On the morning of August 13, the 2025 Boao Real Estate Forum was held at the Westin Resort Hotel in Lanwan, Hainan. Fan Gang, Vice President of the China Economic System Reform Research Association and Dean of the China Shenzhen Comprehensive Development Research Institute of the National High-end Think Tank, chaired the dialogue session of "The Endogenous Dynamics of China's Economy". The following is the full text:

Host Guest:

Fan Gang Vice President of China Economic System Reform Research Association and Dean of China Shenzhen Comprehensive Development Research Institute of the National High-end Think Tank

Conversational guests:

Chen Huai Professor of the Department of Urban and Rural Construction Economics, Graduate School of Chinese Academy of Social Sciences

Wang Chengwei, Chairman of Hong Kong Jianye Group and Hanguo Real Estate

Hong Hao's famous economist

Fan Gang: This link will be discussed by the four of us. I have already talked about it just now, mainly for the three of them. I will read a few themes listed by the organizer first. The main theme is "In 2025, the endogenous driving force of China's economy will gradually emerge, and the expansion of the consumer market and the breakthrough of the entire industrial chain will be new engines of growth."

Sub-item 1: More active and proactive economic and financial policies. Sub-item 2: Reconstruction of industrial chains under the global economic and trade game. Sub-item 3: Consumption upgrade and recovery led by technological innovation. Sub-item 4: Hainan Free Trade Port’s closure and industrial development opportunities.

Chen Huai: I have been thinking about what to talk about since last night. I have thought about it all night and I haven’t slept, so I can’t help it. I know that the entrepreneurs here want us to say four things: First, tell me how to convince consumers to buy a house? Second, you tell me where to borrow some money to deal with the current debt. Third, tell me what policies the government will issue tomorrow and help me. Fourth, tell me when the housing prices will not go down and start to go up. I can't tell. Scholars and entrepreneurs are cars running on the two sides, and everyone has different perspectives.

Fan Gang: The first topic is "more active and proactive economic and financial policies."

Chen Huai: It seems that there is an issue of expanding consumption. In 1998, China faced a comprehensive surplus that it had never expected from top to bottom. The Asian financial crisis broke out and things could not be sold. In 1999, I worked at the Development Research Center of the State Council. I presided over a topic seminar called "surplus economy", which caused certain social impacts.

At that time, China was not at the stage where the surplus, the things could not be sold, and the people did not need them? Look at what ordinary people eat, wear and live in. At that time, there were only 3 private cars for every 10,000 families, and they were all vans. Professor Fan Gang was just driving a van at that time. Why did it reach the surplus stage?

But at that time we summarized more than 620 products, and there was no supply in short supply. Most of them were oversupply, and a small part of them were balanced. For the first time, we were stunned, how could we still not sell the things?

I can tell you this surplus we are facing today. In 1999, I wrote a book called "Super Economy". Now this situation is not just about insufficient consumption, but actually there is demand. So is it okay for us to issue a policy to stimulate consumption? no. The biggest feature of this surplus is that whenever consumption demand occurs, supply will be generated rapidly on a larger scale.

When supply is oversupply, since people do not have a more favorable investment field, each supplier expands its production capacity and finds ways to squeeze others out to form an inverse. In the past few years, we had an export to deal with. Now others are no longer playing with us, and they add tariffs and reorganize the world's industrial chain, so we are facing today's problems.

The core meaning of the above statement is that don’t expect the policy of expanding domestic demand to solve the excess problem we face. This is where our perspectives as scholars and entrepreneurs differ slightly. The reason for the surplus is an inevitable event and why? If there was no surplus, there would not be the Great Depression from 1929 to 1933, and there would not be Keynesianism.

It is because of the main obstacle to the development of the national economy in the middle and late stages of industrialization. It is no longer how to find ways to dig more coal, generate more electricity, and refine more steel, but how to sell it. In 2003, none of us expected that China would become the world's largest car-making country.

By the middle and late stages of industrialization, the main obstacles to economic development have gone from the production side to the demand side. Although many young faces here are, like Professor Fan Gang and I, they must be very familiar with each other, and others must have heard of them.

