Zhongxing Caixing: How to Improve Investment Returns in the Real Economy

At present, the possibility of China's economy shifting from reality to illusion is being questioned. This has also been highly concerned by the central government, especially the recent issue of excessive corporate leverage, and measures such as deleveraging have been frequently mentioned. So, how can the real economy improve investment returns? Based on the opinions of industry experts, some solutions have been proposed.
1.Problem: The manufacturing industry is facing the embarrassment of low investment returns
Industry experts say that the manufacturing industry is the mainstay of the real economy. However, currently, the biggest problem in the manufacturing industry is the low return on investment, which objectively leads to a lack of confidence among entrepreneurs and capital avoidance. The revitalization of the real economy must solidly improve the investment return rate of the manufacturing industry, which is crucial for promoting the long-term stable development of the national economy and solving the crux of China's economy.
2.Plan: Provide policies, funding, and cost reduction
The best way to improve investment return rate is summarized as "two benefits and one reduction" - providing policies, funding, and reducing costs. Some National People's Congress deputies and members of the National Committee of the Chinese People's Political Consultative Conference have been pondering and researching this issue. A representative suggested that for emerging manufacturing industries such as new energy vehicles, support can be increased through policy tilting. Due to emerging industries, people always have many concerns when choosing alternative products. For example, in the selection of new energy vehicles and fuel vehicles, many people have more concerns about technology and vehicle safety. In response to this issue, the representative believes that more policy support should be given to the core technologies of new energy vehicles. For emerging manufacturing industries such as new energy vehicles, support can be increased through policy tilting.
In addition to providing policies, some industry experts also believe that funding should be directly provided for the research and development of core technologies in high-end manufacturing. There are ongoing issues with some special funds for core technology research and development. Experts have pointed out that in previous years, the central budget has allocated a certain scale of special funds, but in2016There was no arrangement for the year. Therefore, support for core technology development should be provided in the form of special construction funds. The expert suggests establishing a mechanism for long-term protection of financial support funds. Especially, the proportion, quota, and preferential degree of special construction funds supporting the manufacturing industry should not be further reduced. Many representatives and committee members expressed that for most manufacturing enterprises, the most urgent need is still to "reduce costs".
When it comes to the issue of "cost reduction", it involves the financing and tax costs of enterprises that are widely concerned by various sectors. Wang Jinghai, National People's Congress representative, Chairman and General Manager of Wanda Mountain Dairy, said that some institutional costs can also be reduced. He said that for example, regarding the issue of preservation experiments in formula registration, a new round of registration has begun. Product formulas that have been sold in the market for many years should no longer have preservation and stability experiments. Because it has been tested for many years in the history of consumer consumption, it is only a matter of re registration this time. Conducting a preservation and stability test may cost millions of dollars, and it will take another six months to a year, which is very expensive.
The fundamental reason for the phenomenon of funds shifting from real to virtual is that the investment return rate of the physical economy is too low. According to survey data,2015In the year, the average profit margin of the main business income of industrial enterprises is5.59%And the average net profit of the financial industry reaches30%The real estate industry also has abundant profits. The significant difference in profit margins results in: on the one hand, companies are unwilling to work hard in industry and are more willing to engage in derivative financial products and real estate; On the other hand, banks are also willing to allocate a large amount of funds to trust, securities, insurance, and real estate industries with higher returns, and their willingness to invest in physical assets is not strong; Therefore, it is trapped in a vicious cycle of "the real economy is not real, and the virtual economy is too virtual". Under such a vicious cycle, there is a risk of deviating from the overall development of the national economy.
The significant difference in profit margins results in: on the one hand, companies are unwilling to work hard in industry and are more willing to engage in derivative financial products and real estate; On the other hand, banks are also willing to allocate a large amount of funds to trust, securities, insurance, and real estate industries with higher returns, and their willingness to invest in physical assets is not strong; Therefore, falling into a vicious cycle of "unreal real economy and virtual economy being too virtual", "unreal real economy" refers to the low productivity of industrial sectors in the real economy; "Fictitious economy is too empty", which means that the finance is separated from the real economy and the foam becomes high.
The development of the real economy has always been the focus of decision-making, and the Central Economic Work Conference has clearly proposed to "focus on revitalizing the real economy.". The root of a country's prosperity lies in the real economy. For the capital market, we should press down the flames, squeeze the foam, and guide the flow of capital to high-quality real enterprises; For the real economy, forging iron also requires its own hard work. It should face difficulties, increase transformation and upgrading efforts, and improve supply quality. Only by working together in this way can we improve the return on investment of the real economy.