How to solve the shortage of effective demand? Both sides of supply and demand deal with China's economy-Shanghai Metals Market

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How to solve the shortage of effective demand? Both sides of supply and demand deal with China's economy

Translation 07:26:12PM Dec 10, 2018 Source:Shanghai Nonferrous Metals Network

SMM12, 10th: some scholars have summed up the core of economic development: transactions, that is to say, all economic activities to promote transactions, the more transactions, the higher the GDP, the better the economic development. The most ideal state between countries is free trade, zero tariffs, zero barriers, and so on. From this point of view, China's continued opening up to the outside world is still a top priority, and the withdrawal of the government from the market is also the direction of future economic development. Resolutely not to take the old road of shutting down the country should be formulated as the most basic national policy.

The rapid economic development in China over the past years has been simply driven by investment, and the model is relatively extensive and simple, so we can see that old and dilapidated low-rise houses have been replaced by tall buildings. All kinds of highways, railways and sea-crossing bridges make the celestial cutting go through. When the urbanization process is more than half, how many tall buildings, how many railways and highways do we really need? I am afraid these are self-evident things.

How should China deal with the new economic normal? Let's go back to the 20th century. In the 20th century, there were a pair of master masters and disciples in the 20th century, Marshall and Keynes. Marshall was a supporter of the market mechanism. However, the Great Depression of 1929 brought the market economy, which had been running for 200 years, to the brink of collapse. Keynes was very distressed that the economic theory advocated by his teacher could not explain the current economic problems. However, Keynes was a great economist, and after much deliberation, He resolutely denied the completely efficient market hypothesis of Marshall neoclassical economics, created macroeconomics, and put forward a great theory, that is, the theory of effective demand. Effective demand theory is still the primary basis for countries to solve economic problems, in Keynes's view, the cause of the crisis is attributed to the lack of total demand, so he proposed that the government through investment to create demand and intervene in the market.

Today, China's economy has not only the problem of insufficient effective demand, but also the problem of overcapacity.

The lack of effective demand not only needs to solve the problem of trade frictions through diplomatic means to expand net exports, but also needs substantial tax cuts and fees to expand domestic demand. Some economists have put forward proposals to abolish personal income tax. Because personal income tax accounts for about 8% of the general public budget revenue, the removal of it is harmless, and it is really conducive to the people's livelihood. The methods are all come up with by people. The key lies in whether the government is determined to reform when it touches its own interests. Isn't the so-called reform a blunt knife to cut meat?.

The problem of overcapacity can no longer be solved by government intervention, because this round of overcapacity is caused by Keynesianism. The right thing to do is the "Belt and Road Initiative" put forward by President Xi. Some people say that this is the Chinese version of the Marshall Plan. There are both the right and the wrong parts. On the whole, it is to consume excess capacity through exports. At this time, enterprises should seize the time to transform and upgrade, do more R & D, and engage in more technological innovation or model innovation. In short, it should be infinitely in line with the tastes of consumers. As for the problem of rising unemployment caused by the reduction in the scale of production, the government should encourage the public to start a business, that is, to create a good business environment to attract entrepreneurs, including the solution to the problem of difficult financing and expensive financing. Including exorbitant tax relief and so on. It is not possible to focus solely on some large enterprises. The problem of employment still requires the joint efforts of the whole society.

It is worth mentioning the importance of scientific and technological innovation. Since the industrial revolution, from the steam engine to the electrical age, from the Internet to the intelligent age, almost all social and industrial changes have been driven by scientific and technological innovation, which also confirms the correctness of science and technology as the primary productive force. All of our enterprises should learn from Huawei. More than a decade of basic research and development has made today Huawei lucky enough to stand on top of the world and become a leader in the communications industry.

To sum up, from the supply side, scientific and technological innovation should become the goal of future economic development, enterprises should do more basic research and development, excess capacity through Belt and Road Initiative and other active digestion; On the demand side, if China wants to deal with trade frictions well, it should also open up domestic demand through proactive fiscal policies, rather than going back to the old way.