It used to be called "revolution moves forward, production grows inch" and "grasp revolution and promote production". We must contribute to the cause of communism and work hard to produce. To develop production and ensure supply, production is the best and the most important thing. We have never thought that even the Asian financial crisis in 1997 did not fully realize that consumer demand is the most important end point in determining the goal of sustainable development and achieving modernization.

We have entered the middle and late stages of industrialization. The continuous, one after another, with different forms of supply oversupply, structural and total quantum are a normal phenomenon. The problem we must face for a long time in the middle and late stages of industrialization, and it cannot be solved by expanding consumption. Some people say that our things are not sold now, mainly because the goods are not right. As long as we develop high-end products and high-quality products, consumers will buy them. So why does Pinduoduo develop so well?

The second meaning is that real estate is facing surplus, not the first time it has been surplus since its first day of birth. In the early 1990s, the house was built for 10 years but not sold. Shanghainese people "would rather have a bed in Puxi than a room in Pudong." The Shanghai Municipal Government issued a policy that outsiders would buy houses in Shanghai and give you a blue seal of household registration. What does Lanyin household registration control? Your son can take the college entrance examination in Shanghai without having to go back to Henan’s internal exams. You can receive a standard pension in Shanghai in the future, and no one from other places will come.

Later, I gave Shanghai people a policy, and you would spend 500,000 to 800,000 yuan to buy a house in Pudong, and you would be exempt from personal income tax in your future income. No one will buy such a preferential policy. This is not the first time we are facing surplus and serious surplus. Is it possible that the living conditions of Shanghai citizens in the early 1990s were better or worse than they are now? Is there no demand? This is not the first time we have destocked a few years ago. Today we will face it and will face it in the future.

Ms. Chen Shitao just said that she wanted to build a good house. The Ministry of Construction proposed the concept of a good house. What is a good house? I think the first is that you have to balance the risks of saving money to buy a house, trading a house, and holding a house among all participants in the entire chain. You cannot only bear the risk by the buyer. The bank said that you couldn't pay the loan, so I would accept your house. The developer said that I couldn't pay the house, so I donated money to run away. What kind of policy of expanding consumption can convince him to buy a house? Therefore, we need to achieve balanced allocation of risks.

Second, if the house needs to be built in the right place, we must allow large, medium and small cities to develop balancedly, and allow people who plan to live in cities of different sizes to be reasonably allocated in cities of different sizes. Only then can we truly start real estate. Can everyone live in Beijing? Professor Fan Gang just said, I have to discuss it with him. He said that because the people did not think about wearing better clothes and eating better food, they were sluggish in consumption. Do you think someone doesn’t want to marry a beautiful wife?

There must be some factor that hinders the consumption of ordinary people. You just mentioned social security. Social security is very important and can solve people's worries. But some people have worries, others also want to consume. For example, Trump in the United States always wants to expel illegal immigrants. These illegal immigrants do not have social security and dare to spend money. They immediately spent all the money they earned in the past three months, and then ran away and came back to work when they had no money. What to do when you are old? He doesn't care.

Fan Gang: What you are talking about in the permanent consumption theory: after getting this money, how do he think it is long-term income or temporary income?

Chen Huai: The Chinese people are very cautious. When I was in the United States, I also had a scholarship from the Humboldt Foundation, so I didn’t dare to spend it. I saved up and bought large items back home. I gave me a total of more than 8,000 US dollars in half a year. After spending, I could still go back to China to buy large items, which scared the Americans.

Fan Gang: A case of typical permanent consumption theory.

Chen Huai: Including Professor Fan Gang, ask him, did he dare to go home if he studied in the United States in that era? A flight ticket costs several thousand yuan, but I can’t afford it, so I save it all, and I’m all here. We in China have gone through this stage. A brief summary of three sentences: First, don’t think about the policy that this surplus can be made, convince consumers, make up a story for them, and they will come to consume, and real estate will get better. There is no such thing. We are facing a stage where the production field is the main obstacle to the consumption field and demand field, and the continuous upgrading of the consumption structure. In the future to the modernization stage, we always face this problem, which has been proven by developed countries.

Second, it is not the first time that real estate has faced surplus. We are always fighting against surplus, always facing new challenges, and then breaking through this challenge and facing a new pattern.

