On August 24, at the press conference of "2020 China's Top 100 Listed Companies" held by Walton Institute of Economic Research, Shen Hanyao, President of Walton Institute of Economic Research and Chairman of China's Top 100 Forum, delivered a speech titled "Starting the Domestic Circulation with Public Economy to Achieve the Overall Revitalization of China's Economy Mr. Shen delivered a speech entitled "Realize the comprehensive revitalization of China's economy by launching the domestic cycle through public economy". President Shen took the pulse of the world economic development trend, deeply analyzed the evolution of economic growth and industrial structure, and systematically elaborated the general idea of the domestic macro-circulation, proposing that "we need to treat both the symptoms and the root causes of the problem, with the central bank of China as the first driving force, and with the fourth industry as the main battlefield, the public economy will drive the private economy to form the domestic high-quality macro-circulation of the public and private economy, and ultimately realize the comprehensive revitalization of China's economy". The ultimate goal is to revitalize China's economy in a comprehensive manner."

Shen Hanyao, President of the Walton Economic Institute and Chairman of the China Business Top 500 Forum

First, China's economic growth cycle analysis: next year's economy rebounded sharply

Shen Hanyao pointed out that the reform and opening up forty years, China's economic growth basically showed an average of about 10 years a cycle of normality. The first growth cycle, from 1981 to 1990, the economic growth rate rose from 5.1% to 15.2% and then fell to 3.9% in 1990 when the bottom, this is a sharp rise and fall, big ups and downs of the cycle, during the period can also be divided into two 5 years or so of the small cycle. The second economic cycle was from 1990 to 1999, when the economic growth rate rose rapidly from 3.9% to 14.2% in 1992, and then declined continuously to 7.7% in 1999, which was a cycle of rapid ups and downs and sharp ups and downs. The third economic growth cycle was from 2000 to 2009, in which the economic growth rate continued to rise steadily to 14.2% in 2007, and then declined rapidly due to the impact of the international financial crisis, falling to 9.4% in 2009, which was a cycle of slow ups and downs. The fourth cycle is from 2009 until now, at that time the government to deal with the financial crisis took 4 trillion fiscal stimulus plan, making the economic growth rate in 2010 and quickly rose to 10.4% of the high growth level, then the economic growth rate continued to decline, in 2019, the economic growth rate has fallen to 6.1%. Currently China's economic growth is in the trough rebound phase of the cycle. Without the outbreak of the epidemic, China's economic growth should have started to rebound this year. However, the epidemic and the escalating friction between China and the US have delayed China's economic recovery backward for some time. If the epidemic does not occur in the future large-scale rebound, the economy will definitely rebound next year, and the probability should be a more substantial rebound.

Second, China's industrial structure evolution analysis: the fourth industry to become the leading industry

(I) The fourth industrial revolution and the theory of the fourth industry

Shen Hanyao believes that the fourth industrial revolution is taking place in today's world, which is a scientific and technological revolution. Reviewing the three industrial revolutions in human history, it can be found that, in the process of replacing the old and the new in the whole industrial structure, where the proportion of new industries is high, the degree of economic development is high, and it all becomes the economic center. The first industrial revolution in the history of mankind was the agricultural revolution, whoever had the most developed agriculture was the economic center at that time. The first industrial revolution gave birth to the four major agricultural civilizations relying on the great rivers (Nile, Euphrates and Tigris, Ganges and Yellow); the second industrial revolution was the commercial revolution, relying on shipping and international trade in Italy, Spain, Holland and other countries have become the world's economic centers in the era of shipping and commerce. The third industrial revolution was the industrial revolution, and Britain and the United States successively became the world's factories and the center of the world economy in the industrial era that lasted for hundreds of years.

Since the latter half of the last century in the 1980s to the present, the fourth industrial revolution has occurred with Silicon Valley in the United States as the core, and this revolution is the science and technology revolution. In the fourth industrial revolution, whoever is at the forefront in the field of science and technology research and development, and whoever is the most developed in its science and technology education, culture and entertainment, and life and health, will become the new center of the world economy. Therefore, he had put forward the theory of the fourth industry at the beginning of the 21st century. The fourth industry mainly consists of four fields: science and technology creation and research and development, science and technology education, culture and entertainment, and medical and health care. Among them, scientific and technological R&D industry is the core of the fourth industry, and scientific and technological education, culture and entertainment, and medical and health care are its main contents. On the one hand, science and innovation R&D is the industry that creates and produces new products, technologies and industries (such as cell phones, Internet, computers, 5G, Internet of Things, big data, etc.) and, through these new products, technologies and industries, metabolizes the existing industries and promotes the rapid development of the economy. These new industries are the descendants of the science and technology R&D industry. These new industries can be manufacturing industries, such as cell phone and computer production, etc., or service industries, such as Internet commerce, such as Ali and Jingdong. On the other hand, science and technology education, culture and entertainment, and health care are the sibling industries of science and technology R&D, and they are the "nurturing" industries. For example, science and technology education promotes the growth of human beings, culture and entertainment promotes the consumption of human beings, and health care and medical treatment expands the production of human beings, which ultimately cultivate higher-quality human beings.

