Sweden, a Scandinavian nation often associated with a high standard of living and an extensive welfare system, is a country that deserves further explorationMany individuals might not be intimately familiar with Sweden, but its reputation as a beacon of social welfare resonates globallyOver the years, Sweden has produced iconic brands such as Volvo, IKEA, and Ericsson, all of which are familiar names for consumers worldwideDespite the fact that Volvo is now owned by the Chinese automotive giant Geely, it remains synonymous with Swedish engineering excellenceThe social welfare model of Sweden—often described as offering cradle-to-grave services—stands out as one of the most commendable frameworks in the world.

However, recent data presents a sobering reality for Sweden’s economyThe GDP proportion of Sweden on a global scale has noticeably diminished over the past six decades, decreasing almost by half

In the last decade, per capita GDP has hovered around $52,000, indicating stagnation, as there has been no significant growth in income levels, and a general decline has been observed since 2011. This stagnation suggests underlying economic shifts that appear inconsistent with the high expectations of a welfare state.

To sustain its high level of social welfare, Sweden imposes a substantial tax policy on its citizens and businessesIncome taxes are bifurcated into national and local levels, with the national income tax further categorized into personal and corporate taxesA staggering 57% tax rate positions Sweden among the highest globally in terms of taxationLooking back 40 years to 1985, tax revenues consumed over 50% of GDPAlthough the last two decades have seen some alteration in the tax structure, personal income tax accounted for nearly half of all tax revenues twenty years ago, now it constitutes around 40%. Meanwhile, social insurance taxes, covered entirely by employers, have soared to more than 37% of total payroll expenses.

This complexity breeds a paradoxical environment where new startups struggle to flourish, making it challenging to lower taxing policies critical for prospering social services

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A vivid analogy emerges when looking at insurances—akin to a theft scenario where police fail to solve cases, forcing insurance companies to hike premiums for survivalLikewise, the substantial income withdrawn via taxes and social contributions leads to dwindling personal savings among the populace, who find their earnings stretched thin by mandatory expenditures such as insurance premiums and property taxes, resulting in living costs that feel burdensome to many.

Such dynamics cultivate what can be termed a 'closed vortex': high indirect living costs among residents contribute to deteriorating social security conditions, which correspondingly drives up insurance claims and costsThis sequence feeds back into the ecosystem where high welfare and wages necessitate elevated corporate taxes, reducing job availability and compounding the indirect costs of living

It ultimately results in a cyclical pattern of worsening conditions for the citizenry.

Yet, amidst this vortex, there exists an exceptional case: a prominent apparel brand established in 1947. This company has methodically navigated through industry challenges, achieving operational turnover rates that set it apart, with the ability to transition from design to retail in as little as 20 days—a stark contrast to the 200 days typically seen in the fashion industryThis optimization of production factors has allowed this brand to establish its footprint as one of the few companies founded post-1930 to surpass 500 employees within Sweden, a rare occurrence in a landscape dominated by long-standing monopolies.

Within the realm of larger enterprises, many of those boasting over 500 employees were created before 1930, often relying on monopolistic practices to thrive

Nevertheless, these enterprises face their own dilemmas as evolving technology and marketplace dynamics—such as the ownership changes in Volvo, Ericsson, and IKEA—challenge their historical advantagesDespite their prominence, they have increasingly found it difficult to stay aligned with global market evolutions.

The noted apparel company illustrates how traditional businesses can still dynamically compete in Sweden by focusing on optimizing production capabilities, establishing a new qualitative productivity levelAs such, it exemplifies how high taxation can be counterbalanced by extraordinary efficiency and adaptability.

In contrast, numerous Chinese corporations currently find themselves entrenched in cutthroat price wars, sometimes to the detriment of their sustainabilityA prevailing narrative suggests that successful companies, such as Xiaomi and Pinduoduo, have thrived through competitive pricing strategy, leading to tension within the marketplace.

For instance, when Xiaomi attained a spot among the top three smartphone manufacturers globally, observers anticipated that founder Lei Jun would venture into new technology territories akin to how Elon Musk has expanded into various fields

Instead, Xiaomi deployed resources to birth the Xiaomi SU7, an automobile reminiscent of Porsche styling; an ambitious timeline for a new model by conventional standards, yet perhaps achievable due to rapid tech advancements.

Pinduoduo, after emerging as China's fastest-growing e-commerce platform, unexpectedly expanded its reach internationally, launching TEMU, an overseas version of its platform, a strategic move that surprised many industry analystsThis action reflects broader strategies within Chinese firms where innovation often seems to take a backseat to market maneuvers.

