Preface

On the afternoon of June 27, 2018, the second session of GLGA Lecture Hall was successfully held at the Innovation and Development Center, Green Legal Global Alliance. Today, we have our keynote speaker here, Cao Heping. He is the academic member of the School of Economics of Peking University, professor of Department of Environmental Resources and Industrial Economics, doctoral supervisor, and vice dean of Digital China Research Institute of Peking University. Based on the global economic development and the reality of China's development, professor Cao analyzes the current Chinese national economic system by explaining economic indicators, depicts the new picture of China's economy development in the next 3-7 years, and interprets the modern economic system supported by digital technology from multiple perspectives, as well as expressing his exclusive views on the essence and development path of blockchain. The Secretariat of the Green Legal Global Alliance will give a summary of professor Cao Heping's lectures, jointly explore the future development trend of China's economy, and grasp the high-value flow of the digital economy. 

Host: This is the second session in the GLGA Lecture Hall series, involving two keywords: digital technology and modern economy. It is well known that, in recent years, the technology represented by the Internet, cloud computing, big data, IoT, AI and fintech has developed rapidly, which has greatly affected the original economic system. In addition, the appearance and pattern of many industrials have been changed in various aspects, and many emerging areas and industries thus have sprung up. However, the rapid development of the industry has also brought about some problems and challenges. How do we understand that and how to face that still remain a problem. Today, we have the honor to invite professor Cao Heping from Peking University. Professor Cao is a member of the Academic Member of Peking University, professor and doctoral tutor. He has conducted long-term research in interaction and mutual influence of digital technology development and economic system, and has a profound understanding. Now, let's applaud professor Cao Heping. 

Cao Heping: Thank you. Today's topic is about the modern economy supported by digital technology. Why is there such a topic? Recent online discussions of the economy present a polarized judgment. One group holds that the China's economy may have a relatively big problem this year because of the decline in investment and export, the stock market problem, the beginning of the trade war, and the decline in comprehensive investment. Besides, the severe financial crisis caused by the outbreak of local government bond will lead to a cliff-like decline in the entire economy. Another group believes that China's economy is now experiencing a once-in-a-lifetime opportunity. From 1840 to today, we first stood up on our own feet, then completed foundation and industrialization, and are now moving from a large-scale workshop manufacturing economy to a new economic system. China's structural changes cannot be interpreted as a downward trend in past statistical indicators. There is a bright future for China's economy. 

The National Economic System of "Three Eliminations, One Reduction, One Supplement" 

I would like to talk about three aspects of the problem. The first is data indicators. Why do we call it "Three Eliminations, One Reduction, One Supplement"? We have produced 800 million tons of steel, but we can only use 470 million tons. Hebei Province, by 2018, had produced 270 million tons, but it must cut 66.34 million tons of steel capacity. The national steel output in the United States is 80 million. Think about it. Only 470 million tons can be used. The Tangshan Iron and Steel Works can produce 30 million tons. What should Hebei do with the rest 470 million tons of steel? It could only use fiscal subsidies to prevent Tangshan steel production, otherwise its GDP would fall. Thus, four years ago, it ranked sixth in the country. It ranks eleventh this year, so can the secretary of the Provincial Party Committee still be a member of the Political Bureau? He's nervous. But think about it. In the old revolutionary base area of Hebei Province, the produced steel cannot be used. On the dock, they rust year after year. Do you think that this capacity should cut or not? 

To cut capacity, the first thing to do is to cut excess urban real estate inventory. Because if we don't do so, the enterprise cannot transform with no liquidity. Again. If the enterprise cannot transform, how to cut capacity? With releasing workers into the community, who will compensate the professional workers? A salary corresponds to a housewife's breakfast in the morning, a child's tuition, and a soy milk in the supermarket. Therefore, it is better to let the enterprise change its production, and to give it liquidity, with cutting its excess urban real estate inventory a basis. Thus, this time, General Secretary Xi plans to know the real situation, the same in Wuhan WISCO, as he did in the 1980s when he decided to build Junjin Steel Plant in the place where was then bare and now is where Baosteel locates. Since then, our steel has increased rapidly. After WISCO took out such a steel plant, it freed up 15 square kilometers of land in Hanyang. The price of an acre is 12 million yuan, while 15 square kilometers is 1.5 trillion yuan. It compensates for the fiscal discount. If our steel accounts for a percentage of Indian steel mills through exports, would "Belt and Road" construction absorb our steel stocks and steel capacity? 

