2024.10.29

At a public forum held by the Institute for New Urbanization Studies at Tsinghua University, Liu Shijin stated that the focus of his previous remarks was not on the "trillion," but rather on the necessity of implementing short-term stimulus measures to stabilize the economy.

In response to the "trillion-stimulus plan" that had sparked heated discussions in the market, Liu Shijin, former deputy director of the Development Research Center of the State Council, has officially commented. Liu further explained at today's forum that stimulus comes at a cost, involving a combination of stimulus and reforms, spending money to build new systems, and creating indispensable institutional conditions and policy environments for high-quality and sustainable economic and social development in the medium to long term.

Liu Shijin stated that the primary challenge facing the current macroeconomy is the increasing pressure on the decline of overall demand levels. Recent data indicates that key indicators such as consumption, employment, and fiscal revenue have shown signs of significant slowdown or even contraction. According to data from the National Bureau of Statistics, the total retail sales of consumer goods increased by .% year-on-year in a certain month, accelerating by . percentage points compared to the previous month. However, this is still . percentage points lower than the .% of the same period last year.

Recently, multiple departments have introduced a package of incremental policies, and many regions have issued new rounds of consumption vouchers. Speaking of the current measures to expand consumption, Liu Shijin believes that some ideas and practices are worth discussing. "A popular proposal is to imitate developed countries and conduct 'helicopter money drops.' However, the method of distributing money universally means that even billionaires might receive it. Even if the money is given to low-income individuals, these people have generally resolved issues like food and clothing for basic sustenance. Receiving money to buy a few more loaves of bread does not address the real problems they face."

Liu Shijin believes that measures such as consumer subsidies can have a direct impact on short-term consumption growth. However, for low-income urban groups, primarily migrant workers, they face challenges such as housing, education, healthcare, social security, and old-age care. In the face of these difficulties, the small amount of income gained through "handouts" is undoubtedly like a drop in the bucket.

"To increase effective consumption demand, we must first understand the new characteristics of consumption demand at this stage," Liu Shijin said. He believes that survival-type consumption, which mainly includes food, clothing, and other daily basic needs, is stabilizing among all groups, including low-income populations. The difficulties faced by low-income groups in housing, elderly care, and social security indicate that there are still unmet developmental consumption needs.

"Expanding developmental consumption is not enough by relying solely on individual efforts, and it is far from enough. It requires the government to build the platform, and it requires a combination of government consumption expenditure and household consumption expenditure. However, at present, the level of equalization of basic public health services in our country is not high enough, which has hindered the growth of developmental consumption," Liu Shijin said.

Liu Shijin believes that the basic public health arrears for nearly 300 million migrant workers, especially the nearly 200 million migrant workers who have moved to cities, are more pronounced. In the face of insufficient demand, one of the key points to expand consumption is to significantly improve the basic public health services for new urban residents, mainly consisting of migrant workers who have moved to cities. In the short term, the focus is on the government purchasing unsold housing, converting it into affordable housing, and then providing it to new urban residents.

Fundamentally, Liu Shijin stated that insufficient domestic demand is directly related to China's current demand structure. The demand structure is backed by the income structure. At this stage, the proportion of China's middle-income group is approximately /, about 100 million people. Below this, there are about 900 million people in the low-income group. "The low proportion of the middle-income group leads to a decline in economic growth potential," Liu Shijin said.

Liu Shijin stated that in countries such as Japan and South Korea, the disparity in national income is relatively small, and the size of the middle-income group can reach %. Such a size of the middle-income group can release a large-scale, long-term demand, thereby supporting a long-term medium-speed growth.

Liu Shijin suggests that by increasing the urbanization rate (to over %) and quality (narrowing or even eliminating the gap in basic public services between urban and rural residents), we should strive to achieve the goal of doubling the middle-income population within about a decade, growing from the current 100 million to 200 million. Proposing and advancing this goal has foundational significance for extending the medium-speed growth period as much as possible and breaking the adverse impact of demand constraints on economic growth.