Wei Jianguo: China’s Economy is Expected to be Number One in the World by 2026

The past five years were full of struggle and glory!

Looking back at the “13th Five-Year Plan”, Chinese people have overcome various difficulties and made great achievements in economic development, scientific and technological research, ecological civilization and people’s livelihood.

This year is the first year of the “14th Five-Year Plan” and also a new historical starting point. How to build a new engine for China’s development and make a good start has become the focus of the two sessions.

The “Cover” Magazine of finance.ifeng.com launched a special feature of the “two sessions”, discussing economic forms and social development in the new era with many experts and scholars, reviewing the economic development under the normalization of the pandemic, and the new development pattern.

Wei Jianguo, former Vice Minister of the Ministry of Commerce, PRC and Vice Chairman of the China Center for International Economic Exchanges, is full of confidence in China’s economy during the “14th Five-Year Plan” period. “China’s economy is expected to surpass the United States and become the world’s number one by 2026,” said Wei Jianguo. His confidence is based on the “dual circulation” development pattern proposed in 2020.

Wei Jianguo said that China’s internal circulation is truly an open, inclusive, and extensive development. In 2020, we made significant progress in poverty alleviation and fighting with the COVID-19 pandemic. Now we have entered the “14th Five-Year Plan” and if the dual circulation development model runs smoothly, China will make far more imports and foreign investment than before, while attracting more foreign investment. China is establishing a larger market system that is market-oriented, legalized, and internationalized.

What opportunities will be brought to us by the new development pattern? Wei Jianguo pointed out that this is the best time for Chinese private entrepreneurs to set up a business.

In the past, many Chinese entrepreneurs relied only on the domestic market but this is no longer good enough. They must go global and make themselves more international. All Chinese entrepreneurs must have such ambitions.

The following content is a summary of the interview with Mr. Wei Jianguo.

1. The total size of China’s economy is expected to surpass that of the US before 2026.

Cover: According to the forecast of Nomura Securities, if the exchange rate of the US dollar to the RMB remains at 1 to 6, China’s economy will surpass the US to become the world’s largest before 2026. What do you think of this forecast?

Wei Jianguo: I think that this prediction is quite objective. We even do not have to wait until 2026.

The reason is that the recession in the United States is extraordinary, but the development of China is outstanding, so it is reasonable to expect that China’s economy will become the largest one before 2026.

We made a great victory in reducing poverty and fighting the pandemic in 2020. Now, we have entered the period of the 14th Five-Year Plan and if the dual circulation development pattern runs well, China will import more goods, make more foreign investment, and attract more foreign capital.

Last year, we attracted 163 billion of foreign investment and 21 free trade zones have been established since the promulgation of the new Foreign Investment Law in 2020. As can be seen, China is building a larger market based on legalization and internationalization. China’s foreign investment grew by 4% in 2020, while the United States fell 49% to 134 billion.

Cover: How to understand the “internal circulation”?

Wei Jianguo: China’s internal circulation is an open, inclusive, and extensive development.

For example, Spain brought five things during the Import Expo, including tomato sauce, olive oil, ham, and clothing. They did not expect the ham to be so popular in China but it did. The popularity of the ham in China has brought changes to the entire production chain. They have to decide whether the meat should be processed in Spain or China, and should the supply chain be located in Shanghai or Spain. I think this is an extensive development.

The so-called retaliatory consumption did not happen in 2020, which is a good thing.

Cover: Both import and foreign investment are parts of the internal cycle, right?

Wei Jianguo: Yes. Consumption is essential for driving internal circulation. Many people say that it is a pity the retaliatory consumption did not happen as expected in 2020, but I think this is a good thing. We should not pursue retaliatory consumption blindly.

The absence of retaliatory consumption does not mean that Chinese people’s enthusiasm for consumption and spending power have decreased. On the contrary, I think that their consumption power and enthusiasm have been strengthened. We should unleash the compressed consumption and the internal circulation can play an important role in this regard, which requires us to weed out those ineffective companies and create more highly efficient companies.

Now is the best opportunity for Chinese entrepreneurs to start a business for the second time.

Cover: Will this process aggravate monopoly?