Third, I still firmly believe that our confidence lies in the fact that the people want to expand consumption, expand demand, and improve expectations, not just social security, but also make more and more people have productive products. Buying a house means making more and more ordinary people become possessed.

Why can most people afford a house in American imperialism? Because most people are middle-class, please note that there is a word "production" in the middle. From the 16th to the 20th National Congress, we have always emphasized one word, "expand the middle-income class." This is a big difference. The middle-income class and the middle-class are two different things. When people pass on their sons family background, their expectations and consumption behavior will be greatly improved. So in this process, real estate is both a victim and a booster of this expected improvement.

Fan Gang: Let me add a sentence here. Chen Huai just talked about how we used to judge whether there was an excess or whether there was insufficient demand in the past. I think an important misunderstanding in concept is that it confuses needs and needs.

Demand is a need supported by the ability to buy money. I need a lot of things. I want to live in a house of 1,000 square meters, but I don’t have money. My money is only enough to buy a house of 30 square meters. Then the demand you put forward is only that 30 square meters.

When the goods are scarce, because he has no income and no assets, he still cannot put forward a greater demand, he just has that need. The living is poor and the life is very hard, but the income is only so much. Therefore, the most basic thing is income. Only if you can have income support can you be called market demand.

Wang Chengwei: I agree with the point of view of Teacher Fan and Teacher Chen just now, that is, the Chinese economy is still just taking off, and foreigners come to China to explore the market. This happened 200 years ago. China's opening up has been less than 50 years, so following the West, there is still a way out and there are still many courses to learn. Teacher Chen just said that expanding the middle-income class is also a very need to do.

I will first introduce myself. We are a family business. We start with our grandfather and hand it over to my father. Then we hand it over to me. The Wang family has a habit of asking me to work outside before going home. I was called back by my father in 2010. At that time, my father was 70 years old. He said that if you don’t come back, it’s unfilial, and I will come back if I can’t do anything.

Before 2010, I worked as a lawyer at Toyota Motor Company. During this period, I watched how many cars we had to build at Toyota Motor every year. This is a problem that a large factory has to solve every year. How many cars are we selling this year and where to build this car.

Today I will talk about the two issues of supply and demand. I will add to the several topics that Teacher Fan just mentioned: The first is to take a closer look at what courses do you need to pass in the comparison between China’s 50 years and foreign countries in the past 200 years. For example, China basically had no phones in the 1970s, so it was very difficult to pull a phone line. If we follow foreign countries and slowly pull the copper wire, we may have finished pulling every time until today. But our country skipped that stage, and now everyone has a mobile phone. Think about it, do you have a landline phone number at home? There is no more now. This is the part we can cross in the market. Apart from technology, are there any courses that can be skipped? We need to think about this issue, which can be skipped with technology.

The second is that policies can be used to reconcile some problems, which may be a process that every society must pass, so that the blow to society will not be so big. Teacher Fan just mentioned the credit card crisis that broke out in South Korea. We can adjust this problem with national policies, and we don’t need to go through this process.

So what kind of process is there to do anything you have to go through? When we talked about the real estate problem just now, we can’t solve it by one or two people. Japan's real estate was very prosperous in the 1980s. A small piece of land in Ginza, Tokyo, was more expensive than all the land in the United States. However, Japan's real estate collapsed in the 1990s and has not returned yet after 30 years. I hope China will not take this path. We have seen the experience in Japan, and now we are all thinking of many ways to avoid the problems in Japan in the 1990s.

Every social stage can rely on new ideas to cross the supply chain where the supply chain is insufficient. New technology will create new markets, and new markets will absorb too much of what was previously supplied. Let’s take the example of mobile phones. Mobile phones before 2010 and mobile phones today are basically two different things. Before 2010, you needed cash to buy things and brought your wallet. Now, you basically paid for mobile phones when you go out. The changes have been very fast in the past decade. New technology can create new markets and new demands.

Our company is in Shenzhen. Now Shenzhen is vigorously developing low-altitude economy and AI. These new technologies are believed to be able to drive China to rebalance supply and demand in the future and increase people's demand, because people are willing to spend money on new things and have new things that can regain the market.

Fan Gang: Now, please invite economist Hong Hao to talk about his views.

