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A Comprehensive and Objective View on New Changes in the Economic Situation

—Discussion on the "New Cycle"

Submit Time:25-09-2017 | Zoom In | Zoom Out

Author:Jin Lilun | Source:People's Daily (August 26, 2017)

Abstract:

Recently, insiders in the economic circle had different views on China's current economic situation. This is normal. However, comprehensive and objective analyses and judgments are needed, instead of superficial discussions of the situation. Some boundaries need to be defined appropriately for the discussion of the new economic cycle. 

The meeting of the Politburo held in late July pointed out that we should grasp the periodic changes in economic development and keep a cool head and strategic concentration based on the understanding of the long economic cycle and structural optimization and upgrading. The gist of this meeting is very important. 

To have the initiative in the economic work and plan for reform and development, we should look at the big picture. From a methodological point of view, it is necessary to recognize the current economic situation, and then see where China's economy came from and will go in a long-term sense, before making specific plans. 

Recently, the "economic new normal" has become a keyword, but what's its essence? How to eliminate some misunderstandings, and adapt to, grasp and lead the economic new normal needs to be further understood. 

Since the 18th National Congress of the Communist Party of China (CPC), the central authority, in consideration of the changes in many aspects, has made a major judgment that China's economic development has entered into the new normal. At its core, the one-sided pursuit of growth no longer works and high growth is unsustainable; more importantly, the old path of economic development in the past few years is a dead end, and a new development path is urgently needed. Thus, the Central Committee of the CPC led by Xi Jinping has made a major adjustment to the ideological method of economic work and put forward a new development idea that advocates higher-quality, more efficient, more equitable and more sustainable development of national economy, pointing out a clear direction for China's economic development. 

In recent years, supported by the new development idea, all plans and policies related to the economic work have been adjusted and changed greatly, and China's economy has thus embarked on a new path and achieved new results. During this process, major judgments, adjustments, and decisions made by the central authority have proved to be effective by practice. 

Where will China's economy go in the new path? It is now clear that, under the guidance of the new development idea, we will usher in a more bright future if we continue to go down the new path. 

The World Bank defined that the per capita national income of high-income economies should be at least 12,476 US dollars. In consideration of the situations in all aspects and through a simple quantitative analysis, we forecast that 6% to 7% growth of China's economy in the next three to five years or longer is well-grounded, well-conditioned and feasible. In this context, China's per capita national income will certainly remain stable growth and reach more than 12,000 US dollars. 

To specifically analyze the current economic situation, in addition to speed, we need to look at the structure, benefit and quality, as well as profound changes behind the economic operation. 

In terms of the speed, China's GDP grew by 6.9% year on year in the first half of this year, an increase of 0.2 percentage point over the same period last year, performing better than expected. This shows that China's economy ran within a reasonable range and stabilized with sound progress. 

In terms of the corporate profitability and residents' income, from January to May this year, the main business income and total profits of industrial enterprises above designated size increased by 13.5% and 22.7% year on year, respectively, up 8.6 and 14.2 percentage points over the previous year. In the first half of this year, the per capita disposable income of residents across the country was 12,932 yuan, a nominal increase of 8.8% over the same period last year, or an actual increase of 7.3% in real terms. The per capita net income of residents across the country was 1,056 yuan, up 9.6%. 

It is gratifying that China saw improving quality of economic growth, faster structural optimization and upgrading, and orderly transition of development drivers. First, the added value of strategic emerging industries above designated size increased by 10.8% year on year, and the added value of high-tech industries above designated size grew by 13.1% year on year, up 3.9 and 6.2 percentage points over that of all industries above designated size, respectively. The added value of information transmission, software and information technology service industries increased by 21.0% year on year. 

Second, as an important indicator of the quality of economic growth, labor productivity continued to improve, and society labor productivity was approximately 49,135 yuan/person, up 6.7% over the same period last year in real terms. Capacity utilization picked up significantly, of which capacity utilization of coal and steel grew more significantly; profits of related industries skyrocketed. 

Third, new growth points and new drivers gave higher impetus to boost industrial economy in the first half of this year. Nearly 10,000 new industrial enterprises above designated size started operation nationwide, accounting for 2.6% of all industrial enterprises above designated size, and contributing 17.6% to industrial growth. 

Fourth, consumption became the main driver of economic growth. In the past three years, the contribution rates of final consumption expenditure to economic growth were 48.8%, 59.7% and 64.6%, respectively, 1.9, 18.1 and 22.4 percentage points higher than the contribution rate of investment, respectively. In the first half of this year, consumption contributed 63.4% to economic growth, 30.7 percentage points higher than that of investment. 

Fifth, export growth accelerated. In the first half of this year, China's industrial export delivery value increased by 10.9% year on year, up 10.5 percentage points over the previous year. The country's total imports and exports grew by 19.6%, reversing the consecutive decline in the past two years at one fell swoop. 

Sixth, the regional coordination and linkage effect started to appear. The "Belt and Road" Initiative, the Beijing-Tianjin-Hebei Integration Initiative, and the Yangtze Economic Belt Initiative were deepened; the poverty alleviation endeavor produced effective results; ecological protection and environmental governance made new progress. 

What is even more gratifying is that the new development idea and the supply-side structural reform enjoy popular support, and that government and corporate behaviors are undergoing positive changes, thereby promoting substantial changes in the supply and demand relations, enhancing market confidence, and strengthening economic development momentum. 

However, some foreign media did not know enough about or turned a blind eye to these important changes in China's economic situation, and still argued that China's economic growth was driven by infrastructure and other investment. 

Economic analyses and reports should be well-grounded with figures and based on economic methodology, or they would be ill-grounded and unconvincing. 

As for the discussion of the new economic cycle, we endorse rigorous academic attitude and in-depth research, and disagree with the superficial discussion of just concepts. Moreover, some differences in the discussion at academic and journalistic levels need to be recognized, and some boundaries may be defined appropriately, to avoid "blind disputes." We particularly disagree with the speculation of concepts to catch others' eyes and lead to wrong guidance. 

In terms of the current economic work, on the one hand, we may neither overestimate the work performance nor even become blindly optimistic just because of some positive changes in the economic situation; on the other hand, we may not lose confidence, courage or responsibility because of some contradictions and problems in the economic operation or some difficulties in the economic work. 

The correct attitude should be a comprehensive, objective and calm view on new changes in China's economic situation. 

At present, all localities and departments should enhance the "Four Awareness" (to uphold political integrity, keep in mind the bigger picture, follow the CPC as the core of the Chinese leadership, act consistently with CPC Central Committee policy), earnestly study and implement the gist of relevant meetings of the central authority, have a profound understanding of the strategic significance of promoting the supply-side structural reform and revitalizing real economy, firmly grasp the main line of the supply-side structural reform, moderately expand aggregate demand, strengthen expectation guidance, and deepen innovation-drive growth, so as to ensure stable and healthy development of China's economy. 

(Reprinted from the Economic Daily dated August 25)


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