1. Supply-side
While expanding the overall demand at a reasonable pace, China will pay more attention to structural reforms on the supply side and implement coordinated policies, according to the country’s economic blueprint for 2016 released during the Central Economic Work Conference.
“‘Supply-side’ reform means promoting competitiveness and bolstering economic growth through supply and production end and unleashing productivity. The core is to increase total factor productivity.
“Supply problems in fact lie in the structure. Therefore, structural adjustment should serve as its core issue. The Political Bureau of the Communist Party of China (CPC) Central Committee earlier specified at a conference that the supply-side reform requires multi-dimensional promotion in the innovation-driven development strategy, actively yet prudently carrying forward the natural selection of the fittest enterprises, lowering corporate costs, destocking housing inventory and ensuring effective investment.”
- Xie Taifeng, professor of Capital University of Economics and Business2. Innovation and entrepreneurship
China will continue to implement the innovation-driven strategy and promote mass entrepreneurship and innovation. Reform and innovation will inspire creativity and new growth engines while facilitating upgrading of traditional industries.
“Innovation is all-around, including institutional, theoretical, technological and model innovations. China will promote mass innovation and entrepreneurship. Enterprises, the main force of social innovation, shall be motivated to innovate, among which State-owned enterprises in particular shall take a leading role. Individuals are the main force of entrepreneurship. China shall reform the scientific research and education mechanism to tackle existing problems of exam-oriented education, thus cultivating a growing number of innovative talents.
“Enterprises, the government and research institutions shall work in collaboration to establish public innovation platforms and form joint forces of innovation.
“The transformation and application of scientific and technological achievements require the support of a multi-level capital market. Therefore, it should depend on financial innovation.”
- Xu Hongcai, director of the department of economic research of China Center for International Economic Exchanges3. Two-way opening
China shall also promote high-level two-way opening up, optimizing the opening-up layout, reported Shanxi Economic Daily. The country shall also enhance quality trades, proactively promote foreign investment and international cooperation on productivity and equipment manufacturing, step up negotiations regarding free trade areas and investment treaties, and actively participate in global economic governance.
“First, China should implement projects such as the ‘Belt and Road’ and the Asian Infrastructure Investment Bank (AIIB) and Free Trade zones. Second, China should continue to transform the development of foreign trade from ‘massive imports and exports’ to ‘quality imports and exports’. China will also mitigate the weakening export demand through attracting foreign purchasers with quality products and optimizing the export structure. Third, China will strengthen the openness of national economy to take better advantage of resources allocation optimization. Fourth, China will enhance global governance to address international pressure.”
- Bai Ming, deputy director of the market research department at the Chinese Academy of International Trade and Economic Cooperation4. De-stocking
China will step up to boost the ratio of registered urban residents and deepen housing system reform, while promoting the citizenship of migrant workers, in order to destock excess inventory and stabilize the real estate market.
“Migrant workers entering cities is the main positive factor for ‘de-stocking’ at present. Nevertheless, China shall first reform household registration system. Only in this way can migrant workers be able to become long-term urban consumers.
“The ‘de-stocking’ process will take a long time. During this period, the government shall make policies in light of market conditions. It is important to shatter all kinds of institutional obstacles through reform so as to better play the role of the market, truly promote urbanization and citizenship of migrant workers and implement the reform of household registration system. It is the most important engine for bolstering urban consumption in the future.
“More importantly, the government must stop playing an active role in the real estate market or gaining double benefits through land-transferring fees. The government, therefore, must end its interest in the real estate market.”
- Li Tie, head of the China Center for Urban Development at the National Development and Reform Commission5. Cut excessive industrial capacity
China aims to proactively and prudently tackle industrial overcapacity, which requires enterprises to take part as the main player and government promotion under the market-oriented and legal principle. China will also strictly control additional capacity to avoid a new round of gluts.
“In future implementation, it’s foreseeable that we will not only reduce overcapacity in industries including steel and iron, cement, electrolytic aluminum and plate glasses, but put more emphasize on increasing effective investment and enhancing the supply of quality products in areas of social security, health care and environmental protection through necessary fiscal support. In this way, we can explore new economic engines while mitigating structural shortage of relevant products as well as realize the true purposes of supply-side reform”.
- Quan Heng, economist with the Shanghai Academy of Social Sciences6. Improve weak growth areas
China will raise efficiency and accuracy of investment so as to facilitate the establishment of market-driven and sustainable mechanisms of investment and operation, according to the blueprint for 2016. The country will also increase investment in labor so that workers can better adapt to the changing market environment.
“The conference explicitly addressed to the weak spots in economic development and gave specific advice in terms of income distribution, corporate vitality, and the hardware and software infrastructure, etc. In particular, the meeting proposed to raise fiscal deficits in stages for the first time, which definitely indicated the determination of decision-makers faced with economic downturn pressure and their resolution to guarantee and improve people’s livelihood.
“Chinese economy has been infrastructure investment-driven for a long time. However, most of the investments have been put into visible fields and fewer into ‘invisible’ fields. For instance, drainage facilities in many cities are poor and lack the capability to handle emergency situations. Once it rains, inland inundation occurs. Therefore, more investments shall go into the upgrading of urban underground pipe gallery, regional infrastructure, medical resource and other aspects in 2016.”
- Yang Song, director of Economic Institute of Beijing Academy of Social Sciences7. De-leveraging
China will strengthen all-round supervision, regulate financing activities, and launch special renovation to address financial risks and clamp down on illegal fund-raising, said the Daily. The government will also improve risk- warning mechanism, duly handle wrongdoings to ward off systematic and regional risks.
“The ‘de-leveraging’ task, put forward in the Central Economic Work Conference, is our comprehensive focus in resolving China’s financial risks. Its generally proposes to ‘stick to the bottom line of avoiding systematic and regional risks’. Meanwhile, it also focuses on local debt risks.
“In terms of specific measures, the ‘de-leveraging’ task means to keep replacing the extending local government debt. In fact, this work has been conducted for a period of time and has attained some achievements. However, as matters stand, it’s still necessary to speed up implementation. In addition, China will also make greater efforts to investigate and punish violations against laws and regulations in financial fields such as illegal fund-raising or financing under the disguise of the Internet.”
-Zhao Xijun, deputy director of Financial and Securities Research Institute at the Renmin University of China8. Lower corporate costs
China will roll out a spate of policies to help companies lower their costs, according to the blueprint for 2016. Such mission include streamlining administration and delegating power to the lower-level authorities, tax relief, and creating a more favorable environment to the real economy. It is also important to lower utility price by promoting market-oriented reform of electricity price and to lower logistics costs through reforms.
“Under current business operating environment, Chinese enterprises are clearly faced with heavy burden and high costs. The Central Economic Work Conference put forward targeted solutions. In my point of view, the government must pay special attention to three issues. First, in facilitating enterprises operation, the government should emphasize on providing them with one-stop services so as to further lower transaction costs. Second, the government should further reduce taxes and fees while taking strict measures to eliminate unreasonable charges.
Third, practical and effective measures are still necessary in lowering logistics costs, among which freeway collecting tolls and bridge tolls should be paid enough attention to. For freeways that have charged tolls for more than 10 years and have basically recovered the cost, the government can reduce relevant charges.”
-He Weida, professor of the Economics and Commerce at the University of Science and Technology Beijing