We want to build the best boat and make some money along the way! The key to supply-side reform is to improve the quality and efficiency of economic growth

"Supply-side reform" has recently become a high-frequency vocabulary. General Secretary Xi Jinping once emphasized at a meeting of the Central Financial and Economic Leading Group that while moderately expanding aggregate demand, efforts should be made to strengthen supply-side structural reforms. Premier Li Keqiang also emphasized again when presiding over the working meeting on the preparation of the "Thirteenth Five-Year Plan" "Planning Outline" that efforts should be made on both the supply side and the demand side to promote the industry towards the mid-to-high end. So, what does “supply side” mean? What are the specific contents of supply-side structural reform? What issues need to be addressed?

1. What exactly is "supply-side reform"?

Prior to this, clues of structural reform ideas starting from the supply side have emerged. When Liu He, director of the Central Finance Office and deputy director of the National Development and Reform Commission, visited Guangdong, he emphasized the need to vigorously promote market-oriented reforms, pay more attention to supply-side adjustments, accelerate the elimination of zombie companies, and effectively resolve excess production capacity.

However, what is "supply-side reform" is the products produced by your supply side that consumers, especially domestic consumers, need. What we need now is not high-quality and cheap things. With the accumulation of wealth, what people need more is quality products and life. Therefore, 6 million people go abroad during the Spring Festival, and my country is the largest consumer market for luxury goods.

Our consumers have quietly upgraded their consumption and realized the transition from a large producer to a large consumer. What they need are high-quality products and high-quality services. There are scenes of people going abroad to buy up rice cookers, horse lids, milk powder, medicines and health products and even condoms.

The popularity of overseas purchasing and overseas travel has reflected people’s consumer desires and needs, because most of our companies are at a certain stage of industrial upgrading and have not yet completed the transformation into high-end manufacturing and precision production, and most of the products they produce are low-end, low-value-added products. The business community should carry forward the spirit of craftsmanship to produce high-quality products. Everyone will support and consume domestic products without hesitation.

2. What is the core of supply-side reform?

Looking back at the LED display industry, we can see that on the one hand, the industry has entered a deep reshuffle, on the other hand, the market has become more rational, and the market will pay more attention to the product itself. For any product to compete in the market, it is inevitable to make a good product. Only businessmen do not pay attention to what the product does, nor do they care about the quality of the product. What businessmen focus on is: I will do whatever makes money! Today if real estate makes money, I will do real estate; tomorrow if electronics makes money, I will do electronics; if IT makes money the day after tomorrow, I will do IT. Anyway, I do whatever it takes to make money! Entrepreneurs focus on product research and development. Therefore, paying attention to products is what every entrepreneur has to face, and must do so! For example, a shipyard owner abroad said: "We will make the best ship and make some money on the way."

Supply-side structural reform will occupy a prominent position during the "Thirteenth Five-Year Plan" period and even longer, and will play an important role in the stability, long-term and healthy vitality of China's economy in the future. However, before implementing supply-side structural reform, we must first understand its connotation and core so that it can be targeted and effective.

Experts pointed out that the key to advancing supply-side structural reform is to improve the quality and efficiency of economic growth and comprehensively enhance China's factor productivity in all aspects. At this stage, the policy focus should be on increasing supply-side adjustments, guiding the supply-side reduction and structural adjustment of excess production capacity, and reaching a new level compatible with the demand side. Only when prices stabilize and corporate profitability recovers can the transformation and rebalancing be achieved.

When emphasizing the core of supply-side reform, some experts believe that it is to reduce the institutional transaction costs of enterprises, including transaction costs, various taxes, financing costs, social security costs, etc. This will help enhance corporate innovation capabilities, improve supply quality and efficiency, improve supply structure, and ultimately increase total factor productivity.

As a representative of the "New Supply School Research Group", Jia Kang, president of the China New Supply-side Economics Research Institute and former director of the Institute of Fiscal Science of the Ministry of Finance, proposed as early as 2013 that the core of China's future reform should start from the supply side.

3. Supply reform promotes industry rebirth

The ancients said: Thousands of sails pass by the side of the sunken boat, and thousands of trees spring in front of the diseased trees. There are still phenomena such as product homogeneity and vicious price competition in the industry, but the driving force for long-term economic development comes from innovation. If we want to solve a series of problems such as low-end LED display products disrupting the market and corporate overcapacity under the new normal, we must innovate systems and mechanisms and vigorously promote supply-side structural reforms. In this process, those rigid and backward production capacities must be eliminated. This is painful from a local perspective, but from an overall and long-term perspective, this is not a new life.

First of all, eliminating backward enterprises and zombie enterprises will eliminate competitors for enterprises with reasonable structures and advanced technologies, eliminate vicious competition, and make product prices more guaranteed. Not only will it not threaten the survival of enterprises, but it will allow these enterprises to shed their burdens and make strides forward. Then the so-called "cold winter" becomes the golden age of enterprises.

Companies with backward production capacity and excess production capacity have withdrawn from the market. Viable LED display companies with prospects and markets can bring greater growth to the entire LED display industry and bring the power and energy for sustained development.

Although the task of overcoming difficulties from the supply side is arduous, we have no choice but to face them head on. By promoting supply-side structural reform, China can not only have a "late-mover advantage" at the technical level, not only eliminate some of the "late-mover disadvantages" that depend on the gradual reform path, but it is also expected to form a "first-mover advantage" in supply-side practice supported by socialist political economics with Chinese characteristics. If the current LED display companies can work hard on the products themselves, then now may be your "golden era".