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The Steady and Positive Development of the Chinese Economy Has Become More Evident with Improving Quality and Efficiency

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Author:Wang Hongju | Source:People's Daily (December 4, 2017)


An objective analysis of the current economic situation, especially in combination with the economic data of the first three quarters of 2017, shows that many positive changes have taken place in our economic development and that the steady and positive development of the Chinese economy has become even more pronounced. The so-called "hard landing," "turning-point theory" and other voices of bad reputation of the Chinese economy have been proved once again very absurd by the reality. 

The economic situation is getting steady and positive with the main indicators better than expected. First, the macroeconomic stability was enhanced. In the first three quarters, the Chinese economy maintained medium- and high-speed growth. The GDP grew by 6.9% over the same period last year and the economic growth ranged 6.7% to 6.9% for nine consecutive quarters. In terms of industries, the primary, secondary and tertiary industries increased by 3.7%, 6.3% and 7.8% year on year, respectively. Second, the quality and efficiency of economic development improved. The general public budget revenue grew by 9.7% year on year in the first three quarters, and the profits of industrial enterprises above designated size increased by 21.6% year on year in the first eight months. The rapid growth of national fiscal revenue and profits of industrial enterprises was a comprehensive reflection of the steady and positive development of the Chinese economy. Third, the balance of payments was in good condition; the current account maintained a surplus; capital flight and the devaluation of the renminbi against the U.S. dollar were effectively deterred; the foreign exchange reserves recovered smoothly. Fourth, people's livelihood continued to improve. In the first three quarters, the per capita disposable income of the country's residents was RMB19,342, a nominal increase of 9.1% on a year-on-year basis and an actual increase of 7.5% in real terms, remaining higher than the economic growth rate. Fifth, the effect of regional synergies began to emerge. The sound progress of economy became more prominent in East China; the space for economic development in the central and western regions expanded; the economy recovered in the northeastern region. 

The supply-side structural reform has produced a marked effect. First, excess capacity continued to be cut, and the prices of industrial products rebounded, easing the financial dilemma of overcapacity industries and significantly improving the performance indicators of related enterprises. Second, real estate stocks fell for several months in a row, and the area of commercial housing for sale continued to decrease. The latter fell by 12.2% year on year by the end of September. Third, the asset-liability ratio of industrial enterprises fell, and it dropped to 55.7% at the end of August. Fourth, tax cuts, fee reduction, and the reforms of streamlining administration, delegating more powers to lower-level governments and to society in general while improving regulation, and optimizing services, helped reduce corporate costs. From January to August, the cost per RMB100 of main business income of industrial enterprises above designated size was RMB85.68, down RMB0.12 over the same period last year. According to a preliminary estimation, the tax cuts and fee reduction measures that have been promulgated in 2017 will enable the enterprises to reduce the total amount of taxes and fees by RMB1,001 billion. Fifth, efforts were made to bolster weak spots and increase investment in areas such as agriculture, environmental control and high-tech industries. In the first three quarters, infrastructure investment grew by 19.8%, of which investment in water conservancy, environmental control, public services and information transmission industries grew more rapidly. 

The new development philosophy has led China's economic development to a higher level. Strategic emerging industries and high-tech industries continued to maintain rapid growth. The new drivers of growth have become an important contributor to promoting steady economic growth. In the first three quarters, the added value of high-tech manufacturing and equipment manufacturing increased by 13.4% and 11.6% respectively over the same period last year, faster than that of industry and the overall economic growth. In the first half of the year, consumption contributed 64.5% to economic growth as it gave full play to its leading and fundamental role. The real estate market regulation started to work. The increase of housing prices in the first and second tier core cities was under control. The third and fourth tier cities continued to deplete stocks. The area of new housing construction and the real estate investment growth remained stable. The real estate market showed steady and sound development. 

Due to the unexpected performance of the Chinese economy, the International Monetary Fund continued to raise China's economic growth forecast for 2017 to 6.8% in October this year. As the structural adjustment is progressing steadily, the expectation of steady and positive economic growth in China will be further consolidated. 

(The author is a research fellow of the National Academy of Economic Strategy and the Research Center for the Theoretical System of Socialism with Chinese Characteristics, CASS)

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