China Circulation Innovation Frontier Report

Author: Song Ze
Publisher:
Publish Date: 2004-08-01
Features: This book is the final outcome of a major project (Category A) initiated by the Chinese Academy of Social Sciences in 2001. A series of intermediate results (research reports, internal references, papers, etc.) derived from this study have garnered attention from various sectors and have had a positive impact. The primary reason for this is that the research adopts a macro perspective to examine and address issues, not only attracting the attention of peers but also establishing the unique position of the Chinese Academy of Social Sciences in the field of circulation studies. The book deliberately avoids the narrow concepts and perspectives of the "commercial sector" and "circulation industry" that have persisted from the planned economy era. It attempts to explore entirely new approaches to examination, focusing on macro-level discussions of core issues in the process of circulation innovation, with the findings being applicable to the modernization of traditional circulation industries for agricultural products, industrial investment goods, and industrial consumer goods, as well as the cultivation of market systems. The book qualitatively and quantitatively discusses the following theoretical and policy issues:
● The essence of circulation innovation and its macro-policy implications;
● The main problems in China's circulation sector and their adverse consequences;
● Key measures to accelerate circulation innovation and promote circulation modernization;
● Policy approaches to accelerate circulation innovation and promote circulation modernization.
Compared to similar domestic and international works, the new contributions of this book are its clear and well-argued propositions and demonstrations of the following new viewpoints tailored to China's context:
1. Unlike the traditional sectoral and industry perspectives, this book proposes that circulation issues are primarily macroeconomic issues. Re-examining the circulation process from a macro perspective can lead to new "discoveries." Therefore, circulation innovation must seek innovation in the research methods and examination approaches of "macro circulation theory," establishing a new concept of "viewing circulation from the perspective of the whole and vice versa," and actively participating in macro-theoretical and policy discussions (all subsequent viewpoints are closely related to this).
2. The backwardness of the circulation industry and the lack of a market system represent a major difference between China's transition economy and mature market economies. These differences determine that China must shift from a market-excluding system to a market-reliant system, facing a series of significant challenges and fundamental transformations. Ignoring these differences and blindly copying mature models often leads to counterproductive and futile efforts. Meeting these challenges and completing the institutional transformation, while addressing the lack of mechanisms, are crucial tasks for China's economic reform and development. Among these, accelerating circulation innovation and promoting circulation modernization carry a special and important mission. By rapidly developing China's modern circulation industry, a powerful circulation sector can establish its rightful leading position in the market economy, improve the market system for the free flow of goods and factors, fill the gap in market transmission mechanisms, and gradually guide China's transition economy toward a mature market economy.
3. In the process of building a moderately prosperous society in all respects, the intertwined background has pushed the development and expansion of China's modern circulation industry to the forefront of economic work. The relationship between the development of the circulation industry and macro-control objectives is becoming increasingly close, and the importance of circulation industry policies is becoming more prominent. Macro-control not only requires fiscal policy, monetary policy, and income distribution policies but also necessitates circulation industry policies.
4. The Wal-Mart phenomenon demonstrates that with strong information technology and modern circulation methods, the circulation industry has quietly created a powerful function in the global integration arena, leading production, adjusting structures, allocating resources, promoting consumption, and mitigating risks. Previously overlooked circulation enterprises are gradually gaining absolute dominance over manufacturers and suppliers. Currently, China's modernization of circulation, centered on property rights reform, e-commerce, chain operations, and logistics distribution, has been fully launched. The widespread implementation of circulation modernization marks a new stage in China's economy, where it is using circulation innovation to comprehensively enhance the speed, structure, quality, efficiency, and overall competitiveness of the national economy.
5. The above new situations and issues highlight the need to re-evaluate the role and effectiveness of the circulation industry. The circulation industry should no longer be intentionally or unintentionally treated as a secondary industry. China should shift its primary focus from manufacturing, which has persisted from the planned economy era, to the circulation industry, seeking new ways to address existing problems through the circulation industry. From a temporal perspective, the circulation industry, through its natural function of "reducing delays or interruptions," can determine the rhythm and speed of the national economy. From a spatial perspective, the circulation industry, through its natural function of "integrating and optimizing resource allocation," can shape various economic structures. This is the highest-level generalization from both temporal and spatial perspectives, yet it carries strong policy implications. Based on these two points, leveraging the latest theories, knowledge, and technologies to seek optimal solutions and repair the accelerating complexification of the economic system is the very origin of circulation innovation and the reason why developed countries value it so highly, invest so much, and continuously explore it.
