate is no longer double-digit, not only gradually decreasing, but also falling faster. . Since the disappearance of the demographic dividend is a V-shaped turn, the potential growth rate is also abrupt. As I have simulated in the past, China’s potential growth rate before 2010 was basically around 10%, and the Asian financial crisis was at that stage; after the 12th Five-Year Plan after 2010, China’s economic growth rate dropped to only 7.6. %, to the present "13th Five-Year Plan", the potential growth rate is only 6.2%, which is a huge change.
If China continues to pursue the return of economic growth to the historical potential growth rate, it is very likely that mistakes will be made. The sequelae of the four trillion plan are difficult to digest in the long run, which is an example.
Since China's development stage is different after the two financial crises, we no longer choose to return to the potential growth rate of the past, but try to return to the new potential growth rate. Otherwise, we will encounter the following two problems: First, excessive stimulation will bring sequelae, such as overcapacity, high leverage, zombie companies and so on. Second, we are still trying to adopt an economic stimulus policy, but the effect is not satisfactory, and it is not as strong as “pushing the rope”.
We can more closely analyze the differences and causes of inflation, return on investment, and duration of the two financial crises. I think it would be more convenient to put it in the framework of the development phase of change, perhaps more easily than in a different cycle framework.
In addition, how do we understand the second financial crisis triggered by the US subprime mortgage crisis? This is related to the world economic situation and the trend of globalization, and it can also explain the unexpected changes in the political structure of contemporary Western countries. In the process of globalization, any country must inevitably adjust its industrial structure. China happens to be a favorable side of the adjustment – ​​globalization requires cheap labor, and we have a rich workforce, that is, the round of global economic development and our dual economy coincide. Although we did not emphasize redistribution and eliminate the income gap, the expansion of employment itself is an inclusive growth. Therefore, we have unwittingly enjoyed the benefits of globalization.
In the past, there were mainly intra-industry trades between Western countries. There were no major differences in factors, so there was no change in interest structure adjustment and employment division. When Western countries trade with developing countries with completely different endowments of production factors, it is clear that developed countries tend to reduce labor gains in such trades, and tend to reduce capital gains in developing countries, which has led to developed countries. Workers are damaged – labor market polarization: high-skilled jobs and low-end jobs in the non-trade sector are growing fast, while jobs in the middle of manufacturing skilled workers are deprived.
Therefore, the income distribution of developed countries has been polarized, and the middle class cannot benefit from globalization. The United States tends to populize economic policies, adopt loose financial policies, expand credit, and create a real estate bubble. When the bubble bursts, the subprime mortgage crisis officially broke out, and these employment problems remain unresolved.
(The author of this article: Director of the Institute of Population and Labor Economics of the Chinese Academy of Social Sciences, Director of the Human Resources Research Center, Doctoral Supervisor. Representative of the 17th National Congress of the Communist Party of China; Representative of the 11th National People's Congress, Member of the Standing Committee of the National People's Congress, Agriculture and Rural Areas Committee member.)

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