In addition, Shen Hanyao thinks it is necessary to explain that the fourth industry comes from the tertiary industry in the traditional classification of the three industries, but it is different from other industries in the tertiary industry, the fourth industry belongs to the economy of public goods, while the other service industries belong to the economy of private goods, and the primary and secondary industries, i.e., the production industry, are also the economy of private goods. Science, education, culture and health, etc. are public utilities, and together with the government and other public administrations, they constitute the fourth industry.

(II) Evolution of China's Consumption Structure: Upgrading from Clothing, Food, Housing and Transportation to Virtue, Intelligence, Physical Fitness and Aesthetics

Shen Hanyao emphasized that the development of the fourth industry refers to the science, education, culture and health industry. Based on the analysis of the changes in the proportion of various consumption expenditures of Chinese urban residents since 1993, he pointed out that, in terms of consumption, the "clothing, food and utilities" of Chinese residents have been solved, and the "housing and transportation" have been basically solved, while the "clothing, food, housing and transportation" of people are basically solved. He pointed out that in terms of consumption, Chinese residents have already solved the problems of "clothing, food and utilities" and "housing and transportation", while people's demand for higher-level moral, intellectual, physical and aesthetic qualities has been increasing with a huge gap. "Virtue" is culture, "wisdom" is science and technology and education, "body" is sports and medical health, and "beauty" is a higher level of behavior. is the higher realm of behavior, the pursuit and action of humanistic, artistic and natural beauty.

(III) Evolution of China's Production Structure: The Fourth Industry is the Leading Direction

Shen Hanyao introduced that by comparing the value added of industries with developed countries in the three major sectors of production sector (including primary and secondary industries), service sector and public utilities, it can be seen that, firstly, the proportion of China's production sector is significantly higher than that of other developed countries, which is 49%, 19.2% in China, 19.2% in the U.S., 28.76% in Germany, and 30.43% in Japan; and secondly, the proportion of China's service sector has increased to 37.02%, but it is still slightly lower than that of other developed countries, 52% in the U.S., 40.15% in Germany and 46.19% in Japan, of which it is worth noting that China's financial sector has surpassed the U.S., reaching 7.97%, which is higher than that of the U.S. (7.6%), while that of Germany and Japan is only 4.15%; moreover, in the real estate sector, China (6.58%) is still significantly behind the the United States (12.2%), Germany (10.88%) and Japan (11.39%), and there is still much room for development. Thirdly, the gap between China and developed countries in terms of public utilities is very large, China is 14.46%, while the United States, Germany and Japan are 28.8%, 30.54% and 23.38% respectively, which is the most core gap between China and developed countries, and is the dominant direction of China's future development.

A comprehensive revitalization plan for China's economy that addresses both the symptoms and the root causes of the problem

Shen Hanyao is very much in favor of the development strategy of "accelerating the formation of a new development pattern with the domestic macro-cycle as the main body and the domestic and international double-cycle promoting each other" put forward by the central government. He believes that this is a very wise development strategy, and the implementation of this development strategy should be carried out from the supply and demand sides at the same time. On the supply side, strengthening structural adjustment and substantially increasing the production capacity of science, education, culture and health industries is an upgrade of the supply-side structural reform in recent years, focusing on "treating the root cause"; on the demand side, emphasizing the increase of domestic demand to stimulate the economy to reverse the downward trend, which is able to "treat the symptoms" as well as "cure the root cause". The demand side, which emphasizes increasing domestic demand and stimulating the economy to reverse the downward trend, can both "treat the symptoms" and "cure the root cause", and the interaction between supply and demand will form a domestic macrocycle as the main body, and the domestic and international double cycle will promote each other. However, the problem now is that we do not seem to know where to start and where to create space for development. Nowadays, everyone mainly focuses on developing new industries and traditional economic areas, such as reducing taxes and fees, issuing consumption vouchers, and developing new infrastructures and strategic emerging industries, but the results do not seem to be very satisfactory. The reason for this is that these areas are all part of the private economy, and at present, the private goods economy can be resolved through the market economy, which operates in a state of surplus, and it is difficult to revitalize the economy substantially in a surplus economy. To revitalize the economy substantially, it is necessary to find new impetus and new space.

(i) Starting from the fourth industry to create domestic demand

Shen Hanyao pointed out that in order to be people-oriented, economic activities should be centered on the longevity and high quality of human life. The first is the basic "clothing, food, housing and transportation", followed by the high-level "moral, intellectual, physical and aesthetic". From the previous analysis of the evolution of the consumer structure, we can find that "food and clothing" has been resolved, and "housing and transportation" is basically resolved, and there is still a lot of room for development in the future, and it is still an important engine of economic development, but there is a huge gap between the supply and demand of health care and science, education and culture, and the supply of products and services in these areas is seriously insufficient. However, there is a huge gap between the supply and demand of health care, science, education and culture, and the supply of products and services in these fields is seriously insufficient, and health care, science, education and culture belong to the fourth industry. Therefore, starting from the fourth sector, expanding domestic demand and increasing supply are the new driving force and new space for future development.