To cut inventory and capacity, of course, you need to deleverage, why? The economic downturn continues to decline, and the bank dare not give industrial and commercial enterprise loans. The reason is that the enterprise used to be good, with sales once a month, however, it turns out to be three months in recent years. In this situation, although the relationship remains good, the bank dare not give loans to an enterprise fearing that it cannot afford? When the bank refuses to give a loan, it will assess the enterprise due to its own performance. Last year, our return rate was 2.84, and this year is 1.415 because the market scale doubles. The bank's asset scale doubles, but the return rate and total income have not dropped. It is only one of the indicator return rates that declines. Next year, we will deposit with each other, with the return rate decreasing to 0.2, 0.3, but I am still positive. Leverage is getting higher and the bubble is getting bigger. Therefore, we must cut overcapacity, reduce inventory and deleverage. Banks and financial institutions should be responsible for lending money to manufacturers and enterprises. 

And reduce what? In the "Three Eliminations, One Reduction, One Supplement", what does "One Reduction" mean? It is reducing costs, that is, improving efficiency. "One Supplement" means supplementing the weakness of national economic enterprises. ZTE's investigation reveals that our chip's upstream top-level design and central industrial chain are missing in the digital economy. We are strong in the downstream industrial chain, because the world's chip industry is of 360 billion market value, and we have purchased 265 billion. We have a buyer's market position, while the United States is in a core technology competitiveness position. The two are tied and neither can beat the other. The corresponding import and export from the other side will make both unhappy. So judgment by the media that we are under an absolute inferiority in the chip campaign is not accurate, which only can frighten ourselves. 

The national economic system of "Three Eliminations, One Reduction, One Supplement" shows that we are carrying out macro-strategic adjustment of supply-side structure. A national economic system that has introduced aggregate demand management for 40 years still comes to the macro-management, and you need to balance the aggregate supply-demand relationship, which is also called supply-side management. The United States implemented supply-side structural reforms from the end of World War II to 1982. Today, we also have 38 years of structural reforms on the international side. There are 38 years in the United States and 38 years in China. What a coincidence. Both learners in law and economics are among us. Please think about the mechanism behind it by yourselves. We will not further dig out about it here. 

Second, the such large-scale production. In fact, our country is also very remarkable in other areas of production, such as this microphone, whose production in Dongguan accounts for 76% of the world share. The table we export holds 76% of the world market share. We also produce 44% of the world's cloth, and claim 51% of clothing. So it's not just steel, but almost all our food, clothing, housing and transportation markets account for more than 35% of the world's material products. How much value have we achieved? The GDP of the world is about 80 trillion yuan, among which we have achieved a share of about 10 trillion yuan to 12 trillion yuan, occupying 16% to 18% of the world GDP. We have a huge share of material products and inefficient ability to realize their values, resulting in a big drop of the production proportion in the national economic system. By the end of the year, the merchants at least produce 35 material products, achieving 16% to 18% of the value during the New Year sale via buying one and getting one free. 