Hong Hao: Let me talk about my observations. Economists only look at one end of supply and demand. If you are a Keynesian, you only look at the demand side and encourage everyone to consume. If you are an economic growth model, such as China, a five-year plan will be formulated every 5 years to determine how much our GDP will double in the next few years. Under this economic thinking model, the adjustment of economic policies will inevitably start from the supply side, because the supply side is the best controlled.

For example, in the years of the epidemic, due to the decline in asset prices and some problems in the real estate market, we have made great moves on the supply side. For example, we invested a lot of capital in new technologies such as electric vehicles, solar panels, batteries, etc. Each province has its own investment office, and each province hopes to invest heavily in these emerging industries. Therefore, each provincial government automatically becomes a private equity fund. The goal of this investment is not very consistent with the government's own governance function, because the government is not the individual with the best assessment of risks and valuations.

Looking back now, we have indeed achieved great achievements in the years of the epidemic. China's economy has grown steadily, with about 5% growth each year. Except for the darkest time of the epidemic, the whole world fell into recession, but basically China has grown at a rate of 5% or even higher in recent years.

But there is also a problem in this process, that is, there is now a serious surplus on our supply side. The difference between the serious oversupply on the supply side this time and the supply-side reform in 2016 is that we call the anti-internal volume this time. The difference is that our production capacity has been built in the past few years.

So the recent important meeting mentioned that we do not want to see provincial governments close their eyes and invest in these so-called emerging industries, because this investment is already too concentrated. There are hundreds of electric vehicle brands in China. Electric vehicles are now worth tens of thousands of yuan, so it is impossible to make money. Some electric vehicle manufacturers only make 100 yuan by selling a car. Some time ago, people across the country could buy a cup of milk tea of 90 cents, which is impossible to make money. So the supply-side adjustment we face this time is more challenging than the one in 2016.

But economists have never thought clearly about how you balance supply and demand. As we just said, if we are in a planned growth economy, our idea is to adjust the supply side and let our economic growth rate reach a certain scale every year. The consumer side is very difficult to control. For example, we saw that in the first half of this year, although there was a national subsidy, before July we saw that the growth rate of social retail sales was better than everyone expected, but it fell in July. This is the effect of national subsidy. After spending 200 to 300 billion yuan in the country, in the second half of the year, how do you subsidize and stimulate consumption have become a problem again.

So these are two different models. One is to achieve the growth rate of our planned through supply-side adjustments, the other is to adjust the market spontaneously, and to adjust the households spontaneously, plan the amount of their own household expenses to make consumption to achieve social growth. Then, the growth rate is slower than the growth rate on the planned side, but the latter growth rate will fluctuate much lower than the former economic model with planned thinking.

If we want to boost consumption, what we see is that there must be a transformation of thinking patterns, transforming from the previous planned thinking into a market-oriented thinking. Teacher Chen also said just now that if consumption starts, consumption will naturally form a terminal demand, stimulating supply-side consumption, otherwise there will be overcapacity.

For hundreds of years, China has been a major producer, and foreigners call China's economic model. Although China's strength had gradually weakened during the Qing Dynasty, China's GDP accounted for 30% of the world during the Qing Dynasty. During the Qing Dynasty, China's foreign trade surplus was more than that of all other countries, which is also the reason why foreigners don't like it.

The problem of consumption is not just a problem that has arisen in recent years. It has always existed in Chinese society. Chinese people know especially how to produce and save, but we are not good at consumption. No matter how much money we make, we are not willing to give up. If it is a social security issue, we have recently seen some changes in social security, such as giving each newborn a year of 3,600 yuan subsidy, and preschool children can receive free education. These are all very big changes, and at the same time, there is a proposal to force universal social security.

Imagine if it is really because of social security reasons, or if it is really because of the decline in real estate prices in recent years, personal resident families have entered a balance sheet recession, causing everyone to lose weight, in fact, when real estate prices have risen in the past 20 years, China's consumption in GDP has not increased, and sometimes it has even declined.