(ii) Create demand for the fourth industry with China's central bank as the first driving force

Shen Hanyao introduced that the basic pattern of China's economic growth since the reform and opening up is that the international macrocycle drives the domestic macrocycle, and the first driving force is the outward-oriented economy, or more precisely, the U.S. central bank. Its path is roughly: the U.S. central bank to the Americans to issue currency, Americans overspending, the formation of China's external demand, driven by external demand for domestic demand, to promote China's economic growth. In this development model, the U.S. central bank is the first level of central bank, the first driving force to promote U.S. imports and China's exports, China's exports of foreign exchange is forced to China's central bank to the domestic issuance of RMB to create China's domestic demand, promote China's economic growth. It can be seen that the U.S. central bank is, in a sense, the first driving force of China's economic growth in previous decades. The fourth industry belongs to the public economy, relying solely on the market economic mechanism can not be developed, and must rely on the government to pull demand and stimulate development. But the current central and local government financial constraints, so the need for fiscal policy and monetary policy to effectively cooperate, the core countermeasures is to learn from the experience of the U.S. central bank, the central bank of China to replace the U.S. central bank to become the first driving force of China's economy to the government to issue currency, by the government to the science, education, culture and health sector injection of funds to create purchasing power, the formation of a new domestic demand, to promote the revitalization of China's economy.

(iii) Public goods economy drives private goods economy, realizing the overall revitalization of China's economy.

Shen Hanyao further introduces that the concrete action plan for realizing the domestic macro-circulation by the public economy driving the private goods economy with the central bank as the first driving force and the development of the fourth industry focusing on education and healthcare can be divided into several steps as follows:

1. China's central bank issues money to the central government by purchasing treasury bonds, and the central government allocates the funds to local governments in a targeted manner to build schools and hospitals. This will lead to the development of science, education, culture and health in cities at all levels of the country.

2. The development of the fourth sector of science, education, culture and health sector directed to drive the private sector economy in the infrastructure, education, hospitals, real estate and science and technology and cultural real estate development, but also led to the construction industry and its related decorative, decorative materials industry development.

3. The next wave will lead to the development of medical equipment, scientific research equipment, educational equipment, cultural and recreational facilities and other private goods economy in the manufacturing industry.

4. The above public goods economy will lead to the development of the private goods economy, which will promote the private goods economy to create GDP, profits and tax revenues.

5. After the private goods economy hands over the tax revenue to the government, the government uses the tax revenue to repay the interest and principal of the central bank loan. This is of course a long cycle lasting about 30 years.

After the private goods economy hands over tax revenues to the government, the government uses those tax revenues to pay back interest and principal on central bank loans. This is of course a long cycle lasting about 30 years. In this way, the demand side will lead the supply side reform, vigorously develop the fourth industry, and the public economy will lead the development of private economy to form a high-quality cycle, which will ultimately realize the overall revitalization of China's economy.

Shen Hanyao believes that this development idea is complementary to the development of new infrastructure and emerging industries currently under discussion, but it is a higher-quality macro-cycle, and through the development of the fourth industry, it will lead to a major transformation and upgrading of China's future economic structure, employment structure and social structure. In addition, creating demand in the form of central bank purchases of central government treasury bonds will also increase the government's debt pressure, and many people may be concerned as a result. In this regard, we need to promote capital market reform and vigorously develop direct equity financing, so that the debt ratio of society as a whole can be brought down.

(iv) Deepen reform and establish an institutional mechanism to support the development of the fourth industry

Shen Hanyao emphasized that to develop the fourth industry, it is necessary to deepen the institutional reform. First of all, encourage the establishment of the main body of scientific and educational undertakings, and liberalize the registration of social undertaking organizations and private NGOs by the Bureau of Societies. Social undertaking organizations can make up for both the market failure of insufficient supply of public products and the government failure of difficulty in meeting diversified and large-scale production of public products. Second, promoting PPP in the field of science, education, culture and health encourages social capital to enter the public goods economy, which increases the supply of public goods and reduces debt pressure. Third, with the large-scale development of science, education, culture and health, it is proposed to extend the nine-year compulsory education system to a 12-year compulsory education system, and after five years, extend the 12-year compulsory education system to a 15-year compulsory education system, so as to realize the universalization of higher education for all. Finally, a policy bank specializing in the development of science, education, culture and health fourth industry should be set up. At present, we have policy banks such as the Agricultural Development Bank, the Export-Import Bank of China, and the China Development Bank, but in science, education, culture and health, a policy bank specializing in supporting the development of the field of social and public utilities is still lacking. Therefore, a policy bank should be set up to support the development of science, education, culture and health, which could be called a social development bank or a science and education bank.