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Promoting Sustained Economic Recovery in Structural Improvement

Submit Time:24-11-2017 | Zoom In | Zoom Out

Author:Wang Jinbin | Source:Guangming Daily (October 30, 2017)

Abstract:

The report to the 19th National Congress of the Communist Party of China points out under the section titled “We have made major achievements in economic development” that supply-side structural reform has made further headway, bringing a steady improvement in the economic structure. The economic statistics for the first three quarters of this year released just now clearly show that the current steady trend of economic development and the good situation of steady development, structural improvement, momentum shifting and efficiency improvement are more obvious. 

The GDP and CPI for the first three quarters of this year grew by 6.9% and 1.5% respectively over the same period last year, and the output and prices were both stable. In the first three quarters, 10.97 million new jobs were created in cities and towns, and the goal of creating 11 million new jobs will soon be realized. The macro-economy showed the trend of sustained recovery in structural improvement. 

First, the output and price structures in the Chinese economy were gradually restored to benign relationships. Compared with the GDP growth rate of 6.7% for 2016 and the year-on-year CPI growth rate of 2.0%, the relationship between the GDP growth rate and prices for the first three quarters of this year shows that the economic growth rate is 0.2 percentage points higher than the same period last year while the price growth rate is 0.5 percentage points lower than the same period last year. In the first three quarters, the price and output levels of the Chinese economy were basically removed from the region of relatively low output and high CPI of 2016. The structural-side structural reform of “cutting overcapacity, reducing excess inventory, deleveraging, lowering costs and strengthening areas of weakness” proposed at the end of 2016 brought about substantial effect. The impact on supply is gradually absorbed by the market, and the market clearing price mechanism gradually becomes dominant. 

Second, the investment and consumption structures in the Chinese economy kept improving. Take real estate, for example. In the first three quarters, China’s investment in real estate development grew by 8.1% nominally over the same period last year, higher than the whole society’s year-on-year fixed assets investment growth rate of 7.5%. In the first three quarters, the area of land purchased by real estate development enterprises grew slowly by 12.2% over the same period last year. The real estate control policy smoothed and lengthened the real estate cycle, eliminating the economy’s dependence on the real estate-driven model on the one hand and helping stabilize real estate development and realize the goal that “housing is for living in” on the other. 

Last, the import and export structures in the Chinese economy were improving. In light of the trade structure, general trade imports and exports increased and accounted for a higher proportion. In light of the export market, traditional markets and newly expanded markets both rose to higher levels. The structure of imports, mostly resources and high-tech products, was improved. 

These statistics fully show that supply-side structural reform has realized sustained progress and that structural transformation has reached a new level. Overcapacity elimination was pushed forward continuously. In the first three quarters, China’s rate of industrial capacity utilization was 76.6%, 3.5 percentage points higher than the same period last year. The effect of excess inventory reduction is obvious. By the end of September, the area of commercial housing for sale was 12.2% less than last year. The result of deleveraging and cost reduction has emerged. By the end of August, the asset-liability ratio of industrial enterprises above the designated size was 0.7 percentage points lower than last year; with promotion and implementation of multiple deleveraging measures such as “conversion of debts into shares”, “mixed-ownership reform” and equity financing and enterprises’ profit growth in the future, enterprises’ financial leverage ratio can be expected to further drop. With active promotion of supply-side structural reform and various tax and fee reduction policies, enterprises’ cost reduction has begun. From January to August, the cost per 100 yuan in main business revenue of industrial enterprises above the designated size decreased by 0.12 yuan over the same period last year. Areas of weakness were strengthened quickly. In the first three quarters, the year-on-year growth rate of investment in the ecological protection and environmental improvement sector, the public facility management sector and agriculture was much higher than the growth rate of China’s investment in fixed assets. 

The report to the 19th National Congress of the Communist Party of China points out that China’s economy has been transitioning from a phase of rapid growth to a stage of high-quality development. This is a pivotal stage for transforming our growth model, improving our economic structure, and fostering new drivers of growth. It is imperative that we develop a modernized economy. This is both an urgent requirement for getting us smoothly through this critical transition and a strategic goal for China’s development. At present, the leading role of the service sector in the Chinese economy is stronger and stronger, consumption has become the main driving force behind economic growth, new momentum of growth is developing quickly, and the idea and strategy of green development have deepened continuously. With improvement of export and import structures and optimistic expectations, the Chinese economy will certainly tend to recover in structural improvement. 

(Author from National Academy of Development and Strategy, Renmin University of China)


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