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Adapting to, Embracing and Leading the New Normal to Make Great Achievements

Submit Time:11-10-2017 | Zoom In | Zoom Out

Author:Zhu Baoliang | Source:People's Daily (September 17, 2017)


Since the 18th National Congress of the Communist Party of China (CPC), China, under the strong leadership of the Central Committee of the CPC led by Xi Jinping and under the guidance of the new development idea, has followed the general principle of seeking progress in stability, put emphasis on the core task of boosting the supply-side structural reform, and adapted to, embraced and led the new normal of economic development that has seen great achievements. 

Consolidated stability, continued progress, and highlighted growth 

In the past five years, the Chinese economy has run stably with steady and sound progress, as evidenced by acceleration of economic restructuring and industrial upgrading, accumulation of new drivers of sustainable economic development, and enhancement of growth inclusiveness and people's sense of gain. 

The Chinese economy ran within a reasonable range, and China's contribution to world economic growth exceeded the total contributions of the United States, the Eurozone and Japan. In the period from 2013 to 2016, the Chinese economy grew at an average annual rate of 7.2%, much higher than the average rate of 2.5% of the world and 4% of developing countries in the same period; employment was stable, as evidenced by the fact that new urban employment registered more than 13 million people for four years in a row and the unemployment rate remained stable at around 5% in 31 large cities and towns; prices rose modestly, and CPI averaged 2% annual growth. In the context of medium-to-high speed of economic growth, to maintain the inflation rate at about 2% and the unemployment rate at about 5% is the macro-control goal all the countries yearn for. In the first half of this year, China's economic growth registered at 6.9% and was situated on the front row among the world's major economies, and CPI rose by 1.4%; at the end of the second quarter, the urban registered unemployment rate was 3.95%, registering the lowest level since 2008. The sound progress of economy became more prominent. As economic development continues to improve, China's comprehensive national strength and economic influence have significantly improved. In 2016, China's economic aggregate accounted for approximately 15% of the world's economic aggregate, up three percentage points over 2012; China's per capita GDP exceeded 8,000 US dollars, close to the average level of upper-middle income countries. Over the past four years, China's contribution to world economic growth averaged more than 30%, exceeding the total contributions of the United States, the Eurozone and Japan. 

Structural adjustment secured steady progress and economic quality and efficiency improved. Consumption remains the primary driver of economic growth, and final consumption contributed 63.4% to economic growth in the first half of this year, ranking first among the three drivers (investment, consumption, and export). The service industry continued rapid development, and accounted for 54.1% in economy in the first half of this year, showing that service-oriented economic characteristics got more prominent. Equipment manufacturing and high-tech manufacturing industries grew significantly faster than traditional industries, as evidenced by the fact that the added value of equipment manufacturing and high-tech manufacturing industries accounted for 32.9% and 12.4% in the added value of the industries above designated size in 2016, up 4.7 and 3 percentage points over 2012. The level of urbanization continuously improved, as the urbanization rate of permanent resident population reached 57.4% at the end of 2016, up 4.8 percentage points over the end of 2012. Energy conservation and emission reduction achieved remarkable results, and energy consumption per unit of GDP in 2016 decreased by 17.9% over 2012. Deepened structural adjustment promoted improvement in economic quality and efficiency. In the first half of this year, total profits of industrial enterprises above designated size increased 22% year on year, registering the highest level over the same period since 2012; fiscal revenue increased by 9.8%, registering the highest level over the same period since 2013. 

The innovation-driven development strategy experienced in-depth implementation and new drivers were growing. Recent years saw deepened implementation of the innovation-driven development strategy, orderly transition from old drivers to new ones, and emerging new economic growth points in China. Scientific and technological innovation has achieved major breakthroughs, as evidenced by an array of major scientific and technological achievements in manned space flight, lunar exploration, quantum communications, and manned deep diving which are of remarkable significance. The Global Innovation Index 2017 released by the World Intellectual Property Organization (WIPO) shows that China's innovation index ranks 22nd in the world, up 13 ranks over 2013 and ranking first among middle-income countries. Entrepreneurship and innovation prevailed throughout China, and the period from 2014 to 2016 saw 44 million newly registered market players, including 13.62 million newly registered enterprises, an average annual increase of 30%. New industries, new types of business, and new models emerged in an endless stream. Online shopping grew rapidly; platform economy, sharing economy, collaborative economy and other new models extended their reach to a wide range of areas; online and offline integration, cross-border e-commerce and other new types of business formats were flourishing. 