Despite the significant scale and market share of large enterprises—both nationally and globally—many struggle with genuine technological innovationMost notably, leading corporations hesitate to invest in radical R&D endeavors, often opting instead to wait for smaller firms to brave the exploration of new territories, which they subsequently leverage through capital and market dominance.

In 2023, I spearheaded multiple investigative projects for the China Democratic League Central Committee, culminating in a plethora of research reports concerning economic vitality in China

A pivotal study I conducted examined the thoughts and sentiments of entrepreneurs, which, despite shortcomings in sampling, unveiled that approximately 85% of responding entrepreneurs hailed their local business environment positivelyMeanwhile, about 70% appreciated the governmental support for innovation while approximately 60% acknowledged adequate assistance for private enterprises.

In an increasingly competitive environment, large firms concurrently experience rising insecurity, resorting to price wars to secure market share, adversely affecting industry profit margins while consistently diminishing investment in technological innovationsIn Jilin Province, a critical hub for automotive and petrochemical industries, merely 11.6% of large-scale enterprises reported having any active R&D initiatives, equating to slightly over 300 out of 3,214 such companies.

Global trends corroborate these findings; scholarly research indicates that in the last three decades, large firms worldwide have reduced their tax burdens, which parallels a decline in innovative outputs compared to their smaller counterparts

In China, rather than fostering groundbreaking advancements, many large enterprises predominantly shift toward integrative functions, leaning heavily on the innovation prowess of small to micro-sized enterprises, which contribute over 70% of all technological innovation.

Despite these hurdles, data from the 2023 China Corporate 500 list reveals a continuous upward trajectory in revenue, amassing a total of 108.36 trillion yuan, up 5.74% from the previous year’s figures, even outpacing GDP growthHowever, the profit margins depicted a contrasting trend, showcasing declines of 7.28% and 3.80% in overall profits and net profits, respectively, from the previous year's metrics, revealing a concerning regression.

As of June 2023, the profitability ratios among the top enterprises have plummetedA significant number, 43 companies, reported losses, with more than half of the top 500 witnessing declines in profit, thus presenting a troubling snapshot of the economic landscape.

With the increasing pressures from price wars, alongside dwindling investments in innovation, many large businesses are resorting to pools of cash reserves—exemplified by corporations like Tencent and Alibaba—utilizing these funds not for progressive R&D but rather for maintaining market share, inadvertently exacerbating the divide within wealth distribution across China.

Central statistics indicate that as of 2022, China's total wealth stands at approximately 790 trillion yuan, illustrating an alarming concentration where state assets dominate the aggregate, coupled with growing disparities amongst various socio-economic classes

This unequal progression points to a diminishing potential for middle and lower-tier citizens, typically represented by small to micro-sized enterprises that are pivotal for sustainable economic advancement.

Recent surveys show that in regions known for robust small and micro-enterprise environments, substantial increases in negative profit experiences are noted, with intolerable thresholds in economically vibrant provinces like Jiangsu and Zhejiang reaching 35.9% and 40%, respectively, signifying distress in the entrepreneurial landscape.

Simultaneously, large enterprises extend their reach into various combinations of industries, exercising major control over market shares while accumulating vast liquidity reservesFor instance, companies like JD, Xiaomi, and state-owned giants illustrate substantial liquidity, a stark contrast to their stifled innovation efforts.

In light of the dynamics at play, the history of capital scarcity in China has bred an environment where large enterprises overshadow small and micro-sized businesses

Many industry insiders have voiced concerns about monopolistic behaviors that hinder healthy competition and disrupt the potential for innovation.

The road ahead necessitates developing a shared language for fostering constructive dialogues, enabling coherent efforts towards nurturing both large and small businesses in a synergistic mannerThe overarching goal involves facilitating an ecosystem that propels new qualitative productivity, providing clarity and direction.

The notion of new qualitative productivity can be encapsulated with three quantifiable metrics: the transformative leap of technological products from concept to reality, demonstrating cross-galaxy advancements in production efficiency and effectiveness.

Encouragingly, recent innovations showcase the potential for revolutionary developments, as seen with Tsinghua University’s team pioneering a groundbreaking multi-functional chip that dramatically elevates computing efficiency, thus redefining industry standards.

Achieving significant qualifications towards new qualitative productivity underscores the importance of harnessing technological advancements for holistic industry growth