context: Making some of the earliest calls for supply-side reform, the New Supply economists argue that demand can be increased with the injection of new supply-side factors such as technology, material, business and management models. Stressing the constant upgrade of supply structure, New Supply economists see a new opportunity brought about by the COVID-19 outbreak.
Despite economic disruption in the wake of the epidemic, an economic upside could be structural transition. Recent interviews by Securities Daily show industry experts and scholars remain optimistic that new supply factors will gain momentum.
With strict quarantine measures impeding the flow of labour, low-end manufacturing and other traditional industries are under stress. Dong Dengxin 董登新 Wuhan University Institute of Finance and Securities director believes labour-intensive industries like construction will suffer in Q1 2020.
But blows delivered by the epidemic to the old industrial structure also facilitate a new round of structural upgrades, argues Teng Tai 滕泰 Wanb Institute of New Economics dean. Only by transferring resources to new supply factors and business forms can the state truly reduce outdated capacity and complete structural upgrades, the New Supply economists argue.
Sector-wise, the Chinese economy should shift its focus towards public services and medical care, Shao Yu 邵宇 Orient Securities chief economist points out. High-quality growth needs strong innovation and scientific research. The replacement of traditional industries and capacity must therefore be accelerated, Shao contends, expecting the idea of sustainable development to be promoted in 2020.
Agreeing with Shao, Gu Qiang 顾强 Huaxia CFLD Industry Research Institute dean identifies two drivers of future growth
- consumption upgrades
- though urbanisation rates exceeded 60 percent in 2019, large space remains for urban development over next decade
- technology upgrades
- demographic dividend is replaced by ‘engineer dividend’
- the state’s massive base of sci-tech talent will guarantee growth
- the proportion of traditional industries is now still about 70 percent
- service sector digitisation and AI integration are promising
- China’s huge market helps facilitate new industries and technologies