The reform framework supported by multiple pillars was basically established, and breakthroughs were made in a number of key reform areas and links. Solid progress was made in deepening reforms comprehensively. Over the past five years, more than 1,500 reform measures, which advanced in various fields in depth, were taken under the established reform framework underpinned by multiple pillars in major areas, giving a strong impetus to economic development. The supply-side structural reform made substantial progress. Based on the overfulfilment of the goal of cutting steel and coal overcapacity in 2016, by the end of June this year, 56.36 million tons of steel production capacity were reduced, overfulfilling the annual goal; 111 million tons of coal were reduced, completing 74% of the annual goal. Reforms of streamlining administration, delegating more powers to lower-level governments and to society in general while improving regulation, and optimizing services were deepened; the decisive role of market in allocating resources and the role of government were capitalized on in a better fashion. Steady progress was made in the reform of fiscal, taxation and financial systems, and tax reforms such as replacing business tax with VAT achieved remarkable success. In the period from May 2016 to June 2017, more than 850 billion yuan of tax was directly reduced, making it possible that tax burdens on all industries were reduced; the reform of interest rate liberalization was continuously deepened, the convertibility of capital accounts was steadily improved, and the elasticity of RMB exchange rate was continuously strengthened. State-owned enterprises focused on their main business while carrying out specialized restructuring, constantly optimized the layout of state-owned capital, and accelerated the reform of corporate system and shareholding system. The reform of investment and financing systems proceeded in full swing, and public-private partnership (PPP) projects were implemented at a faster pace. 

China's high-level opening-up exhibited a new pattern and China's voice in global economic governance continued to improve. Over the past five years, China has implemented a more active opening-up strategy in response to economic globalization. Import and export trade saw a change from volume expansion to quality upgrade. In 2016, China's total import and export of goods accounted for more than 11% of total world trade, and in the period from 2012 to 2016, growth of import and export of services averaged 8.1% per year. The use of foreign investment and the size of outward foreign investment both hit a new high. In the period from 2013 to 2016, China's actual use of foreign investment reached 489.4 billion US dollars, an average annual growth of 3.1%, marking the optimization of the utilization of foreign investment; the non-financial outward foreign direct investment amounted to 491.5 billion US dollars, an average annual growth of 21.6%. China's voice in global economic governance continued to improve. In recent years, China successfully held the G20 Hangzhou Summit, the Belt and Road Forum for International Cooperation, the 9th BRICS Summit and other major diplomatic events, and President Xi Jinping addressed many times in major international occasions, offering Chinese solutions to improving global economic governance. 

The cause of people's livelihood continued to advance, and people's living standards continued to improve. In the period from 2012 to 2016, the per capita disposable income of residents across the country grew by 7.4% in real terms, and growth of rural residents' income exceeded that of urban residents' income for seven years in a row, indicating that the income gap between urban and rural residents continued to shrink. Targeted poverty alleviation achieved outstanding results, as evidenced by 55.64 million people being lifted out of poverty from 2013 to 2016. In the context of increasing pressure on financial revenue and expenditure, investment in people's livelihood continued to increase, and social security and public service levels continued to improve. In 2016, more than 100 billion yuan was earmarked as special funds for poverty alleviation by central finance; basic living allowances, preferential treatment, and retirees' basic pension criteria were raised, and more than 17 million people in straitened circumstances and severely handicapped people were given living or nursing subsidies; financial expenditure on education accounted for more than 4% of GDP, students from rural poor families were exempt from tuitions and fees of regular senior secondary schools, and more than 84 million students from families with financial difficulties were subsidized; expenditure on basic public health services was increased, and critical illness insurance achieved full coverage; and so on. People's living standards continued to improve, and society maintained harmony and stability. 

