On December 10, the Central Economic Work Conference concluded.

In reality, there is no need to dwell too much on questions such as whether monetary policy will be loose or tight, whether the real estate market will crash, or which sectors will be prioritized for development next year.

These issues can be summed up in a single word: “stability.”

Unlike previous meetings, this one specifically mentioned the need to “correctly understand and grasp the nature and behavioral patterns of capital.”

It is rare for such a high-level economic conference to explicitly state its stance on capital.

We must “grow the pie,” not “exploit the masses.”

The original text states:

The socialist market economy is a great creation. Various forms of capital will inevitably exist within the socialist market economy. We must harness the positive role of capital as a factor of production while effectively curbing its negative effects.

We must establish “traffic lights” for capital, strengthen effective regulation in accordance with the law, and prevent the unchecked growth of capital.

This passage is brief; it is worth reading it carefully a few times to fully grasp what it means to understand and master the characteristics and behavioral patterns of capital.

For many years, we have encouraged the orderly expansion of capital to promote economic growth. Now, we must conduct a comprehensive review of capital.

Of course, the meeting first affirmed the positive role of capital, but it also emphasized the need to curb its negative effects.

Therefore, the key lies in how to guide capital to create value—we must “grow the pie” rather than “reap profits at the expense of others.”

Since the reform and opening-up, the overall economic pie has continued to grow, and capital has indeed played a positive role in this process.

But now, the pace of expanding the pie is slowing down.

With the incremental growth of the pie no longer sufficient to satisfy everyone’s appetite, some capital has turned to carving up the existing pie, exploiting monopolies over essential public resources to exploit the public—as evidenced by the chaos in sectors such as healthcare, education, real estate, and finance.

Some capital has crossed boundaries to expand chaotically, stifling innovation; disregarding policies, it has grown recklessly and rushed to cash in, which has indeed bred numerous problems.

▲ Beijing has rolled out new concrete measures under the “Double Reduction” policy: starting January 1, 2022, more than 330,000 students across 646 schools in the city will receive free online tutoring.

Consequently, regulatory efforts over the past two years have been significant. Initiatives such as centralized procurement in healthcare, the “Double Reduction” policy in education, the “Housing for Living, Not for Speculation” policy, and the summons of numerous financial conglomerates may only be the beginning.

There are red lights, and there are green lights

Only through orderly development can capital achieve great things

The meeting also emphasized a crucial point closely tied to capital: common prosperity.

The original text states: We must correctly understand and grasp the strategic goals and practical pathways for achieving common prosperity.

The subsequent section is quite lengthy, focusing primarily on the need to ensure that, on the premise of making the “pie” bigger and better, it is cut and distributed fairly through a reasonable distribution system.

When the 10th Meeting of the Central Financial and Economic Affairs Commission proposed “steadily promoting common prosperity” last August, its emphasis on distribution drew widespread attention. The fact that the Central Economic Work Conference has once again raised the issues of common prosperity and the distribution system speaks volumes about their importance.

Is there a particular connection between the repeated emphasis on common prosperity and the comprehensive review of capital?

Consider this:

Although China’s per capita GDP reached $11,300 in 2020, there remains a significant gap compared to developed countries. To continue raising this figure to $20,000, $30,000, or higher , we must invest substantial resources in research, development, and innovation to achieve a leap in production technology.

▲ In this new stage of development, China’s socio-economic progress requires enterprises with a sense of national responsibility to courageously shoulder the responsibilities of the era and their historical mission. Pictured is Huawei’s first research institute, established in 1995—the Beijing Research Institute.

However, the work in these fields is arduous and labor-intensive, with long profit cycles— areas not favored by capital accustomed to easy profits.

This necessitates timely guidance to channel capital into key sectors, drive technological innovation in production, and solidify the momentum for industrial upgrading. Hence the call to “set traffic lights for capital”—avoid “cutting the chives” and instead work together to “grow the pie.”

On December 13, Yi Huiman, Secretary of the Party Leadership Group and Chairman of the China Securities Regulatory Commission (CSRC), mentioned while conveying and studying the spirit of the Central Economic Work Conference:

"We must closely focus on key tasks such as serving the real economy, preventing and controlling financial risks, and deepening the reform and opening-up of the capital market... We must leverage the positive role of capital as a factor of production and continue to strengthen the capital market’s vital function in facilitating the circulation of capital, technology, and industry."

The recent establishment of the Beijing Stock Exchange, which focuses on serving “specialized, refined, distinctive, and innovative” small and medium-sized enterprises, is precisely an important measure to set “traffic lights” for capital and guide it away from the virtual economy toward the real economy.

Utilizing the capital market to further broaden investment channels for the public, ensuring that everyone has the opportunity to share in the landmark achievements of the nation’s economic development, will also become an important practical pathway toward common prosperity.

Guiding Capital Away from the Virtual Economy and Toward the Real Economy

Grasping Industrial Upgrading by the "Horn"

As a key pathway for driving regional economic development, investment promotion serves as the “lifeline” of economic work and is closely linked to national strategy.

Under the new development paradigm, how should investment promotion efforts guide capital into key sectors, drive the development of the real economy, and create more jobs and opportunities for prosperity?

