[Editor’s note]
On October 16th, the 17th (2019) annual academic conference of Shanghai social sciences celebrated the 70th anniversary of the founding of New China, and the sub-forum of Shanghai Economic Achievements: Theoretical Summary and Prospect was held in Shanghai Normal University. The experts and scholars attending the conference gave speeches and discussed many topics on China’s economic development in the past 70 years. At the forum, Huang Shaoan, Dean of the Economic Research Institute of Shandong University, delivered a speech with the theme of "Differences in Informal Institutions and the North-South Divide of China’s Economy". Huang Shaoan made a deep comparison between Shandong’s economic development and Guangdong’s and Jiangsu’s, and expounded why Shandong lacked innovative enterprises and talents, and what was the root cause of Shandong’s economic decline?
The following is the full text of Professor Huang Shaoan’s speech compiled by The Paper for readers.
Vision china data map of Shenzhen night scene
Recently, we are doing a project, comparing Shandong with Guangdong and Jiangsu in the south. In the process of doing it, we found an important phenomenon. The imbalance of regional economy in China has rapidly changed from the imbalance in the eastern, central and western regions in the past to the imbalance between the north and the south and the gap between the north and the south in recent years, and the gap is obvious.
1. After the 2008 financial crisis, the substantial economic gap between the north and the south of China has begun.
In terms of growth rate, before 2014, there was little difference between the growth rates of the north and the south, but since 2014, the GDP growth rate of the northern region, including the northern leader Shandong Province, has been divided from that of the southern region, and the growth rate of the southern region is significantly higher than that of the northern region. Statistical data began to appear in 2012, and it began to be obvious in 2014. It is obvious that this speed is very fast this year.
In the first half of 2019, the GDP of 31 provinces and cities, excluding Hong Kong, Macao and Taiwan, increased, with the national average growth rate of 6.3, and the average growth rate of 16 provinces and cities in the south was 7.38, only 5.9 in Shanghai, 6.2 in Chongqing and 5.3 in Hainan, which was lower than the national average growth rate, but Shanghai had a large base and the kinetic energy of growth rate changed faster. The average growth rate of 15 provinces, municipalities and autonomous regions in the north is 5.63. Only Beijing 6.3, Henan 7.7, Hebei 6.62, Shanxi 7.2 and Ningxia 6.5 are slightly higher.
The total GDP of the north is about 172,354 trillion yuan, accounting for only 38% of the national total, while the south accounts for 62%. This is the data for the first half of 2019. One in the north is Beijing-Tianjin-Hebei, and the other is Shandong plate, which was more than 7 trillion last year. One province in Shandong is equal to three provinces and cities of Beijing-Tianjin-Hebei.
From the perspective of personal income tax, the gap between the north and the south is even greater. The income tax paid by residents of Zhejiang, Jiangsu and Guangdong is obviously higher than that of Shandong, which represents the largest economy in the north, and the difference is too far.
1. The gap actually started after the 2008 crisis.
What I saw before is a statistical difference, as if 2014 was a watershed. In fact, the substantial gap did not start in 2014, but should have started when the world financial crisis spread to China in 2008. The substantive difference lies in the different measures to deal with the economic crisis. After 2008, Guangdong, especially Shenzhen, Guangzhou and Dongguan, underwent painful economic restructuring. When the economic crisis came, some resource-consuming, labor-intensive and low-end exports were forcibly eliminated by relying on the market mechanism.
Of course, the statistics don’t show it. At that time, the growth rate of the north and the south didn’t show it. From which aspect can it be seen?
Economic structural transformation. After the financial crisis in 2008, Guangdong, Zhejiang, Fujian and Jiangsu, especially Guangdong, implemented economic structural transformation, which is what we call the transformation of old and new kinetic energy. The transformation of Shenzhen, Dongguan and Dongguan was particularly successful. Let’s go to Dongguan again, and the economic transformation turned particularly well. At the same time, Shandong is actively undertaking the transfer of relatively backward industries such as Guangdong and Zhejiang. Although the economic growth rate will be relatively high in the short term, it actually puts itself in the position of accepting the transfer of backward production capacity. This is the gap.
Therefore, the substantive gap began in 2008, but it can’t be seen from the economic aggregate and GDP growth rate. The growth rate of GDP, the total GDP and the transformation of industrial structure are all important, but they are not the core.
2. The core and key gap in the widening economic gap between the North and the South is the gap in innovation ability, not the industrial structure.
In fact, the industrial structure itself does not matter whether it is good or bad, only whether it conforms to the quality structure of its own production factors, and there is no problem of upgrading the industrial structure, only the problem of adjustment and optimization. However, the industry has the problem of upgrading, that is, improving quality. There are no backward industries, only backward industrial technology and management. Not every place should raise the tertiary industry to more than 70%, which is contrary to the most basic principles of economics. The structure of production factors determines the industrial structure, and the quality of production factors determines the quality of industry. The key is the level of each industry, the technical content and the management innovation ability. The same manufacturing industry, Guangdong and Hebei are different, the same agriculture, Shandong and Shanxi are different.
