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In the last lecture, we talked about why we need to build a unified national market and how the country should build it. Today, we will focus on the profound impact of building a unified national market on enterprises and individuals. This part is particularly important, you must listen to it, and I suggest you think about it repeatedly.
First of all, let me popularize a concept. Every major policy, especially this kind of major document, has a keyword behind it, which is “reshuffle”, which means the reshuffle of resources, interests and opportunities, and also the reshuffle of wealth. So you must learn to read the policy. This is also what I want to tell you in particular, you must learn to use the policy pot to cook your own dishes.
Back to this document, we can divide the country’s actions this time into three categories: one is what the country prohibits; the second is what the country now focuses on supporting; the third is what the country will strive to do in the future. They are facing the past, present, and future interest patterns respectively, and behind them is the redistribution under the baton of the country.
Prohibited behavior: Reshaping the past interest pattern
The first type of action, which the country prohibits, is the reshuffle of the past interest pattern and wealth.
The document has made a series of prohibitive provisions on local behavior. Due to space limitations, I will not read the corresponding complete clauses, but only the key words. I have put the original text of the document in the manuscript, and you can compare it.
First of all, it is prohibited for local governments to issue various regulations that have local protectionism and obvious bias in violation of regulations, and they cannot deliberately use local enterprises to exclude foreign enterprises in bidding.
Original text of the document: All regions and departments shall not draft laws, administrative regulations, local regulations, rules, normative documents and specific policy measures on market access and exit, industrial development, investment promotion, bidding, government procurement, business behavior norms, qualification standards and other economic activities involving business entities without fair competition review or in violation of review standards. (The original policy text is here, the audio is not read, and it is only presented in the manuscript.)
Original document: All regions and departments shall not illegally limit or specify specific patents, trademarks, brands, parts, places of origin, suppliers, etc. in bidding and government procurement… (The original policy text is here, the audio is not read, and it is only presented in the manuscript.)
And, we must treat them equally, accepting both local products and foreign products.
Original document: It is not allowed to strengthen the protection of local products or specific products in the form of targeted subsidies, local recommended catalogs, etc., and restrict foreign products from entering the local market in disguised form. (The original policy text is here, the audio is not read, and it is only presented in the manuscript.)
What is this for? I think this is to break the past mountain-topism and the solidified and backward interest structure formed under local protectionism. In the past, some local governments and local enterprises relied on various means to exclude foreign enterprises and products, and reduced the costs of local enterprises through explicit and covert preferential treatment, subsidies, and loans, forming unfair competition, which actually protected backward production capacity. Now the central government wants to build a unified national market. The first thing is to use prohibitive policies to reshuffle the backward production capacity and enterprises in these places and give the market to better enterprises.
Based on the above analysis, I think three types of enterprises will be affected:
The first type is enterprises that rely on government relations to obtain resources. Many local snake enterprises are formed in this way.
The second type is foreign key enterprises that may not rely on relations or be native local enterprises, but as foreign key enterprises for investment attraction, they have been deeply bound with local governments before. For example, we mentioned the example of a star bus enterprise in a provincial capital in the last lecture. The local government gave the green light on various matters. This situation will become less and less in the future.
The third type is enterprises that used to enjoy the preferential treatment of “tax depressions” according to the local policies for investment attraction. The so-called “local policies” refer to policies and regulations formulated by local governments. In the past, many places in the central and western regions would give enterprises great preferential treatment in order to attract investment, such as value-added tax refunds and land supply at 10% of the market price. Many of these practices are contrary to the policy of a unified national market. The central government has issued two rounds of special actions to govern tax depressions. The enterprises that benefited from these policies will naturally be reshuffled.
In short, if the central government wants to build a unified market, it must first break and then build, and clear the old interest structure of special or even privileged enterprises in the past. So in the future, when you are doing business, looking for a job, making investments, and providing supporting supplies, you must be aware that the above-mentioned types of enterprises may face shocks, and you must have a sense of advance.
Key support: building the current new interest structure
The second type of action, which the country now focuses on supporting, is the new construction of the current interest structure.
In my opinion, based on the order of measures in the document, the country should now give priority to two things, one is the construction of a large land market, and the other is the construction of a large labor market. This will bring about a reshuffle of cities and classes respectively.