How to solve the shortage of effective demand? Both sides of supply and demand deal with China's economy

Translation 07:26:12PM Dec 10, 2018 Source:Shanghai Nonferrous Metals Network

SMM12, 10th: some scholars have summed up the core of economic development: transactions, that is to say, all economic activities to promote transactions, the more transactions, the higher the GDP, the better the economic development. The most ideal state between countries is free trade, zero tariffs, zero barriers, and so on. From this point of view, China's continued opening up to the outside world is still a top priority, and the withdrawal of the government from the market is also the direction of future economic development. Resolutely not to take the old road of shutting down the country should be formulated as the most basic national policy.

The rapid economic development in China over the past years has been simply driven by investment, and the model is relatively extensive and simple, so we can see that old and dilapidated low-rise houses have been replaced by tall buildings. All kinds of highways, railways and sea-crossing bridges make the celestial cutting go through. When the urbanization process is more than half, how many tall buildings, how many railways and highways do we really need? I am afraid these are self-evident things.

How should China deal with the new economic normal? Let's go back to the 20th century. In the 20th century, there were a pair of master masters and disciples in the 20th century, Marshall and Keynes. Marshall was a supporter of the market mechanism. However, the Great Depression of 1929 brought the market economy, which had been running for 200 years, to the brink of collapse. Keynes was very distressed that the economic theory advocated by his teacher could not explain the current economic problems. However, Keynes was a great economist, and after much deliberation, He resolutely denied the completely efficient market hypothesis of Marshall neoclassical economics, created macroeconomics, and put forward a great theory, that is, the theory of effective demand. Effective demand theory is still the primary basis for countries to solve economic problems, in Keynes's view, the cause of the crisis is attributed to the lack of total demand, so he proposed that the government through investment to create demand and intervene in the market.

Today, China's economy has not only the problem of insufficient effective demand, but also the problem of overcapacity.

The lack of effective demand not only needs to solve the problem of trade frictions through diplomatic means to expand net exports, but also needs substantial tax cuts and fees to expand domestic demand. Some economists have put forward proposals to abolish personal income tax. Because personal income tax accounts for about 8% of the general public budget revenue, the removal of it is harmless, and it is really conducive to the people's livelihood. The methods are all come up with by people. The key lies in whether the government is determined to reform when it touches its own interests. Isn't the so-called reform a blunt knife to cut meat?.

The problem of overcapacity can no longer be solved by government intervention, because this round of overcapacity is caused by Keynesianism. The right thing to do is the "Belt and Road Initiative" put forward by President Xi. Some people say that this is the Chinese version of the Marshall Plan. There are both the right and the wrong parts. On the whole, it is to consume excess capacity through exports. At this time, enterprises should seize the time to transform and upgrade, do more R & D, and engage in more technological innovation or model innovation. In short, it should be infinitely in line with the tastes of consumers. As for the problem of rising unemployment caused by the reduction in the scale of production, the government should encourage the public to start a business, that is, to create a good business environment to attract entrepreneurs, including the solution to the problem of difficult financing and expensive financing. Including exorbitant tax relief and so on. It is not possible to focus solely on some large enterprises. The problem of employment still requires the joint efforts of the whole society.

It is worth mentioning the importance of scientific and technological innovation. Since the industrial revolution, from the steam engine to the electrical age, from the Internet to the intelligent age, almost all social and industrial changes have been driven by scientific and technological innovation, which also confirms the correctness of science and technology as the primary productive force. All of our enterprises should learn from Huawei. More than a decade of basic research and development has made today Huawei lucky enough to stand on top of the world and become a leader in the communications industry.

To sum up, from the supply side, scientific and technological innovation should become the goal of future economic development, enterprises should do more basic research and development, excess capacity through Belt and Road Initiative and other active digestion; On the demand side, if China wants to deal with trade frictions well, it should also open up domestic demand through proactive fiscal policies, rather than going back to the old way.