Industrial Policy,Market Environment And Enterprise Investment

The government and the market are two important forces that promote the efficient operation and healthy development of our country’s economy.The Third Plenary Session of the Eighteenth Central Committee of the Communist Party of China pointed out that “the reform of the economic institution is the essence of comprehensively deepening reform and the core issue is to handle the relationship between the government and the market properly”.The government working paper of 2022 underlines the determination to unswervingly deepen the economic reforms and vitalize market mechanism as well as the endogenous power of development.How to properly handle the relationship between the government and the market under the new situation in order to abtain coordinated development is the key to achieve the modernization of the country’s governing institutions and capabilities.However,the currently the research concerning the synergy between the government and the market at micro-level enterprise behavior is relatively lacked.Due to this background,this article takes the general industrial policies and specific policy tools as the government’s "visible hand",while the regional marketization level combined with the product market competition as the "invisible hand" of the market,and accordingly analyzes the relationship between industrial policies,market environment and enterprise investment systematically.The research conclusions include,but are not limited to:(1)Industrial-supporting policy can improve enterprise investment level,expand the substantial investment,while reduce the level of financial asset allocation,that is,to play the role of "breaking away from the virtual to the real".However,industrial-supporting policy will reduce the overall investment efficiency of enterprises.(2)Different industrial policy tools can both increase enterprise investment level and fixed asset investment scale,but their impacts on different enterprise investments vary greatly.Manifested mainly in: Government subsidies will reduce the efficiency both of enterprise investment and the fixed asset investment scale,while increase the scale and efficiency of investment in intangible assets,so as to reduce the level of financial asset allocation;tax incentives will increase the efficiency of both the enterprise investment and the intangible assets investment;bank credit will reduce enterprise investment efficiency and fixed asset investment efficiency,while expand the scale of enterprise financial asset investment.(3)The regional marketization level will optimize the micro-economic effects of industrialsupporting policy.The higher the level of regional marketization,the smaller the positive impact of industrial-supporting policy on the level of enterprise investment and fixed asset investment,and the greater the positive impact on enterprise intangible asset investment;the higher the level of regional marketization,the smaller the negative impact of industrial policy support on the investment efficiency of enterprises.Under the support of industrial policy,the investment efficiency of enterprise financial assets,fixed assets,and intangible assets will all increase.(4)The regional marketization level will optimize the microeconomic effects of specific industrial policy tools.For example,the higher the level of regional marketization,the smaller the positive impact of government subsidies on the level of enterprise investment and fixed asset investment,the stronger the positive impact on intangible asset investment,and the stronger the negative impact on the level of financial asset allocation;the increase in the level of regional marketization has alleviated the negative impact of government subsidies on the efficiency of enterprise fixed asset investment and strengthened the positive impact on the efficiency of enterprise intangible asset investment.(5)Product market competition will improve the microeconomic effects of industrial policy support.The fiercer the product market competition,the greater the positive impact of industrialsupporting policy on the investment of intangible assets;the smaller the negative impact on the overall investment efficiency of the company and the efficiency of fixed asset investment,the greater the positive impact on the efficiency of intangible asset investment.(6)Product market competition will improve the microeconomic effects of specific industrial policy tools.For example,the fiercer the product market competition,the greater the positive impact of tax incentives on enterprise investment in fixed assets and intangible assets;the smaller the negative impact on the efficiency of enterprise investment in fixed assets,the greater the positive impact on the efficiency of intangible asset investment.(7)Heterogeneity analysis finds that the impact of industrial policy on enterprise investment and the regulatory role of the market environment are mainly reflected in small and medium-sized enterprises,growth-stage enterprises and nonstate-owned enterprises.(8)When we’ve analyzed the co-regulatory effect of the regional marketization level and product competition on the relationship between industrial policy and enterprise investment in depth,we found that the lower the regional marketization degree,the more intense the product market competition,and the greater the impact of industrial policy on enterprise investment.Based on the above research conclusions,the following recommendations are put forward:(1)Improve the Industrial Policy system and consolidate the institutional foundation of enterprise investment;(2)Optimize the effect of government subsidies and improve the accuracy of policy support;(3)Insist on structural deleveraging and optimize the enterprise financing structure;(4)Insist on innovation-driven development and further enhance the output level of innovating investment;(5)Prevent and control financial risks,and promote funds to "remove from the virtual to the real";(6)Deepen market reforms and improve the market economic system of socialism;(7)Optimize the business environment and establish the mechanism to ensure fair and reasonable Competitions.Based on the in-depth exploration of the synergistic influence of the government’s "visible hand" and the market’s "invisible hand" on micro-firm behavior,this research systematically analyzes the relationship between industrial policy,market environment and enterprise investment.The theoretical significance of the research is embodied in the following.This research links government industrial policies,market environment and micro-enterprise investment,and will enrich the research results in the fields of government intervention,market environment and enterprise investment to a certain extent.The practical significance for the real economic world is to provide a better relationship between the government and the market,so as to formulate scientific industrial-policy-guidelines for better decision-making;at the same time,to provide some suggestions to further vitalize the enterprise investment activities and enhance the sophistication of the investment strategies.