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Reform Pushes Supply to Shift from “Available” to “Good”

Submit Time:16-08-2017 | Zoom In | Zoom Out

Author:Zhang Liqun | Source:Guangming Daily (Page 02, July 20, 2017)

Abstract:

The theme of the large scale political features program Carry on the Reform through to the End Episode II is “Leading the New Normal in Economic Development”, which is also the theme of economic development and reform in recent years in China.

After the international financial crisis, profound changes have taken place in the domestic and international conditions for the economic development in China, with significant change in the supply and demand ratio on the domestic and overseas markets. The annual average growth rate of China’s export was 29.2% from 2003 to 2007, it dropped to 8.09% from 2008 to 2015, and the export growth in 2016 was -7.7%.  

With the increase of the income level of residents and the increasingly abundant supplies of consumer goods, more and more families now pay less attention to the prices of consumer goods while more attention to the quality, safety and brands, and the consumption started to change from the rowing wave pattern to the personalized and diversified patterns. On the investment product market, with the abundance of supplies and increasing selectivity for purchasers, the requirements on product quality are also rising daily. In the meantime, due to the unbalanced allocation of resources such as infrastructure, public services and high quality industries between cities, population is over-concentrated in big cities, resulting in the problems of overcrowded people in big cities but insufficient people living in medium and small cities. It is difficult to get land in big cities but difficult to sell houses in medium and small cities. The loss of balance in the space layout for economic and social development and social resource allocation has resulted in continual substantial decrease of the growth rate of the investment in real estates, which in turn affected the investment in other areas; the measures to restrict the purchase of cars and the effect of real estate market fluctuation on household articles such as furniture and household electrical appliance have also restricted the growth of consuming demand. With the decrease of demand level, the total supply and demand relationship on market changed from general shortage to general excess.  

In a comprehensive view, the requirements of demand level and structure on supply have changed profoundly, and this will inevitably demand corresponding changes in the supply level, structure and quality. The outstanding question in the economic development in China has shifted from emphasizing the rapid increase of quantity to emphasizing the quality and the rising of brands and reputation, and from emphasizing “availability” to emphasizing “good quality”. The Chinese economy started to shift from the scale and speed oriented extensive high speed growth to quality and efficiency based intensive medium and high speed growth, and the economic development has come to the new normal.  

In view of the features and changes of demand, changes on two aspects are required to adapt to them: on one hand, the total supply should be readjusted, to solve the problem of excess production capacity; on the other hand, the quality of the supply system should be improved, to solve the problem of quality. Support by relevant institutional mechanism is required to solve these problems and accomplish the related tasks. To shut down zombie enterprises and cut overcapacity, support is required from the relevant institutional mechanism for market exit, especially a strict property right protection system. To push the supply to shift from “available” to “good”, we must give full play to the role of market in competition to select the superior and eliminate the inferior, so that it plays a decisive role in resource allocation. In the meantime, the government must enhance its functions in market oversight, strict accountability and law enforcement. To solve contradictions in urbanization and pursue the new type industrialization, new type urbanization and construction of new rural areas at a higher level, it is necessary to rationally adjust and allocate land resources, complete the agriculture, industry and city layout, and further deepen the reform. In general, to adapt to the new normal in economic development, meet the new requirements of market demand on supply, it is necessary to deepen the reform in all aspects, adjust the production relationship accordingly according to the new features and requirements in the development of social productive force, improve the socialist market economy system, and emancipate and develop the social productive force at a higher level.  

Therefore, after the Third Plenary Session of the 18th CPC Central Committee, the Leading Group for Deepening Reform Comprehensively of the CPC Central Committee held 36 meetings, to grasp the implementation of reform tasks, including streamlining the government and market relationship, continuing to deepen the reforms to streamline administration, delegate powers, and improve regulation and services; to push ahead the reform of land system in rural areas in the principle of separating rural land ownership rights, contract rights and management rights; and formulate the Guiding Opinions on Deepening the Reform of State-owned Enterprises, to focus on the reform in main areas and at key links, and to grasp the reform tightly and firmly. Now these measures have produced fairly apparent effect, material progress has been made in the readjustment of economic structure and change of development pattern, the trend of stabilizing with a momentum for growth has become daily apparent in the national economy operation, and the people has daily increasing sense of gain.  

(Author: Zhang Liqun, research fellow of the Macroeconomic Research Department of the Development Research Center of the State Council) 


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