On April 14, 2017, author of On New Protracted War: China Growth Strategy under the New Normal and Director of the Research Department of Industrial Economy of the Development Research Center of the State Council Changwen ZHAO came to the Thought Leadership Forum as guest, and brought a speech titled Supply-side Reform and China’s Economic Growth Strategy. Then Deputy Editor-in-Chief of China Business News and Director of the CBN Research Institute Yanqing YANG moderated discussion on “how to look at the current economic situation” by Counselor of the People’s Bank of China and Former Director of the Statistics and Analysis Department Songcheng SHENG, Professor of Economics at Hitotsubashi University in Japan and Senior Academic Advisor to the CBN Research Institute Xiaoying WU, Chief Economist of Mizuho Securities Asia Jianguang SHEN, Chief Economist of Shenwan Hongyuan Securities Chengzhang YANG, Professor at the Department of Finance of our School Aiguo KONG and Director Changwen ZHAO. Dean Xiongwen LU gave a speech at the beginning of the activity.

Director Changwen ZHAO answered the question “how is the outlook of China’s economic growth and development in the next stage” from the strategic perspective of “protracted war”. He thought “the future of the Chinese economy is bright, but the road is full of twists and turns”. In Director Changwen ZHAO’s opinion, protracted war in Mao Zedong’s great work “On Protracted War” was not only about epistemology but also methodology and a whole set of strategic and tactical arrangements. Protracted war also applied in the economic context. Therefore, the first two chapters of On New Protracted War specially answered “why protracted war”, and the next seven chapters elaborated “how to fight well in protracted war”. At this new book reading party, he mainly elaborated the three concepts of late-mover advantage, possibility of reforming the system and economic ecology to help the audience understand the core logic of protracted war better.

Late-mover advantage meant countries on the frontier had more opportunities to learn, draw lessons and even adopt the model of taking whatever was useful for technological progress so as to realize faster growth than frontier countries. Possibility of reforming the system determined whether a country’s system could keep progressing and innovating with the times and whether reform could be pushed forward continuously. Late-mover advantage and possibility of reforming the system actually reflected the divergence between neoclassical growth economics and new system economics: whether technology or the system came first in the development of the national economy. In fact, the two could be united in one framework. According to these two dimensions, all countries in the world could be classified into four types. China belonged to the type of “having strong late-mover advantage and at the same having high possibility of reforming the system”, i.e. “one major country in innovation-based development”, and there’s no reason why “one major country in innovation-based development” would not maintain a higher or better growth rate in the near future. This answer showed the future of the Chinese economy was bright.

Meanwhile, “the road is full of twists and turns”. Director Changwen ZHAO put forward the concept of “economic ecology”. Like natural ecology, economic ecology was polluted easily. “The path of economic pollution abatement is pushing forward supply-side structural reform, cutting overcapacity and excess inventory and deleveraging.”

The corresponding methodology proceeding from these three concepts was also very clear: paying attention to late-mover advantage to release speed and rhythm; creating ecology beneficial to politicians’ innovation in the economic system to ensure possibility of reform; building an innovation-oriented economic structure for economic pollution abatement.

Next, Director Changwen ZHAO and the five guests engaged in a roundtable discussion. Professor of Economics at Hitotsubashi University in Japan and Senior Academic Advisor to the CBN Research Institute Xiaoying WU thought that we should not only attach importance to “late-mover advantage”, but also give attention to “late-mover disadvantage”. “Possibility of reform is a question of possibility, and whether it can be realized continuously is vitally important. Only in this way can late-mover advantage be truly brought into full play. Meanwhile, the system can be reformed continuously to overcome the problem of late-mover disadvantage.”

Professor at the Department of Finance of our School Aiguo KONG also further emphasized the importance of system reform and proposed “system reform should preferably return to enterprises and return to human nature”, but how to include it into economic growth models was yet to be studied.

Counselor of the People’s Bank of China and Former Director of the Statistics and Analysis Department Songcheng SHENG pointed out three highlights in On New Protracted War: the first one was studying problems of the national economy in terms of methodology; the second one was proceeding from the most basic theoretical framework to combine economy, philosophy and history; the third one was proposing a more comprehensive policy plan instead of a fragmentary one.

Chief Economist of Mizuho Securities Asia Jianguang SHEN also agreed to the opinion that late-mover advantage occupies an important place in China’s economic development, but he reminded the audience that “a system’s advantage can hardly described and can never be explained clearly just from the perspectives of the market, enterprises and opening as we imagine”.

Chief Economist of Shenwan Hongyuan Securities Chengzhang YANG, in light of the current situation, hoped “the government could refrain from market intervention and resource allocation as much as possible and delineate the boundary between the government and the market more clearly, which is the core issue for China’s long-term growth, improvement of efficiency and innovation”.