Regarding the unified national land market, the document mentioned that the primary and secondary land markets should be developed as soon as possible, and they should be coordinated and optimized.
Original document: Relevant departments should promote the market-oriented allocation of urban and rural land elements in accordance with the law, explore the coordinated allocation of regional construction land indicators and the coordinated supply of construction land in adjacent areas in urban agglomerations and metropolitan areas based on national land space planning, and orderly promote the reform of rural collective commercial construction land entering the market. (This is the original policy text, the audio is not read, and it is only presented in the manuscript.)
Original document: All regions should accelerate the development of the secondary market for construction land under the provisions of the national unified system… Relying on the national secondary land market transaction service platform, collect secondary land market transaction information, and actively publish information such as public land prices, transaction prices, and transaction rules. (This is the original policy text, the audio is not read, and it is only presented in the manuscript.)
Let me first explain that the primary land market is actually the link where the government supplies land, that is, local governments sell land to enterprises in need.
There is a key point here: in the past ten years, the supply of land in various provinces and cities, especially the supply of construction land, has been allocated according to indicators. The rules behind it are very complicated, so I won’t go into details here. In short, the result is that with the development of the economy, the land indicators of eastern cities are very scarce. For example, the land in Shenzhen can be sold for 1.2 million yuan per mu, while the land indicators in the central and western regions are relatively loose. For example, the land in Yibin, Sichuan may only be 30,000 yuan per mu, which is 40 times lower than that in Shenzhen.
This mismatch in land indicators has restricted the development of the eastern economy, so the country now needs to solve this problem. For example, between urban and rural areas, between urban agglomerations, and between adjacent regions – such as Guangxi and Guangdong, Jiangxi and Zhejiang, a mechanism or even a payment mechanism should be established to enable the coordinated circulation of land indicators.
For example, in 2018, the General Office of the State Council issued the “Management Measures for the Inter-provincial Adjustment of Surplus Indicators Linked to the Increase and Reduction of Urban and Rural Construction Land”, and traded the surplus land indicators of some poor areas in Tibet, Qinghai, Guangxi, Sichuan, Yunnan, Gansu and other places to eight provinces and cities including Guangdong, Zhejiang, Shanghai and Beijing. Data shows that by the end of 2020, this policy has provided more than 180 billion yuan in benefits to poor areas.
After talking about the primary land market, let’s talk about the secondary land market. Unlike the former, which is a transaction between the government and enterprises, it is a transaction between enterprises. Many enterprises have obtained land but have no money or ability to develop it, so the central government wants to build a unified large market for the secondary land market, so that enterprises can sell idle land to those in need and speed up resource allocation.
What is this for? Think about it, for the east, especially big cities, the land price is very high because of the shortage of land indicators. Land is the basic cost, which leads to high factory construction costs, so the product cost is high, including housing prices, shop rents, and various consumer expenditures are also high.
I said in the previous 7th lecture that the head of the Central Finance Office recently made it clear that for economically developed provinces, land use, energy use, sea use and other indicators should be given priority. In short, whether in the primary market or the secondary market, more land resources should be allowed to flow to developed cities in the east and to enterprises in greater need to meet local development needs and reduce local basic costs.
What are the impacts and opportunities of this policy? I remind you to think: In the past, enterprises went to the central and western regions to build factories for cheap land, but they found that there were no industrial clusters and poor supporting facilities in the local area, which was quite uncomfortable. Now, if there are more land indicators in the east, the land is not so expensive, and the local supporting facilities are good, should I expand in the local area instead of relocating? Do you understand what I mean? You can think about it carefully. In my opinion, objectively, the strong will become stronger and stronger, because the new land indicators in the east are backed by better development in the future, which will also bring about a new round of reshuffle in the city.
At this point, some students will ask, if big cities have new land indicators and cheaper land, will housing prices also fall? My answer is that such a policy may only accelerate the differentiation of housing prices.
Taking Shanghai as an example, there are almost no plots to be developed in the central areas such as Xuhui, the Bund, and Lujiazui. With the new land indicators, the Shanghai Municipal Government can only supply land in marginal suburbs such as Jinshan, Qingpu, and Jiading, and these suburbs will also have a continuous influx of foreign population.