6. Compared to other countries, China faces a somewhat awkward situation. , due to neglecting circulation innovation and the natural functions of the circulation industry, the national economy has accumulated massive inventories over time, resulting in "the greatest delays and interruptions, the greatest resource idleness and waste," tying up vast amounts of working capital and quietly eroding trillions of yuan in circulating capital. For example, due to neglect or underestimation of the statistics and monitoring of economic rhythms and enterprise circulation efficiency, as well as a lack of vigilance against the slowing of commodity circulation, capital turnover, and inventory growth during the "Eighth Five-Year Plan" to the "Tenth Five-Year Plan" period, the national economy suffered at least trillion yuan in avoidable implicit losses (in 2001, the average annual turnover rate of enterprise working capital accelerated from 12 times in 1999 to 166 times in 2001, slightly better than the 165 times in 1992). Second, due to neglecting the irreplaceable natural function of circulation in structural adjustment, the spatial dimension has led to over-reliance on fiscal and administrative measures, leaving the "leading role" of structural adjustment missing, resulting in poor outcomes in industrial and regional restructuring, persistent redundant construction despite repeated prohibitions, and insufficient awareness of foreign investment in China's circulation industry aimed at manufacturing. For example, some people believe that foreign investment in the circulation industry would at most result in the loss of a portion of domestic market share and the bankruptcy of poorly managed commercial enterprises, which would be of no great significance. In reality, this is not the case. Foreign investment in the circulation industry primarily affects the circulation industry, but ultimately, it impacts China's manufacturing sector. Based on the aforementioned natural functions, the massive orders and large-scale commodity procurement capabilities of foreign-invested enterprises clearly dominate the competitive and pricing advantages of the circulation industry, enabling them to exert in-depth control over manufacturing, even upstream industrial chains, and ultimately "govern" China's industrial structure. The batch sizes and prices set by foreign enterprises can entirely determine the sales and survival of numerous domestic manufacturers. The energy and strategic considerations of foreign investment in this regard cannot be taken lightly. Precisely because of this, strengthening the domestic circulation industry and leveraging its role as the "leading role" in optimizing industrial structure are urgent and far-reaching tasks. In the process of opening up to the world and participating in global economic integration, China should make independent and autonomous policy arrangements for its domestic circulation industry, manufacturing sector, and industrial structure within the framework of the World Trade Organization.
7. The core idea of circulation innovation is to establish the leading position of the circulation industry and facilitate the national economy's "third transformation." As a country transitioning from a planned to a market economy, China's greatest difference from general market economies lies in the absence of the circulation industry and market systems as transmission mechanisms. Therefore, while relying on general macro-policies such as fiscal and monetary policies to solve China's challenges, it is essential to strengthen the functions of the circulation industry and market systems. For the same reason, China not only faces the "two transformations" of its economic system and growth model but also urgently needs to leverage circulation innovation to shape transmission mechanisms, enhance circulation efficiency, and achieve the "third transformation," which centers on accelerating economic rhythms, commodity circulation, and capital turnover, promoting the national economy from a static, slow-paced, high-cost, low-efficiency state to a dynamic, fast-paced, low-cost, high-efficiency state. Emphasizing the "third transformation" is based on China's realities and historical tasks, making it highly targeted and realistic, far from being superfluous or a mere repetition of the "two transformations." To this day, every industry, department, and region is crying out about "insufficient capital" and "shortages of funds," yet at the same time, they allow economic rhythms to remain slow and stagnant, letting vast amounts of invested capital stagnate, solidify, or remain implicitly idle. Now it appears that China's primary problem is not the apparent "lack of money everywhere" but rather the slowness of the cycle, the lack of "vitality," and the fact that several yuan do not equal one yuan.
8. Key points for accelerating the development of China's modern circulation industry in the new era.
(1) Among the enterprise, industry, and macro levels of the circulation industry, the most critical issue is to address macro-level problems, i.e., placing circulation industry policies on the most important agenda and the highest level of decision-making, fully valuing and leveraging the significant role of modern circulation in the new era and various aspects, and comprehensively enhancing the contribution rate of the circulation industry.
(2) Accelerate the integration of China's domestic and foreign trade from theoretical, institutional, policy, administrative agency, approval authority, and enterprise business scope perspectives, addressing this prominent and urgent issue after joining the World Trade Organization.
(3) Establish a precise, reliable, and practical evaluation system for circulation modernization and a tracking and monitoring system for circulation conditions.
(4) Under the premise of deepening the property rights reform of state-owned circulation enterprises, focus on technological innovation, develop modern circulation methods, and implement modernization reforms for traditional circulation industries based on e-commerce, chain operations, and logistics distribution. At the same time, promote the development of "third-party logistics" based on logistics cost research and resource surveys, while firmly preventing the misguided promotion of logistics industries that violate the laws of logistics.
(5) Circulation modernization is not just a matter for the tertiary industry; the secondary industry must also actively participate in circulation innovation. Circulation modernization is not just a matter for coastal cities in the east; attention must also be paid to rural and central-western regions.
(6) Clarify circulation industry policies, accelerate the formulation of circulation industry legislation, develop circulation industry plans, optimize the industrial structure of the circulation industry, and actively cultivate modern circulation industry groups with competitive strength.
(7) Accelerate anti-monopoly legislation and domestic opening-up, changing the fragmented state that hinders commodity circulation.
(8) Strengthen the enforcement of integrity, contract adherence, and fraud prevention, regulate market order, and safeguard the legitimate rights and interests of enterprises and consumers.