Morgan Stanley mentioned that "we are standing at an
important turning point in China's economy and capital market. The
resetting of the underlying logic of the economy brought about by the new goals
is marked by the supervision of Internet giants. China is changing the
underlying logic of economic development: shifting from priority growth to fairness". In their view, this policy orientation, coupled with Chinese economic rationale,
will have a long-term and far-reaching impact on China's future development,
business, and investment.
economic rationale is a part of social phenomenon, the fundamental basis of
economy logic also lies in changes in demographic factors. Although human
factors are crucial in economic activity, they are often overlooked due to the
long-term and individual nature of changes in population quality and scale. On
the contrary, industrial development and policy choices pay more attention to
changes in external factors such as cost, technology, and capital. However, the
underlying logic changes caused by demographic shifts are often decisive and could
serve as the basis for corporate decision-making and macro-policy.
transition from a high-growth era to high-quality diffusion shows that the
underlying foundation of the country's economic development has changed fundamentally.
From the demand side, the past trend of counting on exports and investment as
economic drivers will soon become obsolete. At the same time, driven by
continuous investment on the supply side in the past, the steady growth of
production capacity not only conforms to domestic demand, but also the
subsequent expansion of exports has also turned China into the world's factory,
resulting in excess production capacity. After its rapid development, internal contradictions
continue to accumulate, resulting in a widening gap between the rich and the
poor, excessive collection of environmental resources, declining investment
returns, and rising labor costs in the country. These factors have deprived
China's economy of its potential for scale expansion. On this basis, China's
economy began to turn inward. Upgrading value content and output efficiency have
become the key to improving its industrial productivity and competitiveness.
the underlying logic, China's population structure is undergoing a trend adjustment.
The declining share of labor force driven by continuous urbanization and the rural
population transfer has alternated labor supply. The low-end labor force has
now become relatively insufficient, while the industrial labor costs continue
to rise. This makes cost-push expansion increasingly onerous. On the other hand, with the development of urbanization
to a certain stage, rising land prices, housing, and education costs begin to
erode the spending power of households, causing an increasingly inadequate
domestic demand. These two aspects are eroding the long-term growth potential of the
Chinese economy. The recent drop in China's economic growth rate is not only
caused by cyclical factors driven by demand, but also by structural factors at
the supply side.
terms of policy trends, whether it is the "13th Five-Year Plan"
poverty alleviation, or the current policies on common prosperity and unification
of the large market, the fairness of these supply-side structural reform
policies is being strengthened. The purpose is to enhance the contribution of
science and technology and human capital to the economy. By increasing
household income and spending power, China's economy can achieve endogenous
economic growth. Despite increased macroeconomic pressures and the need for
countercyclical policies, macro foundation has yet to change significantly. The
focus remains on decisive regulation and quality improvement, which is the
logic of the policy change.
implementing the supply-side reform, the Chinese economy still needs to improve
the structure of supply through incremental expansion to achieve a balance
between efficiency and fairness. Morgan Stanley revealed that, on the one hand,
the efficiency improvement brought about by digital industrialization is the
main area for China's future market expansion. On the other hand, further
urbanization still has great significance in the market space. These two
aspects will be the main essence of China's economic growth in the future, and therefore
the focus of policy support and catalyst. Overall, under the new underlying logic,
increasing households' income, reducing class gaps, and increasing the output
of capital and labor would be the main lines of sustainable development in the
future. This pattern suggests that economic expansion has become relatively
less important in policymaking. As noted by Morgan Stanley, China "is
shifting its regulatory priorities to a balance between growth, sustainability,
improving social imbalances, and maintaining security. This will shift the
division of economic benefits to workers and reduce corporate profits".
the policy-oriented changes under this underlying logic could be precarious.
Due to the dominant role of government policies in market supervision,
education, transformation of scientific and technological achievements, as well
as the allocation of public resources, the impact of policies on economic and
market development is getting more pronounced. For the industry and market
players, future development must consider even more policy influences. At present, education and the
consolidation of internet platform companies have had a significant impact on
related fields and investors. Concernedly, as policy influence continues to expand, so
do the risks posed by policy excesses. Although the current policy does not emphasize "one-size-fits-all"
but rather "precise regulation", it is often strenuous to achieve
"moderate" and "balance" in the current policy
implementation capacity. Meanwhile, the risk of excessive supervision continues
to cause harm to economic activities. Therefore, under the expanding policy
influences, policy decision-making should be more cautious to prevent harm or
excessive intervention in the market and economic activities.
the fundamental changes in the underlying logic of China's economy, the policy
focus will be more equitable. Not only must industries adapt to the new economic
rationale, but policy formulation and its implementation should also be more vigilant.
Ensuring sufficient supply and effective demand will be a challenge for China's
sustainable economic growth in the future.
ANBOUND Research Center (Malaysia) Sdn Bhd (1006190-U)
Suite 25.5, Level 25, Menara AIA Sentral, 30 Jalan Sultan Ismail, 50250 Kuala Lumpur
TEL : +60 3-21413678 Email : firstname.lastname@example.org ; email@example.com