Therefore, in the future, the housing prices in big cities, from the perspective of land supply only, note that I am only talking about this single dimension, will not decrease in the central area, which is conducive to value preservation. The housing prices in the suburbs will most likely decrease in the future, and the ability to maintain value is a little worse, but fortunately the total price is low, and it is easy for young people to buy a house. Therefore, you have to have a general idea of the general trend of buying a house. In addition, if you want to do business, setting up a factory in the suburbs of a big city will have lower costs in the future, and your products will serve the urban population, so the price will not be low, which is also a new trend.
After talking about the big land market, let’s talk about the unified labor market across the country.
Here I put the corresponding original document in the manuscript, you can compare it.
Original document: Relevant departments should improve the unified and standardized human resources market system, build a national employment public service platform, and improve the unified national social security public service platform. (This is the original policy text, the audio is not read, and it is only presented in the manuscript.)
Original document: All regions shall not set policy barriers that affect the flow of talents in terms of household registration, region, identity, archives, personnel relations, etc. (The original policy text is here, the audio is not read, and it is only presented in the manuscript.)
My opinion is that we need to further remove obstacles to population mobility and expand employment, such as unified social security across the country, so that social security is no longer an obstacle to mobility, and household registration, identity, archives, etc. are no longer obstacles. This is essentially to release urban services and resources that were attached to household registration in the past. Let more people go from rural areas to cities, from small cities to big cities, increase more urban incremental consumer population, and promote economic development.
I judge that such a change may bring about a major reshuffle of the class. Simply put, the various benefits originally tied to urban household registration will gradually spread, and more new populations will come in to share the cake. For newcomers, this may be an opportunity to cross the threshold and enjoy more urban benefits and development. In addition, in this process, the “siphoning” of new first- and second-tier cities with incremental development to small cities will be further strengthened. According to the country’s future urbanization plan, this involves class changes involving hundreds of millions of people. In my opinion, for the country, it is definitely hoped that the class will flow, and the new class will have new demands.
Future planning: creating new opportunities for interest patterns
The third type of action to be discussed at the end is what the country will strive to do in the future, which will bring new opportunities for the future interest pattern.
There are many things to do in the construction of a unified large market, some of which are not the most urgent, but the future has been planned, and everyone can strive for this future “opportunity” dividend. So this will bring about a reshuffle of the future interest pattern.
From the documents, there are several things that the country will strive to do in the future:
“Unified capital market”, “integrated technology and data market”, “unified electricity market”, “unified resource and environmental market”.
These are all to be built step by step. For example, if you want to build a unified capital market, then the regional equity markets originally scattered in various provinces must be connected, and financial infrastructure such as financial market registration and custody, settlement and liquidation, and corporate entity archives must be built; for example, if you want to build a unified resource and environmental market, like the construction of a carbon emission market, the carbon trading market and carbon trading platform of each province must also be unified.
So these areas are still in the process of “laying the foundation and building infrastructure”, and they must be done step by step.
In this process, I would like to mention three key points, and you should pay special attention to them:
First, in this foundation-laying process, a typical dividend party is the “water seller”. For example, enterprises that help realize digitalization, because no matter how they develop in the future, capital, technology, data, electricity, resources and environment, these fields need to establish a unified large market, so the first step must be to digitalize first. Simply put, in my opinion, whoever can help these fields realize digitalization will have the opportunity to get a share first.
Second, in this new field, whoever enters first and becomes a dominant enterprise first may increase the probability of future dividends. Of course, opportunities and risks coexist, and pioneers are also prone to the risk of failure, depending on whether they have the ability.
Third, the keywords involved in the unified capital market, integrated technology and data market mentioned above – capital, technology, and data, are often more in line with the resource advantages and industrial structure of economically developed provinces. For underdeveloped provinces, how to find breakthroughs in these fields is a challenge worthy of attention.
At the end, I will leave you an assignment. One of the goals of building a large market for electricity and resources is to optimize resource allocation and reduce overall costs. Which region will it ultimately reduce costs in? You are welcome to submit your assignment in the comments section.
