New Direction
China charters a course for economic growth in 2017 with a series of crucial reforms
It takes time to fundamentally transform the growth models by further deepening structural reform this year.
Zhang Liqun, Researcher with State Council Development Research Center
An improvement in people’s livelihood, stable
economic growth, structural adjustment and risk prevention were some of the key information from the 2016 Central Economic Work Conference held on December 14-16, an important meeting in China held to map out economic priorities and reform plans for 2017.
After decades of breakneck growth, China’s economy has entered a new normal of medium-high growth. In the context of complex economic environment at home and abroad, the country’s top leaders have mapped out a “new direction” for the world’s second largest economy and are resolved to pursue new development philosophies that emphasize “innovative, coordinated, green, open and shared” growth.
In addition, with 2017 being seen as an important year for the 13th Five-Year Plan (2016-20), deepening supply-side structural reform holds great significance for the economic work ahead.
Stability focus
In view of the current economic deceleration, Wang Yiming, Policy Advisor with the State Council Development Research Center, believes that China should maintain stability and continuity of its macro policies to stabilize market expectation, while boosting market confidence by implementing major reform initiatives.
“We should have confidence in maintaining stability instead of looking for quick success,” said Wang.
Other priorities also include supply-side structural reform aimed at cutting excessive capacity, destocking, deleveraging, reducing enterprises’ costs and shoring up the economy’s weak links, as well as increasing consumption and improving the investment environment.
The supply-side structural reform made initial progress in 2016 but its success is certainly no easy feat.
“It takes time to fundamentally transform the growth models by further deepening structural reform this year,” said Zhang Liqun, Researcher with State Council Development Research Center.
Wang agreed, saying the country could combine capacity-cutting with reform of state-owned enterprises (SOEs). Efforts should be made to decrease real estate inventory in third- and fourth-tier cities, gradually phase out deleveraging, lower transaction costs, and enhance support for growth in soft power.
Boosting the real economy
According to the conference, the country should also push forward reforms in key sectors, including the SOEs, taxation, finance and social security.
Analysts believe that China’s economy will realize a more optimized structure and division of labor, create new driving forces, and develop stronger resilience and a greater capability to resist risks.
“While advancing the reform, we must cling firmly to some major market-oriented reforms this year,” said Peng Sen, Chairman of China Society of Economic Reform. Peng said the country must make a breakthrough in the series of reforms in key sectors for sustainable growth, including deepening reform of SOEs, coordinating central-local relations, and improving social security systems.
Additionally, the real economy sectors will be boosted. Analysts said that boosting the real economy is an important driving force for China’s transformation and upgrading under the pressure of an economic downturn.
“Manufacturing has become the main ’battlefield’ for reviving the real economy by bringing innovation to its core,” said Li Guangbei, Deputy Director of Department of Planning, Ministry of Industry and Information Technology, adding that it is more important to advance traditional industries by innovation, in addition to speeding up the development of emerging industries.
The real estate market is still under the spotlight in 2017. The government will accelerate establishing a long-term mechanism for the real estate market’s stable and healthy growth that follows market rules and is in line with national conditions.
Insiders believe that maintaining stability in the real estate market will be the main policy orientation over a long period. Under the long-term mechanism, government departments and market players will be able to actively and rationally participate in the development of real estate, according to Ni Pengfei, Assistant to the Dean of the National Academy of Economic Strategy, Chinese Academy of Social Sciences.
Liu Hongyu, Professor at Tsinghua University, said the conference indicates that for the next steps, a series of institutional building needs strengthening in such aspects as land and housing supply, real estate taxation, real estate market regulation, and urbanization.
Li Cungen
A crane ship is being built in Nantong, Jiangsu Province in line with supply-side reform
Attracting foreign investment
Despite uncertainty and downside risks, the Chinese economy ended 2016 on a firm footing. For 2017, analysts expect the government to give high priority to political, economic and social stability, and maintain its growth target of 6.5-7 percent, according to Shen Lan, an economist at Standard Chartered China.
China will also expand its opening up and act to attract foreign investment, according to the conference.
Putting priority on attracting foreign investment sent an active signal of further opening up, said Bai Ming, Researcher with Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce, adding that a series of initiatives that improve optimal allocation of resources by opening up will inject vitality into China’s economic growth to achieve mutual benefits and win-win results with foreign investors.
Liu Yingkui, Director of the Department of International Investment Research, China Council for the Promotion of International Trade Academy, shares similar sentiments. Liu said that developed countries still enjoy advantages in technology management in some areas of high technology, although the scale of China’s investments abroad has exceeded that of foreign investment in China.
More efforts should be made to learn from the advanced experience of developed countries, and guiding foreign investments into hi-tech manufacturing and highly value-added services to help transform and upgrade China’s economy, said Liu.
The country will also push ahead with the Belt and Road Initiative aimed at boosting trade and connectivity across Asia, Europe and Africa.
“It indicates China’s integration into the world at a faster pace,” said Zhang Liqun. In spite of a sluggish world economy, the Belt and Road Initiative not only lays a solid foundation for growth but pushes forward the recovery of the global economy. CA