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Better Combination of Stabilizing Growth and Preventing Risks

Submit Time:13-07-2017 | Zoom In | Zoom Out

Author:Yan Jianguo, Wang Tao | Source:People's Daily


  At present, the Chinese economy has stabilized with sound growth. As the main force stabilizing growth and investment, infrastructure investment continued high growth. In the first quarter of 2017, benefits of industrial enterprises improved, and their operating income and profits continued to grow. The number of money-losing industrial enterprises above designated size reduced. In addition, the economic structure was constantly optimized, new growth drivers continued to emerge, and the macroeconomic climate index, purchasing managers' index of manufacturing, and other indicators of prosperity and leading indicators all improved. But it should also be noted that the foundation for the current positive growth of economy is still not strong, and some deep-seated problems in the economic operation, such as debt risk and imbalance in the supply-demand structure, have not been fundamentally resolved. In view of these problems, we should grasp the dialectical relationship between stabilizing growth and preventing risks, and adhere to and implement the general principle of seeking progress in stability from the following aspects.

  We should strengthen the risk prevention and structural adjustment functions of the proactive fiscal policy. Moderate expansion of fiscal deficits and reduction of taxes and fees are necessary means to reduce debt risks and create favorable conditions for the development of enterprises. China's fiscal deficit ratio was about 2.4% in 2015 and rose to 3% in 2016. Defaults of local government financing platforms were effectively avoided through the issuance of local government bonds to replace original government debts. At present, while continuing to make the proactive fiscal policy play its role in stabilizing growth, promoting reform and benefiting people's livelihood, we should also further strengthen the risk prevention and structural adjustment functions of the proactive fiscal policy, continue to increase investment in infrastructure, education, health care and old-age care, and drive enterprises to expand investment. We should promote the reduction of taxes and fees, reduce burdens on business operations, and create a good environment for production and operation of enterprises. We should provide more policy support for industries that are in line with the direction of economic restructuring and reduce risks in the development process of new industries and new types of business. Stable production and operation of enterprises guarantee the sustained and healthy development of economy.

  We should further enhance the resilience of the monetary policy. At present, to keep with the advancement of the supply-side structural reform, the monetary policy should remain stable and neutral, and it is necessary to avoid excessive loosening and prevent liquidity shortage. The decline in real interest rates is critical for deleveraging, cutting production overcapacity and stabilizing investment, thus the resilience of the monetary policy should be further enhanced. On the one hand, we should maintain moderate liquidity and stabilize economic growth; on the other hand, we should guide market players to make long-term planning and reduce corporate leverage ratios under the premise of the control of the total leverage ratio, thereby ensuring that no new bubbles will be formed in the process of deleveraging.

  We should deepen the supply-side structural reform. The root cause for China's economic downturn pressure and risk lies in the major structural imbalance. Therefore, we must firmly grasp the main line of the supply-side structural reform and focus on resolving major structural imbalance problems. To give full play to the role of the supply-side structural reform in resolving major structural imbalance problems, we must deepen basic reforms in relevant fields. We should continue to promote the reform of state-owned enterprises, speed up the transformation of government functions, deepen the basic reforms in the fields of prices, taxation, finance and social security, and improve the system and mechanism where the market plays a decisive role in the allocation of resources, in order to not only follow the laws of the market and make good use of the market mechanism to solve problems, but also allow the government to undertake its responsibility and do what it should do, in the process of the supply-side structural reform. To give full play to the role of the supply-side structural reform in resolving major structural imbalance problems, we must also adhere to the problem-oriented method and put emphasis on key areas. For example, high leverage ratios in China are mainly concentrated in non-financial state-owned enterprises, so the proper handling of state-owned enterprises' debt problems is of vital importance to the control of the overall risk. For another example, the imperfect capital market is a technical factor for high leverage ratios, which requires improvement of the multi-level capital market, multi-channel expansion of equity financing, and optimization of the corporate financing structure. With adherence to the problem-oriented method, the supply-side structural reform will be more targeted and effective.

                                  (Author's affiliation: Economics and Management School of Wuhan University)

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