Economic indicators: reduce the sensitivity of data collection points 

I noticed from the map just now that the Chinese build 51% ships all over the world, while American less than 1%. If all our ships by each other and rebuild at the same time, we will be faster than Americans with no doubt. The U.S. actually worries about our national economic system very much. But if the statistic items of the National Bureau of Statistics are all enterprises above the designated scale within the fields like heavy industry, heavy chemical industry, energy-based raw materials and equipment manufacturing, processing and manufacturing, and daily necessities manufacturing, is this year's economic scale increased or decreased after the inventory and capacity cutting?  Is the investment increased or decreased? It must be decreased. But the GDP growth rate was set at 6% at the beginning of the year based on the fake statistics. However, the growth rate is particularly fast in other areas, such as our e-commerce, Internet, digital and entrepreneurial economy, with about 16%-60% of the share. What was the online sale volume last year? 27.2 trillion, which accounts for 32% of GDP. These third-party platform sales cannot be included in the statistic item to enter the national economic system accounting of our National Bureau of Statistics, which would lead to a reduction of sensitivity of data collection points. In this case, a great confusion will be taken to those who are not professional to judge the development of the macroeconomic. Therefore, the National People's Congress approved the law of the National Bureau of Statistics to conduct a nationwide census of the secondary and tertiary industries for details. 

What is the modern economic system supported by digital technology? 

What I talked about just now are traditional economy and overall economy. Look! This is the first information interconnection in the corridor. Such kind of power distribution in corridor connects 285 million computers together. Fiber Optics as I said earlier, connected the desktop computers together. As a result, we were 150 times more productive with information interconnected. What happened when the mouse technology comes out? The mouse technology could be equivalent to a prolonged highway from 35km to 350km for information transmission when connected with the fiber optics. What kind of platform will emerge with such a change? We call it the first generation of the Internet portal website era. When I went to Tencent three weeks ago, I found it handled 150 billion pieces of information a day while Orient Telecommunication 60,000 pieces a day. How much information does the world put on the Internet every day? Three hundred trillion messages. How can you find the one you need? You need a certain entrance. Without such a general information website, or we can call it portal website, there will be millions of  thousands of information occurring to you. It is necessary for the portal website to appear in our life. 

What changing does the portal website bring to us? Information is abundant in some places but scarce in other places, which is the same like the wealth of coal in Shanxi and the shortage in Zhejiang. We have to transport the rich coal from Shanxi to Zhejiang, and transport the abundant resources from rich areas to other places. Peking University Library collects 2,000 books, but families in the mountain area are utterly destitute. But the little kids in rural areas would receive the same information as Cao Heping, a Peking University professor does, through the cell phone or computer. The search engine and portal websites in this story make up the second generation of operating platform. After the appearance of the first generation of the Internet portal website and the second generation of the search engine, the story still goes ahead. 

In 1997, Unicom was established; 1998, Mobile; and 1999, Tencent. There are 50km between every two base stations. From Beijing to Shijiazhuang, we have to dig 300 km long to bury the fiber optical network. With such a short distance between base stations almost equal to the distance between wire telephones, why do we continue to use wire telephone? Of course the cell phone, or wireless phone, is still necessary. Base stations bring a greatly lower cost in infrastructure facilities. Do you know how many terminals it has developed? 900 million. How many terminals are installed in this one? 285 million. What are the consequences? A series of APPs and applications on mobile phones has led to the emergence of super e-commerce and third-generation operators. Taobao, this is Hangzhou Normal University, Vip, Jingdong and Renmin University of China. Jingdong is a combination of retail markets and vendors, while Ali just combines retail markets with payments. Jingdong now owns its payment platform, so will Jingdong win Alibaba without the payment of Ali? I don't know what to say now. Of course, Peking University is lagging behind. Dangdang is out of time. So the modern economy, supported by digital technology, has now figured out some ways. As a result, who could have thought of the TouTiao? TouTiao now posts 2.27 million pieces of news on the Internet per day, and the CCTV news agency Xinhua, NetEase, Sohu, Sina, Ifeng, provincial TV stations and print newspapers now post 175,000 pieces of news on the Internet a day. So now there may be an inaccurate rumor, saying that the CPC Central Propaganda Department has sent CCTV 10,000 Party member editors to review his general news and political news. I never knew there was a piece of news that the Publicity Department of the CPC Central Committee had sent 10,000 editors on CCTV, and that was not the case. It has become so significant because although the People's Daily has a circulation of more than two million copies, the real voluntary subscription is only 930,000 copies. If any of you wants to become a legal partner in the future, think over it. Don't think the legal partnership system is amazing. No, this is not the case. If all the new technologies come, everything has to change. 

