The topic I am going to talk about today is "The Decline and Revitalization of Entrepreneurial Spirit."
There were two major trends in the society, which have been widely reported by various media. One was university graduates taking civil service exams, and the other was emigration overseas. Among those who emigrated, there were children of officials, successful entrepreneurs, and their offspring. These two trends clearly indicate that the entrepreneurial spirit is in decline.
I would like to clarify the definition first. Here, "entrepreneurs" refer to private entrepreneurs. Although state-owned enterprises (SOEs) have many excellent managers, they do not have entrepreneurs. In a market economy, entrepreneurs are people who possess keen insight and can promptly identify social needs, even create them; they have the courage and ability to take risks, organize resources, and develop and produce products and services needed by society when the market prospects are unclear; they bear the consequences of failure with their personal reputation and assets, and also win the benefits of success with their personal reputation and assets. In this sense, SOEs only have managers, not entrepreneurs.
When we see the decline of the entrepreneurial spirit in China, we must ask what the reason is. In fact, everyone knows that the rise of a strong government is the fundamental cause of the current decline in entrepreneurial spirit. The main characters of the market economy should be enterprises and the public, and the soul of enterprises is entrepreneurs. In recent years, reforms have stalled, and under the attraction of huge interests, the government has transformed from an enforcer of game rules to a participant in the game. Not only have SOEs expanded forcefully with advantages in policies, laws, funds, resources, and ideologies, squeezing the survival space of the private economy, but also the intervention of various government departments in economic activities has become increasingly frequent. A prominent example of government intervention is real estate, where almost all known administrative intervention measures have been used in a very short period of time.
Government intervention in economic and market activities increases the burden on enterprises, disrupts market order, undermines the stability of expectations, and increases future uncertainty. As the business environment deteriorates and profit opportunities decrease, a considerable number of entrepreneurs have abandoned the real economy and gradually turned to investment, forming the second trend in the business community besides emigration. Among my students, I have found two current trends: the first is obtaining foreign passports, and the second is doing investments instead of engaging in the real economy, as operating in the real economy becomes increasingly difficult.
The subtle change in social status has also led to the decline of the entrepreneurial spirit. Entrepreneurs have transformed from admired tide-makers in the market economy into objects of complaint for societal inequality. In recent years, income distribution has continued to worsen. In a society with a tradition of equality, people habitually focus on results rather than causes, paying more attention to the results of unequal income distribution without investigating its causes.
Research by Chinese scholars shows that the main reasons for widening income disparities are money-power transactions, corruption in public investment, monopolistic land supply, and profits from monopolized industries. However, rent-seekers always direct public opinion pressure towards producers and operators. For instance, unaffordable housing is blamed on developers making excessive profits, high medical costs are attributed to doctors receiving red envelopes, and rising vegetable prices are blamed on vendors hoarding goods. When resentment against the rich replaces respect for wealth, entrepreneurs not only lose the spiritual motivation for innovation and progress, but also turn giving back to society into a pressured obligation rather than an expression of gratitude from the heart. As a result, there are few "naked donors" in society, while "naked officials" are becoming increasingly popular.
There is a trade-off between entrepreneurial spirit and bureaucratic culture. What does this mean for our nation? It means the loss of innovation capability and social unrest. When society no longer encourages and rewards value-creating enterprises and the public, and instead directs people's intelligence, time, and energy towards redistribution rather than value creation, we know the long-term effects of such a social incentive mechanism. That is, the shrinkage of the value-creation sector and the slowdown in the speed of value creation. Here, it is necessary to explain what value creation is. Value creation means effectively meeting social needs. From this definition, it is clear that government departments actually do not create value; all their income comes from the private sector, and state-owned assets are created by taxpayer investments. When we see university graduates rushing to government departments, social elites avoiding value-creation sectors, and aspiring to wealth redistribution sectors, gaining their own interests from wealth redistribution, we know that society will tend towards parasitism and stagnation, and the economy will lose vitality.
More worrying is that the young talents in our society not only aspire to wealth redistribution sectors, i.e., government agencies, but are also prepared to use corrupt and illegal means to achieve their goals. Look at the following data: In 2010, for the recruitment of civil servants by central agencies and their subordinate institutions, among the 1.35 million people who passed the qualification review, 400,000 applied for the State Taxation system, and 300,000 for customs, accounting for 70% of the total applicants. Railway, public security, and meteorological systems had very low popularity. We can't help but ask, why is there such uneven enthusiasm for equally secure, stable, and respected civil servant positions? Obviously, people's preferences for these departments are determined by the size of rent-seeking power. Of course, there is some information asymmetry here. Fewer people applying to railway, public security, and meteorological systems may be because they don't yet fully understand the potential for rent-seeking in those areas. So many people flocking to the State Taxation and Customs Departments indicates that our young talents not only want to gain their interests through wealth redistribution but are also prepared to use illegal means to achieve their goals.
Using illegal methods for wealth redistribution makes the public question the fairness of government legislation and law enforcement, shaking their belief in social justice. Unrest arises, and when public grievances boil over, talking about stability and harmony may be too late.
Our country is currently at a critical stage of transforming its economic growth model. Encouraging and promoting innovation is a fundamental approach to changing the growth model. And the mission and work of entrepreneurs is innovation. At this time, re-emphasizing and revitalizing the entrepreneurial spirit is particularly important.
Revitalizing the entrepreneurial spirit requires the government to withdraw from the economy, allowing the market to play a decisive role in resource allocation, and returning enterprises and the public to the center of the stage. The phrase "the decisive role of the market in resource allocation" is not something I said; it has been repeatedly emphasized in the party's documents.
Revitalizing the entrepreneurial spirit requires the government to relax and lift regulations, strengthen market functions, and weaken the ability of officials to create and seek rents. Although some entrepreneurs have also participated in rent-seeking activities, it is natural that they have been condemned by the public. Observations suggest that only a minority actively collude with officials, while the majority do so reluctantly. They actually hope to operate in a transparent, standardized, legal, and fair business environment and do not wish to take legal and political risks. The root of rent-seeking lies in the system, in the unchecked power of the government and excessive regulation.
Revitalizing the entrepreneurial spirit requires the public to understand the role of entrepreneurs in the market economy. Because entrepreneurs endure work intensities, pressures, and risks that ordinary people cannot bear, and because their innovations bring great benefits to society, the market and society give entrepreneurs rich returns. This is a reasonable and fair arrangement, at least more reasonable and fair than accumulating wealth through corruption, as entrepreneurs meet social needs and create value for society, while corruption and rent-seeking are merely legitimate or illegitimate ways of seizing others' wealth.
Fortunately, China has abundant entrepreneurial resources, from farmers in Xiaogang Village and Nian Guangjiu who operated "Foolish Melon Seeds" to all of you present today, representing outstanding entrepreneurs. The farmers of Xiaogang Village and Nian Guangjiu were both entrepreneurs whom Comrade Deng Xiaoping paid attention to. Unfortunately, we have thousands of years of bureaucratic centralization traditions that suppress and harm grassroots innovation.
If government officials could realize, like Comrade Deng Xiaoping did, that the wisdom of the people far exceeds their own, respect and encourage grassroots innovation, and shift the focus of government work from participating in and regulating market economic activities to building and protecting institutions, we can confidently say that the transformation of China's economic growth model is not far off, and we will write another brilliant chapter in the miracle of China's economy.
Thank you all!