What does supply-side reform change?

Supply-side structural reform is to improve the quality of supply, promote structural adjustment by means of reform, correct the distortion of the allocation of factors, expand effective supply, improve the adaptability and flexibility of the supply structure to changes in demand, increase the total factor productivity, better meet the needs of the masses, and promote the sustained and healthy economic and social development. What is supply-side reform, the following I answer for you!

What is supply-side reform?

The so-called supply-side is corresponding to the demand side, there is a minimum of general knowledge of economics people know that the market is dominated by demand-supply.

Everyone has a variety of needs, demand is the origin of the economy and society, the supply is to meet the needs of the economic means. 1978, China began to implement the policy of reform and opening up, China formally entered the market economy society, China's economy after nearly 40 years of rapid development to realize the scale of 67 trillion. The Chinese economy has been in a state of scarcity for the past 40 years, which means that the majority of the population has a relative lack of purchasing power, and therefore the supply structure of the entire economy has been built on the idea of cost-effective, low-profit, high-marketing.

However, on the one hand, as China's market economy becomes more and more mature, the entire society's labor costs, land costs, raw material costs, etc. are rising, and many industries, although more sales, but the profits are so thin that they are almost none, i.e., they are unprofitable, so a lot of money has been pumped out of the real estate industry into the stock market, real estate market, and other virtual industries, which is one of the `one side of the stock market and real estate market bubbles' of the past few years ( Interested in reading the historical article "how to dissolve the real estate bubble? The unringing of the bell must be tied!") On the other hand, with the rapid development of the economy, people's incomes are also rising, China has emerged as a 100 million or so middle-class consumer groups, and the size of this group is constantly expanding, the original domestic supply of cheap, low-quality products and services have not been able to meet their needs, they are looking for higher-quality, more distinctive products and services, the two years of the Golden Week to run to Japan to buy a smart toilet seat, Multifunctional rice cooker is this group of people. Therefore, on the one hand, the industrial structure itself is under pressure, on the one hand, the demand side of the consumer upgrading, then the supply side of the industrial structure of the reform has been put forward in a logical manner.

How to reform the supply side?

For domestic free-market industries, such as the digital industry, cell phone industry, apparel industry, catering industry and other consumer industries, are very sensitive to changes in demand, and along with the rise of the Internet, mobile Internet, the original business structure adjustment has become fast and efficient. On the one hand, using mobile Internet technology, some startups are transforming traditional industries, such as e-commerce on the transformation of the retail industry, the transformation of the takeaway group purchase on the catering industry, the transformation of the car hailing platform on the travel industry, etc.; there are also some startups in the development of new industries, such as unmanned vehicles, drones, VR equipment, network community services, and so on. On the other hand, traditional industries are also upgrading themselves, such as Suning's e-commerce, Huawei's manufacturing of medium- and high-end smartphones to enter the top three in the international market, domestic home appliance companies developed 4K HD cloud TVs, smart homes, etc. (For a more detailed introduction, you can look at the historical article, "Why the Internet is so hot"). These are some high value-added industries, all of which have been innovatively created in response to domestic consumption upgrades. For the supply-side reform of this type of industry, it is spontaneously promoted from the bottom up, and the government has been actively encouraging and policy support, last year during the two sessions of the Premier proposed? Internet+? The concept is the government's encouragement signal.

And some of the national livelihood by the government to regulate the important industries, such as oil, steel, telecommunications, banking, stock market, property market and other basic industries, due to the huge volume, for the change in demand is not so sensitive. In this regard, the supply-side reform, after the two sessions last year, the central government began to actively promote. Oil and steel to go to production capacity, the property market to go to inventory, telecommunications to reduce tariffs, stock market regulation, tax cuts and interest rate cuts, reduce the burden on enterprises and financing difficulties and so on. The supply-side reform in this regard mainly relies on the top-down driving force, and is promoted through a combination of fiscal and monetary policies. This industrial reform, on the one hand, to achieve supply-side optimization and upgrading, from low-end to high-end development, from low value-added to high-value-added transformation; on the other hand, we must also ensure that the basic livelihood of the industry is not chaotic, for example, the property market restrictions on purchases in parallel with the de-inventory, in order to inhibit the expansion of the bubble, and prevent the bubble bursting of the impact on the economy as a whole.

What's the relationship with the people?

Supply-side reform is not only an economic policy, but also a livelihood project. It does not mean that after the supply-side reform, in order to meet the needs of the middle class, the quality of products and services went up, and the price also went up, increasing the burden of life for the general public. The logic of the development of things is not only this line, there is another line.

As the supply-side reform advances, domestic products and services will indeed see a rise in quality and prices, but in meeting the consumption needs of the middle class, it will lead to the development of related industries. As the level of corporate profitability rises significantly, more capital will be invested in equipment, technology and other production and distribution, which will lead to an increase in people's work efficiency, thus bringing about a significant increase in income. The rise in wages in China over the past decade is not only due to the rapid development of China's economy and rising prices, which is superficial, but also due to the significant increase in productivity of the Chinese economy over the past decade, which has brought about the rise in wages.

But as mentioned above, China's economic development to this point, the original industrial structure can not ensure that the economy continues to rise, and accompanied by a large number of internal structural pressure. Only through industrial upgrading, supply-side reform, and a change in the economic growth model, can we realize the second takeoff of the Chinese economy, and people's incomes can grow at a sustained pace. Demand upgrading leads to industrial upgrading, industrial upgrading leads to productivity improvement, productivity improvement ushers in a new round of high economic growth and sustainable income growth, and people with increased purchasing power will in turn lead to upgraded demand. This will be a virtuous cycle of economic growth, and this process can really benefit the people? Income increases, increased purchasing power, diversified needs of high-quality to meet, for example, when your annual salary increased from 50,000 to 500,000, foreign travel, high-end decoration, private cars, these potential needs will be effectively met. Some organizations predict that 70% of the people in China (nearly 1 billion) will become middle class in 2030, when people's living conditions such as food, clothing, housing, transportation and other living conditions will be greatly improved. This is the immediate impact and long-term effect of supply-side reform on the people, and this is the relationship between supply-side reform and the people.

Breaking through the middle-income trap

Many countries in the world have fallen into the middle-income trap when their economies ended a round of rapid growth, which means that economic growth has been stagnant or low for a long time, and people's real incomes have not been improved for a long time. And like Japan and South Korea and other late modernization countries, the reason why they can break through the middle-income trap, is that after the first round of rapid economic growth, by virtue of industrial upgrading to achieve the second accelerated economic upgrading, so as to achieve long-term high-speed economic growth and the people's income into the high-income level countries.

And China's economy is experiencing this from a round of high growth to the second round of high-speed growth shift period, and China has such a large economic volume, the industrial structure is much more complex than Japan and South Korea, especially since 2015 for the internal and external urgent requirements of industrial upgrading, supply-side reform on behalf of industrial upgrading has only been put forward and emphasized in many rounds. China's economy only shift gears successfully, so many young people's entrepreneurial dreams, the majority of people's expectations of poverty alleviation, China's full access to the sequence of developed countries in order to achieve the national goal, so the supply-side reform, industrial structure upgrading is imperative, and is bound to become.