As we all know, what is supported by digital technology can become a creative economy. This is terrible. 

At this time you will find that there are a fiber-optic Internet and a mobile Internet, and now there is satellite Internet, so how can we interconnect them? A satellite with a positioning distance of more than 40,000 kilometers is a positioning satellite. Beidou positioning satellite requires a constellation. The communication satellite transmits information in a dense, continuous, and dead-end manner. Why do you use China Mobile rather than China Unicom? Because Unicom's signal is unstable. A satellite will cost 20 million yuan, and 14,000 satellites will cost more than 200 million yuan. In our base stations, China's base stations cover 70% of the country's territory, with an investment of more than one trillion yuan. The cost of China's infrastructure is particularly low because of the improvement of new technology facilities in digital technology. Constellation satellites, communication satellites, navigation satellites, positioning satellites, and remote sensing satellites are all free port operations. Airports and spaceports are not seaports, land ports or fishing ports on the ground. It turns out that this is from13 to 16 kilometers, and this from 20 to 100 kilometers. Only Chinese know the weather in this layer of the world. As a result, when an aircraft is placed here, the amount of information transmitted by China's communications has enlarged greatly. As a result, satellite transmission has been combined to achieve hundreds of times the efficiency of today's Internet transmission. 5G still needs to move forward, because 5G features just a transitional era, and we should integrate the space, sky and earth together. 

This building processes more information in a day than 101 buildings do in a week. With your mobile Internet and fiber-optic Internet, it's impossible for you to carry that amount of data. What about the consequences? The consequences can only be seen by putting all the automobiles and high-speed rails on the railroads of the 1940s. You can imagine the level of congestion, which represents data congestion. A new economic situation has emerged, and it can provide more powerful services. Just now it was the information interconnection and at the moment it has become the Internet of everything. When you come to the room, it knows professor Cao's blood glucose level, which overtakes the doctor. When you sit on the table, the stool will tell you:" professor Cao, the stool is not suitable for you." Or the stool will send you a message telling you that there is something wrong with it and you cannot sit on it. I'm telling you, professor Cao, you can't sit here but here. 

The mobile phone is an alarm clock, an MP3 player, or a tour guide. Hundreds of traditional products have been put into the phone. How do traditional products run into mobile phones? This is a bit scary. How does the child's cradle connect with the toy? How do I direct the cradle and the toy? His child has been running around under the table recently, so he recorded his child's behavior. When his wife analyzed it, it formed a pattern for children to learn and interact. Another piece of software, that's awesome! What are the consequences of traditional second-class products, frontier third-class products and frontier fourth-class products? What are the consequences of products becoming more and more intelligent? If a driverless car is produced, you can't immediately put the driverless automobile on the road. Suppose you put a piece of software in it, then a girl came over, a green girl with red hair and a yellow scarf. What it sees is not traffic light, it is a girl, but if it has poor eyesight, what do you do with it?  Therefore, the automobile has to go on the road to study first. After a few months' learning, it will be given a formal "driver's license", and driverless automobile can get on the road, we can't let it drive directly on the road. So the products are becoming more and more intelligent and the management is becoming more and more networked. There are 10, 000 watchmen in these 100 buildings, and they can earn 1.8 million yuan a month and 18 million yuan in ten months. After this infrastructure is laid down, the operating cost is less than 5% of 18 million yuan. Relying on those networks and node hubs, the entire economy has changed from a large workshop assembly line and modular production to a digital smart economy. 

Because human influence is huge, humans may control Venus with their left hand, Mars with their right hand, and a small moon with the middle. At this time, you find that creatures are coming in and out of these planets. Five tons of materials are sent from our Loess Plateau to other planets, and we generate electricity on those planets. This will create a total of all fossil energy sources in the world, and humans no longer have to be plagued by environmental pollution. The "Belt and Road" has terrified Americans. How can we guide the future of the human economy forward has become both realistic and dreamy. Therefore, the modern economic system supported by digital technology has reached a point in time when China can take part in the finals from the perspective of all mankind. Therefore, we should grasp this era well. 

That's all. Thank you.