So the theory we propose now does not necessarily fully explain China's consumption model, why we have not consumed for hundreds of years. At the same time, although everyone feels that consumption is insufficient this year, among Hong Kong stock companies, this year's consumer concept stocks, including the A-share consumption concept sector, have performed very well. There are three new consumer musketeers in Hong Kong stocks: Pop Mart, Mixue Bingcheng and Laoshu Gold. So it’s not that Chinese people don’t consume, or we should look at consumption from two perspectives now:

One is long-term trend of consumption upgrading or downgrading, which is closely related to our population trends, real estate price trends, and the cycle of the entire Chinese real estate sector. If the population birth rate continues to decline, it seems difficult to reverse now. Although we have policies to stimulate, young people are not married or have children, and everyone spends their money on themselves. According to the current perspective, the population trend is very difficult to reverse. The trend of real estate will be difficult to change in a trend for a while. Therefore, from the perspective of long-term trends, our consumption decline requires a newer thinking to solve this problem. This is how we change from a planned growth economic thinking to a market-led consumer economy.

Second, in addition to the background of the decline in long-term consumption trend, consumption is still a cyclical thing, and the cycle is relatively short, and the trend may be calculated in 10 years, 20 years or even longer. The decline in cyclical consumption is closely related to the operation of China's economic cycle. If we see some new policies in each short cycle (3 to 4 years), we may conduct a new round of national subsidies in the second half of the year. In the future, each new child will be subsidized by 1,000 yuan per month instead of 300 yuan per month. The pension for farmers after retirement will not be 200 yuan per month, but 2,000 yuan per month. I believe that the downward pressure on cyclical consumption will be effectively solved.

If we do these things at the same time, it is not about treating the headache or treating the feet. We should treat consumption from the perspective of changes in economic management thinking, and observe the changes in China's consumption from the perspective of long-term historical cycles. We should formulate some stimulus policies to help everyone overcome the downward trend of the short-term cycle. I believe that in stimulating consumption, our policy effect is likely to be better.

Fan Gang: In this round just now, we discussed a lot of culture, including consumption. I once told my doctoral student before that whether you understand economics depends on whether you can explain the concept of consumption clearly. This is indeed very complicated and involves all aspects of the problem.

Now we don’t have more time to discuss in-depth, but there is one of our topics that has not been covered by anyone, which is the closing of the Hainan Free Trade Port and the opportunities for industrial development. What do you think?

Hong Hao: I think the word "closing" has caused a big misunderstanding for everyone, "closing" means not being open. Actually, it is not. The closure of the pass means that Hainan is more open as a free trade zone, which is equivalent to import and export of goods in Hainan, which is a very big stimulus for Hainan's economy.

But now the outside world has not discussed this matter extensively. Unlike when Hainan was classified as a free trade port, everyone came to Hainan to open a company and bonded warehouse. The reaction this time was not so strong.

Fan Gang: Does it have anything to do with not allowing you to buy a house?

Wang Chengwei: I think if Hainan can expand this concept slightly and add the part of encouraging innovation, I think this concept will be stronger. I know that in Hainan's low-altitude economy, Ehang has already done many new projects here and is considering many new projects. In addition to Ehang, what innovative companies are there? Because of the concept of free port, Hong Kong has been doing so for many years. If another thing can be added to the free port, it can play a greater role.

Chen Huai: Regarding Hainan's development, I actually know a little about history. Professor Fan Gang also knows that it was not just proposed Hainan's development today. Needless to say, the Hainan real estate bubble was the past. Later, he proposed to build Hainan into a large base for petroleum and petrochemicals. Later, he thought that it would be impossible to pollute such good resources, and this was not done. Later, the international tourist island and free trade zone were proposed, and now the closure of the border was proposed. These concepts are not important. What is your essential thing? In fact, the so-called closure means that foreign things can be sold without taxes when they come here. Isn’t that what it means to let people like Professor Fan secretly take them back?

Fan Gang: That's what Mr. Wang did.

Chen Huai: We don’t give it such a big cake. If you sell it to Hainan, you won’t charge your taxes. Let the people who come here bring some goods away. You can rely on Hainan to digest those things that don’t have taxes? This thing has nothing to do with real estate.

The new demand for real estate in Hainan must rely on external demand. We have done many researches and I have been the director of the Policy Research Center of the Ministry of Housing and Urban-Rural Development for 8 years. I understand this very well. As long as you don’t relax its purchase restrictions, Hainan’s real estate will probably have limited prospects depending on its own needs. There is still a lot of room for improvement