Addressing the “Three Major Pressures” with Foresight

Summarizing the “Ambition” for Industrial Upgrading

The meeting succinctly identified the three major pressures currently facing China: shrinking demand, supply shocks, and weakening expectations.

The contraction in demand refers not only to the decline in demand driven by an aging population but also to the contraction in foreign trade exports resulting from the restructuring of global industrial chains. On one hand, cost-sensitive industries are moving to countries with lower costs; on the other, capital is diversifying industrial chains for security reasons.

Overall, China’s fundamental solution lies in industrial upgrading —only by advancing toward a higher-level industrial structure can we facilitate the rational flow of labor across the three sectors and achieve the effective allocation of resources among them. Investment promotion efforts must center on industrial upgrading, and the key lies in guiding capital to drive technological innovation in production.

▲ To this day, coal still accounts for nearly 60% of China’s primary energy mix. Given that we cannot break free from our reliance on coal in the short term, CCUS (Carbon Capture, Utilization, and Storage) technology may become a significant development opportunity within the green economy.

This conference placed particular emphasis on science and technology, the "dual carbon" goals, food security, and specialized, refined, distinctive, and innovative enterprises. Consequently, industrial upgrading in sectors such as the digital economy, new energy, green power, seed industry, and agricultural machinery will continue to be key highlights and breakthrough areas next year.

Stirring Up the "Still Waters" of Scientific Research and Innovation

Strengthening the "Confidence" for Industrial Upgrading

This meeting specifically addressed scientific research. The original text states:

We must implement the three-year action plan for reforming the science and technology system and formulate and implement a ten-year plan for basic research. We must strengthen national strategic scientific and technological capabilities, leverage the role of national laboratories, restructure national key laboratories, and advance reforms in research institutes.

Why is scientific research given such high priority? Because scientific research capabilities are the core of industrial upgrading, and China’s basic research still has significant shortcomings.

It is not difficult to imagine that competition among cities for major scientific facilities and national laboratories will become even more intense in the future. The more national-level science and technology innovation platforms a city has, the greater its potential for scientific research and innovation.

▲ On December 9, 2021, the Advanced Attosecond Laser Facility was established in Songshan Lake Science City, Dongguan. Following the Spallation Neutron Source and the Southern Advanced Light Source, this marks the third major scientific facility to be established in Dongguan.

At the same time, while encouraging leading enterprises to tackle major challenges and win tough battles, we must not neglect the recruitment and cultivation of small and medium-sized enterprises (SMEs) . SMEs must become a vital complement to the nation’s major industrial pillars.

Although these enterprises are small in scale, they have long specialized in niche sectors and occupy critical links in the industrial chain. They play a vital role in strengthening and complementing the industrial chain and will pave new paths for the advancement of China’s manufacturing sector toward high-end development.

Embarking on the “Vessel of Cooperation” Toward Common Prosperity

Nurturing the “Spirit of Solidarity” for Industrial Upgrading

In the future, neighboring regions must shift away from the past practice of competing fiercely for resources. Instead, they should achieve the orderly transfer of industries and talent through cooperative investment promotion, thereby narrowing regional disparities and bridging the urban-rural divide to realize common prosperity in phases.

On December 8, the National Development and Reform Commission issued the “Implementation Plan for Pairing and Cooperation Between Cities in Shanghai, Jiangsu, and Zhejiang to Assist Cities in Northern Anhui.” Three districts in Shanghai, three cities in Jiangsu, and two cities in Zhejiang will form partnerships to assist Huainan, Lu’an, Bozhou, Chuzhou, Fuyang, Huaibei, Suzhou, and Bengbu in Anhui.

The assisting and assisted parties will implement reciprocal secondments of officials, jointly establish interprovincial industrial cooperation zones, and build platforms for capital-project matching, as well as for the supply and demand of human resources and the sharing of highly skilled talent. By promoting common prosperity through coordinated regional economic development, the Yangtze River Delta region has once again taken the lead.

▲ On November 6, the Zhejiang Provincial Government approved the establishment of the Yangtze River Delta (Huzhou) Industrial Cooperation Zone. Zhejiang, Jiangsu, Anhui, and Shanghai will adopt a “one chain, one cluster” approach to industrial cooperation, aiming to achieve shared prosperity and mutual development.

Currently, many regions lack the capacity or necessity to independently build large-scale, high-end industrial clusters. Instead, they should strive to integrate into key segments of industry supply chains, establish critical bases, and cultivate local “chain-leading” enterprises.

This is particularly true for less developed regions. When attracting industrial transfers, they must clearly understand the composition of the entire industrial chain and the strategic positioning of the “chain-leading enterprises” within it . They should define their own industrial positioning based on the industry’s overarching strategic layout and, on this foundation , carry out targeted investment promotion.

Whoever can effectively control capital will shape the future of humanity.

The proposal to establish “traffic lights” for capital signifies that China is entering a new phase and era of redefining market elements, including capital. Guiding capital away from the virtual economy toward the real economy will effectively drive the transformation and upgrading of manufacturing and bolster the rise of the real economy.

As the coordinated development of regional economies deepens, the cooperative and symbiotic relationship between underdeveloped and developed regions is growing increasingly close. Investment promotion will inevitably become more active, with innovative models emerging one after another, contributing more powerfully and effectively to the promotion of common prosperity.