Wei Jianguo: No, this is a supply-side reform to pursue the greatest profit at the lowest cost. We should let the supply-side reform play an important role in the internal circulation, so that more companies will not only strengthen the internal circulation, but also go abroad through the internal circulation.

Chinese entrepreneurs should be aware of that now is the best opportunity for them to start a business.

In the past, Chinese companies could achieve decent profitability by relying on the domestic market but this is no longer the case. Local entrepreneurs should have the ambition to make themselves more international.

Cover: Many companies are not competitive enough to expand their business abroad, what should they do?

Wei Jianguo: It is too early to say that which companies will be competitive in the international stage. A new competition has just begun and everyone has the opportunity to become successful. Many private entrepreneurs engaged in the capital or labor-intensive industries, but have started to buy advanced technology worldwide to reduce their costs. At the end, they have come up with new raw materials. This is the right path.

Moderator: For some companies, bankruptcy seems unavoidable, is that mean they were on the wrong path?

Wei Jianguo: I think the biggest mistake made by those companies is that they did not make an accurate judgment. Under the current new economic structure, what kind of role should a company play is the biggest test for entrepreneurs. If they can get the decisions right this time, they might be able to bring their companies back on track.

China’s middle-income group should be “apple shape”, not “olive shape”.

Cover: On the one hand, some people have luxury goods and mansions, but on the other hand, ordinary people feel that they have less money. Is this an increase in the income gap?

Wei Jianguo: The recent sales of luxury houses in Shanghai cannot explain the development of China’s economy. Real estate is for living, not for speculative investment.

Chinn will draw experience from other countries when designing its real estate policy. For example, for some civil servants and other low-income groups, we will build more affordable housing for them. For people who want to live in a better even luxurious house, we should satisfy their demand by applying real estate tax.

Cover: Are you suggesting that the real estate tax will be introduced soon?

Wei Jianguo: No, the real estate tax is just a kind of adjustment method and it takes time to design and implement. Cities in China might have different local conditions but they all want to narrow the rich-poor gap and enlarge the middle-income group. Therefore, I do not agree with some experts that the middle-income group in China is like an olive: the top tip indicates that some people from the middle-income group are running up to the high-income group, while the bottom tip indicates that some people from the middle-income group might fall into the low-income group.

I think that the middle-income group in China should become an apple shape, meaning that some people from the high-income group will fall into the middle-income group without reducing their income, and some people from the low-income group will climb up to the middle-income group. In the end, the income gap will be reduced.

Cover: It is not hard to understand that people at the bottom want to move up, but why people from the high-income group want to move down to the middle-income group?

Wei Jianguo: This makes sense. For example, many extremely wealthy people in the United States such as Bill Gates, have reduced their wealth by making a large donation to society.

The expansion of the middle-income group is the foundation of our society. The bigger the group, the faster the country develops; the more stable the country, and the smaller the gap between the rich and the poor.

Private entrepreneurs should take the lead in supporting anti-monopoly.

Cover: Not long ago, people were very worried about the increasing monopoly power of those large Internet companies, what do you think of this?

Wei Jianguo: China’s development should learn from other countries’ experience: on the one hand, we should allow individuals to realize their dreams, on the other hand, we should against monopoly because it will damage small and medium enterprises, low-income people and even the entire country.

In the United States, the US government has also adopted anti-monopoly laws to reduce monopoly. China attaches great importance to anti-monopoly as well. I think that private entrepreneurs should take the lead in supporting this policy.

Cover: Is monopoly a serious problem in China?

Wei Jianguo: Monopoly exists in China but it is not so serious as the US. The anti-monopoly policies adopted by the central government comes at the right time, which will not only protect private entrepreneurs, but also benefit the development of the so-called platform economy.

For example, many young people are tied into credit by just satisfying their basic needs such as buying a house. In the end, they might lose their houses and a lot of money. Why are young people kidnapped into this financial relationship? The government should come up with solutions to avoid such things from happening.

Cover: That means the regulation did not keep up with economic development?

Wei Jianguo: That is right. We are doing what we can to get things right and it takes time. I think that the government has already realized the importance of regulatory supervision, which is why they released the “Civil Code” and more new laws will be produced to protect vulnerable groups.