First of all, there is a gap in total R&D investment. Shandong has the highest investment in the north, ranking third in the country, and the total amount is also the third in the country, but it is not in the same file as Guangdong and Jiangsu, both of which are more than 200 billion, and Shandong is more than 100 billion. There is also the intensity of investment, which accounts for the proportion of GDP. It is also obvious that the south is higher than the north. The total amount of this investment is not the most critical. The most critical thing is the input-output ratio. Look at Shandong, which is the most invested in the north, with more than 100 billion yuan, equivalent to 70% of Guangdong’s investment. The difference of 30% should also be far away, but the biggest gap is not in these places. The key is the output after investing these money. According to the patent index, this gap is two or three times the order of magnitude, and it is invested in Guangdong, Zhejiang and Jiangsu.
Why is the difference between input and output so far? We’re going to analyze the reasons.
Another is the innovation level of representative cities, and Shandong represents the north. Beijing is a very special city. Generally speaking, the cities in the north are obviously behind Shenzhen, Guangzhou, Nanjing, Wuhan, Tianjin and Hangzhou, and even worse than Shanghai. In this North-South economic structure, the gap between the economies of big cities and megacities as a percentage of GDP can basically determine this gap in innovation capacity. To tell the truth, the real innovation is mainly in big cities, and there is little innovation in GDP below the prefecture level.
Compared with the south, there is a shortage of innovative scientific and technological talents in the north. In fact, there are not necessarily fewer people with titles in the north than in the south. There are many academicians, Changjiang scholars and so on in Beijing. However, the scientific and technological talents in the south pay more attention to innovation itself. You may think that Shandong is a big province of marine economy, and you may think that Shandong’s marine scientific and technological talents are the first in the country. In fact, the number of academicians in the field of marine science and technology is the first in the country, and others are far behind Guangdong. Moreover, the total GDP of Shandong’s marine economy has lagged behind that of Guangdong. In 2018, Guangdong was 1.9 trillion and Shandong was 1.6 trillion. It is not that academicians are not important, but if there are only academicians, it is difficult to give full play to the role of academicians.
Therefore, the economic gap, statistical data is not the most fundamental, the most fundamental is the ability to innovate.
Second, the economic gap between North and South lies in the different preferences of system and economic development model.
Economy determines whether a region’s long-term economic development has enough development momentum, whether it can catch up with the new era and whether it can move forward further. Culture also plays a great role in it. The reason for the economic gap between North and South lies in the different preferences of system and economic development model. The relatively prominent official-oriented culture and hierarchical concept in the north are naturally close to the planned economic system and state-owned enterprises, while they are not close to or even contradictory to the equal competition, legal consciousness, scientific consciousness and innovation consciousness of the market mechanism.
First, the North prefers state-owned enterprises and planned economic systems, including officials of local governments at all levels. They are handy in using and managing state-owned enterprises and planning means, and the government is generally strong and controls and allocates resources.
Second, both state-owned enterprises and private enterprises are heterogeneous between the north and the south. The whole country, Shandong itself and the central leaders all feel that Shandong’s private economy is underdeveloped and state-owned enterprises dominate the world, but Shandong’s contribution to GDP, the number of private enterprises and the number of top 500 enterprises in China are among the best in the country.
Why does everyone think that Shandong’s private economy is underdeveloped? This is the economic mystery of Shandong. Because: Shandong’s state-owned enterprises are very state-owned, and Shandong’s private enterprises are also like state-owned enterprises. We checked the state-owned enterprise groups in Shandong Province, including some large subsidiaries, among which the senior executives, party secretary, general manager and deputy prime minister are basically officials of the former party and government organs sent down by the organization department, while managers of state-owned enterprises in Guangdong, Zhejiang and Fujian, such as Wang Shi and Dong Mingzhu, thought they were bosses of private enterprises, but in fact they were bosses of state-owned holding enterprises, and many of them were entrepreneurs screened out by the market. It is not that officials of the party and government organs will not be enterprises, not necessarily, but the overall big data analysis, this ratio is so far away, it is hard to say that the party and government organs will not be brought to the enterprise.
The gap between private enterprises. Private enterprises in Shandong are different from those in the south. Private enterprises in Shandong should first establish good relations with state-owned enterprises or cadres of party and government organs. In 2017, we conducted a questionnaire survey and listed 14 factors to do well in business management. We interviewed these private enterprise bosses randomly. As a result, two-thirds of the business owners ranked good relations with state-owned enterprises and party and government organs in the top three, and one-third ranked this factor in the first place. In addition, the industrial institutions of private enterprises are developed around state-owned enterprises, and they are highly dependent on state-owned enterprises. So why does Shandong’s statistics show that the private economy is very developed, but the central leadership, Shandong itself and the people of the whole country all think that Shandong’s private economy is underdeveloped.
Third, different institutional preferences lead to different economic development models.
