市场多一点，还是计划多一点 － 关于供给侧改革的一点想法

More Market or More Plan? Some Thoughts on Supply-Side Reform

> By Colin Huang · 2017-09-22 · [Original link](https://mp.weixin.qq.com/s?__biz=MzAwNjc1ODg4NA==&mid=2652692554&idx=1&sn=e9cd2f83ba6f95587df8ff67f84e02c1) (Chinese)
> Our translation from the Chinese original.

A few days ago a friend was talking with me about the history of garment production. He said today's large-scale mass production of clothing is thanks to the First World War, because the war created the demand to produce clothes quickly and at large scale, and only then did we have today's size standards. The fashionable Burberry trench coat popular today was also produced for the army back then. I haven't verified the whole history, but I have seen the Burberry trench coat ad, and it does tell a moving war story. When I first heard my friend's account I was a bit surprised and also a bit doubtful, but it did activate my thinking over the past year about supply-side reform.

Supply and demand are two sides of one whole, promoting each other, with something of the egg-laying-chicken, chicken-laying-egg flavor; it seems impossible to say which comes before which. But to make a change you always have to grab hold of one end, and the story my friend told seems to echo [Translator's note: the original writes 映和, a variant/miswritten form of 应和, "echo"] a feeling of mine that is vague and yet strong.

To fundamentally change the supply side, you first have to change the demand side; the demand side is the ox's nose by which to pull the change of the supply side. [Translator's note: 牛鼻子, "the ox's nose", a Chinese idiom for the key point by which a thing is led.]

The first kind of supply-side change satisfies a need that has always existed but was never fully satisfied. For example, people wanted to fly, and finally one day there were airplanes, which satisfied the need to fly, and also the need for people to travel quickly across oceans. This broad category covers most supply-side upgrades, satisfying people's demands for faster, more, better and more beautiful. When one greed is satisfied, another greed appears. Of course, most of the time this greed is called pursuit.

The second kind of supply-side change originates in the appearance of a new usage scenario. For example, a world war broke out. In this new, sudden usage scenario, clothing and many other daily goods were needed in batches, at large scale and standardized, which pushed enormous changes on the supply side in production organization, management, delivery and circulation.

The third kind of supply-side change originates in a change in the aggregation of front-end demand, or is caused by a large change in the cost of gathering information. For example, after smartphones appeared, the cost of gathering routes, locations and ride-hailing demand fell sharply, so that people's travel by car could be met with a sharing approach like Uber.

There should also be some situations causing supply-side change that I haven't thought of, but whichever kind of supply-side change it is, there should always be a corresponding demand. Changes in people's big demand scenarios are not many (new scenarios like war that cause the second kind of change). Upgrades of people's existing needs (more, faster, better and the like) are quite many, but are all these faster and more things worth pursuing and encouraging? This is a question worth our reflection; whether or not to expand on it here [Translator's note: the original reads 在不在这里展开, apparently a slip for 就不在这里展开, "I won't expand on it here"]. And the third kind of change, achieving better-quality and more efficient satisfaction of existing needs through gathering information and connecting the whole chain end to end, has great potential, and in most cases is also worth encouraging. Extending the third kind of change a bit further is quite interesting: there exists a large number of possibilities to trade the unification of time and space for higher overall efficiency and lower cost. In the abstract, there exists the possibility of a semi-market economy in which, by pushing the demand-and-circulation side to adopt more planning, we push the supply side to break out of lagging large-scale planned production and achieve small- and medium-scale batch "made-to-order production", that is:

Use a semi-"planned economy" on the demand-and-circulation side to push the realization of a semi-"market economy" on the supply side.

Our original online e-commerce solved the problem of moving the Yiwu small-commodities market online. This made information on the circulation side highly transparent and accelerated market competition among all kinds of vendors, but it didn't change the factories of traditional manufacturing much. How much a factory should produce still needs some planning; the main factories still depend chiefly on batch orders from offline supermarkets, scheduling plans on cycles of several months, even half a year or a year. The fiercer and more market-driven the competition among online vendors, the more severe the disconnect from and contrast with offline production plans. The disconnect between plans for batch foreign-trade orders from international demand and scattered online retail orders also grows more severe. In this situation, the main factories still depend chiefly on Walmart and Carrefour. The extreme marketization of the purely circulation side online doesn't change the lag and the high degree of planning on the production side either. So does there exist a model that can change the lag and the high degree of rigid planning on the production side? I think we still have to work on the change of the demand side.

Suppose we can get front-end consumers to have a bit more patience and willingness to coordinate with other people, and give up part of the impulse for what-you-see-is-what-you-get and wanting it right now; then we have the chance to use person-to-person recommendation, relationships between people and similarities of interest to do the grouping of "people sort themselves into groups", and aggregate each person's individualized demand into planned demand with a certain amount of slack in time. The degree of aggregation of this demand may not be as large as a half-year batch order from someone like Walmart, but it is enough for a factory to run a production line economically. In this way we have the chance to split one big Walmart order into 50 small batch orders, and back-end production can then shake off its dependence on Walmart, change the original model of authorized manufacturers doing full-volume planned production, and in turn have dozens of manufacturers with production capacity compete in the market for these 50 batch orders aggregated by all kinds of different demands.

If this can be done, then the contradiction between the high marketization online on the circulation side and the rigid planning on the production side can also be eased. What replaces it is the merging of more planned demand with a more market-driven supply side. Front-end and back-end information will be connected more fully, eliminating the mismatch between demand and production, and even more helping our traditional production shake off dependence on traditional Walmart-type supermarkets, find its own differentiation in the differentiated batch aggregation of demand, and achieve true supply-side change. From rigid toward flexible, from homogeneous toward differentiated and distinctive, from lagging plans toward a semi-marketization in step with demand.

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