Summary of successful experiences, with focus on prominent problems and key tasks of economic work 

Needless to say, China's economy is still confronted with some prominent contradictions and problems, including gradual reduction of demographic dividends, strengthened constraints on resources and environment, and lack of scientific and technological innovation capabilities, as well as structural supply and demand imbalance, accumulation of financial risks, fast rising real estate prices in some cities, insufficient investment vitality of private enterprises, and so on. These problems occur in reform and development, and will be resolved by accelerating reform and development. Over the past five years, China has accumulated a wealth of experiences in adapting to, embracing and leading the new normal of economic development. These experiences are not only the main reasons for the great achievements of China's economic development, but also the focus of the future to overcome challenges and risks, solve contradictions and problems, and continue to perform well in economic work. 

We should judge the economic situation using the general logic of the new normal. That China's economic development has entered the new normal is a major strategic judgment made by the Central Committee of the CPC led by Xi Jinping. The new normal is mainly featured by speed change, structural optimization, and driver transition. Only by using the general logic of the new normal to judge the economic situation can we make a correct judgment regarding major issues of economic and social development. It should be noted that after nearly 40 years of continuous development, China has established a strong material basis supported by complete industrial systems and complete infrastructure facilities. Human capital and scientific and technological innovation are making more contributions to economic growth, and upgrading of consumption structure and in-depth advancement of new urbanization give rise to enormous market demand. The fundamentals that support sound and long-term economic development in China have not changed and will not change. Moreover, since the international financial crisis in 2008, world economy has been growing slowly, and China's external demand has experienced normal shrinkages; the contradiction between domestic overcapacity and demand structure upgrade is prominent, and traditional drivers of economic growth were declining, so it is urgent to foster new drivers of growth. Therefore, we must make great efforts to shift the Chinese economy from size- and speed-oriented extensive growth to quality- and efficiency-oriented intensive growth, and from factor-driven growth to innovation-driven growth, and rely more on deepening reforms, accelerating structural adjustment and realizing transition of old drivers to new ones to push development. 

We should lead the new normal of economic development using a new development idea. To resolve such old problems as gradual reduction of demographic dividends, strengthened constraints on resources and environment, and lack of scientific and technological innovation capabilities, as well as new problems including structural imbalance, insufficient endogenous power of economic growth, accumulation of financial risks, and insufficient investment vitality of private enterprises, we must update our development concept, change our development model, and utilize innovative means of development, in order to lead the new normal of economic development with a new development idea. The new idea of innovative, coordinated, green, open, and shared development mirrors China's thinking, direction and focus of development in the context of the new normal of economic development. Innovation is the primary driver leading the development, acting as a core element to lead the new normal of economic development. Coordination is the inherent requirement of sustained and sound development, acting as a key to leading the new normal of economic development. Green is a necessary condition for sustainable development, acting as an inevitable requirement for leading the new normal of economic development. Opening is the only way for prosperity and development of the country, acting as an important driving force to lead the new normal of economic development. Sharing is the essential requirement of socialism with Chinese characteristics, acting as a starting point and ultimate goal of leading the new normal of economic development. By adhering to the new development idea to lead the new normal of economic development, we can continue to bolster our weak spots in development, crack development problems, enhance the power of development, and foster development advantages, thereby shaping a new pattern of economic development. 

We should deepen the supply-side structural reform. Promoting the supply-side structural reform is a major innovation to adapt to and lead the new normal of economic development. Only by deepening the supply-side structural reform can we solve the problem of major structural imbalance, smooth the economic cycle, and realize the new dynamic equilibrium of supply-demand relations. The main direction of the supply-side structural reform is to improve the supply quality, reduce ineffective supply, expand effective supply, and improve the adaptability of the supply structure to the demand structure; the fundamental way is to deepen the reform, straighten out the relationship between government and market, and improve the system and mechanism where the market plays a decisive role in the allocation of resources. At present, we should push forward the five tasks of cutting production overcapacity, depleting stocks, deleveraging, reducing costs and bolstering weak spots, deepen the supply-side structural reform in agriculture, focus on revitalizing the real economy, and promote the steady and sound development of the real estate market, in a bid to promote the successful entry of China's economy into a development stage with a more advanced form, more complex division of labor, and a more reasonable structure. 

(Author: Director of Economic Forecasting Department, State Information Center)

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