Guangdong is a "private economy+foreign capital economy+market-oriented state-owned economy+relatively weak county economy". Of course, this county is a non-Bay area, because most of the developed counties are in the Bay Area, and many of them are not counties, but prefecture-level cities, such as Dongguan. Another is "super-large urban economy+security government". Therefore, all kinds of enterprises in this economy have strong vitality, great market mechanism, high economic development, strong innovation ability, strong government power, especially strong financial resources, but their scope of action is small, which is equivalent to security.
Zhejiang is a "private economy+market state-owned economy+strong county economy" and a strong "urban economy+security government". Jiangsu is a little different from Zhejiang and Guangdong. Jiangsu is a "collective economy+foreign capital economy (Suzhou is typical)+civilian economy+market-planned state-owned economy+strong county economy" and a relatively strong "urban economy+nanny government". Nanny is a service management type.
Shandong is "planned state-owned economy+quasi-state-owned private economy+strong county economy+weak big city economy", plus Confucian cultural or paternalistic government, what is the difference between paternalistic government and nanny government? Everyone is in charge of the enterprise. The nanny-type government provides services and does not make decisions. The parent-type government is management-oriented and must listen to me.
Fourth, the difference between the north and the south in urban formation mechanism and function. There is a big difference between the cities in the south and those in the north. The cities in the south, especially the central cities, have developed, and the surrounding areas of the cities have been driven. The surrounding areas of Shanghai, Hangzhou, Shenzhen and Guangzhou have all been driven, including some cities in the middle, such as Changsha, which can drive the surrounding areas, that is, the development of the central cities and the development of the surrounding areas, that is, the growth pole of the regional economy. This growth has a very strong polarizing effect. The big cities in the north, no matter how big they are, are very developed inside the city, but outside the city gate, they are relatively poor places, such as Beijing, Tianjin and Xi ‘an. According to the statistics of per capita GDP and per capita income between the northern and southern cities and the surrounding areas, the gap is very large. That is to say, the cities in the north don’t transmit positive energy to the surroundings, but absorb resources from the surroundings. To put it bluntly, they are "vampires". In other words, all kinds of resources are piled up together, which is a "resource pile", not an economic organism, while the cities in the south are an economic organism. The central city and the surrounding areas provide positive energy to each other and promote each other. This is one of the very important reasons for the gap between the north and the south.
Fifth, the cultural differences between North and South. Where are the root causes of the differences between institutional preference and economic development model? Just now, I talked about formal institutional differences, such as state-owned enterprises and planned systems. Are there any differences in informal systems? Shandong represents the north, with relatively prominent official standard and hierarchical concept, and relatively prominent relationship culture, fellow villagers culture, dock culture and circle culture. It is a common phenomenon that China worships officials and ranks the officials, but Shandong is the worst. Relevant data show that since the reform and opening up more than 40 years ago, the number of college students taking the civil service examination and being admitted to universities across the country has been the largest in Shandong. Second, the number and proportion of civil servants in universities in Shandong Province are also the largest in China every year.
At the same time, the relatively prominent concept of official standard and hierarchy naturally leads to the unreasonable flow of elites (excessive flow to party and government organs), which also affects the innovation of local talents and the innovation of foreign talents. It is difficult for people outside Shandong to start a business in Shandong. It is no problem that Shandong is very hospitable, but it is relatively difficult for foreigners to start a business in Shandong. In Jinan and Qingdao, Shandong, the daily working language is basically Shandong dialect, which shows that there are not many foreigners. As a southeast coastal area, the data of the total population flow and structure over the past 40 years can also confirm our judgment.
3. Why didn’t these cultures and systems lead to economic backwardness in the north in the past?
Some people may say that the northern region, including Shandong, used to be the same culture, system and people. Why did it not lead to economic backwardness in the past few decades? Didn’t Shandong’s economy grow very fast in the past, and once ranked first in the country? How to explain it? It turns out that our economy is mainly resource-consuming, environment-polluting, labor-intensive, and a large number of low-end products are exported. The key is resource consumption. Moreover, there are still many resources under the original state planned economy system. Therefore, mandatory planning system, relationship culture, state-owned enterprises, etc., are not necessarily at a disadvantage for economic extension and extensive growth, and some aspects are even dominant, such as obtaining more central resources through relationships and mobilizing various resources on a large scale.
But now it’s different. The economy needs to transform, abandon these traditional growth modes, and promote economic development by innovation. Innovation mainly depends on talents, and talents mainly depend on systems. Informal systems have a great influence on local economic development. What are the main talents introduced from Shandong? Many talented people with titles have been introduced, including academicians. Looking at the statistics, it’s pretty good. A few days ago, Qingdao introduced a large number of academicians in their 80s, and Shandong University also introduced a foreign Nobel Prize in Physics in their 80s. This index system identifies and evaluates talents according to their titles. Major officially introduced talents can only be identified in this way. However, there is a lack of market mechanism to attract, identify, use and treat talents (including respect). This is a hard gap.
It is a fact that the gap between the north and the south is widening. If the concept and system are not changed, the gap between the North and the South may widen further. We also don’t want this gap to widen further.
[Author Huang Shaoan is a professor at Shandong University and dean of the Economic Research Institute of Shandong University. This article has been revised by the author]
