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Developing New and Better Ways to New-era Macro Regulation with Chinese Characteristics

Submit Time:10-05-2018 | Zoom In | Zoom Out

Author:Liu Yuanchun | Source:People's Daily (April 03, 2018)

Abstract:

Introducing new and better ways to macro regulation is a necessary requirement for improving the socialist market economy, developing modernized economy and realizing socialist modernization. At the Third and Fifth Plenary Sessions of the 18th CPC National Congress, the 19th CPC National Congress, and the 2017 Central Economic Work Conference, Comrade Xi Jinping proposed a guiding thought, basic thinking or major measure to introduce new and better approaches to macro regulation. Extracted from the great practice over the past five years, it is the new-era macro regulation theory with Chinese characteristics. As an integral part of Xi Jinping's economic thinking for new-era socialism with Chinese characteristics, it also serves as a fundamental principle for China to deliver a solid performance in macro regulation.  

New-era macro regulation with Chinese characteristics faces new requirements.  

As Comrade Xi Jinping pointed out at the Central Economic Work Conference that was concluded by the end of 2017, socialism with Chinese characteristics has entered a new era, and the Chinese economy has also crossed the threshold into a new era, which is mainly characterized that the economic growth is transitioning from a phase of rapid growth to a stage of high-quality development. The switch in the phases of development in the new era thus creates new requirements for macro regulation with Chinese characteristics.  

The evolution of the principal contradiction facing Chinese society imposes challenges on the traditional macro regulation. As socialism with Chinese Characteristics has entered a new era, the principal contradiction facing Chinese society has evolved from the one "between the backward social production and the ever-growing material and cultural needs of the masses" to that "between the unbalanced and inadequate development and the people's ever-growing needs for a better life." The evolution of the principal contradiction makes the traditional macro regulation with economic aggregate and growth speed at its core facing mounting challenges. The traditional macro regulation did a good job in driving up economic aggregate against the backward productive force. But to solve the problem of unbalanced and inadequate development obviously exceeds its ability. The new-era macro regulation with Chinese characteristics is laser-focused on solving the problem of unbalanced and inadequate development and meeting the people's ever-growing needs for a better life. While following the new development philosophy and taking the high-quality development as the ultimate task, China will constantly come up with new theories and conduct new practice in this regard.  

The changes in economic landscape push us to review and grasp the laws that underlie economic development. With the advent of the new era, the Chinese economy has seen huge changes in its development situation: the economic growth switches from high speed to medium-high pace; the development mode transitions its focus from scale and speed to quality and efficiency; and the new growth drivers replaces the old ones. This attests that the switch of development phases is accompanied by the changes in the laws that underlie economic development. Against such a backdrop, macro regulation cannot attach all attention on economic growth rate any longer. Instead, it must put its focus on creating new growth drivers and improving development quality.  

The pressing challenges and problems confronting the Chinese economy force us to change our approaches to macro regulation. At present, the Chinese economy faces many overall or periodic problems, but supply-side problems stand out most, which are manifested as poor supply quality, unbalanced structure, difficult market clearing, and inadequate driving force for development. The traditional macro regulation used to place particular emphasis on short-term demand management. Far from easing the supply-side structural problems, it is likely to aggravate them. Therefore, getting rid of the short-term demand management framework, diverting attention to the supply side, adopting more structural instruments, and strengthening the coordination among fiscal, monetary, industrial and regional policies are new approaches to macro regulation with Chinese characteristics in the new era.  

The strategic arrangement for developing socialism with Chinese characteristics in the new era requires improving the strategic significance of macro regulation on all fronts. Such an arrangement was unfolded in the report to the 19th CPC National Congress as "we will build on the foundation created by the moderately prosperous society with a further 15 years of hard work to see that socialist modernization is basically realized; by the middle of the 21st century, we will develop China into a great modern socialist country that is prosperous, strong, democratic, culturally advanced, harmonious and beautiful." To realize the strategic goal, we must get rid of the Western doctrine that "macro regulation primarily is a short-term, counter-cyclical tool for regulating economic aggregate," walk out of the dilemma where macro regulation only works for a short term, and fully leverage on the strategically guiding role of the state development plans. At the same time, a variety of new policy tools will be created to enable macro regulation to match with state strategies in terms of objectives, means, tools and implementation modes.  

The further complex economic environment makes it more necessary for the Party to exercise the centralized, unified leadership over the economic work. As the Chinese economy has entered a new era, macro regulation turns into an instrument that involves many ways than one: while focusing on stabilizing economic growth, it also needs to advance reforms, adjust structure, improve people's wellbeing and forestall risks; while coordinating the economic relations among general market entities, it also needs to streamline all sorts of interest relations institutionally. In this sense, the old classified governance approach that required the match between tools and objectives is difficult to fundamentally straighten out various interest relations and coordinate different objectives for generating a synergy of regulation. Only by furthering strengthening the Party's uniform leadership for the economic work, can we shatter the restrictions brought by departmental separation, remove the dual constraints from market failure and government failure, and propel our economy and society towards sound development.  

New practice promotes theoretical innovation in socialism with Chinese characteristics. 

Since the 18th CPC National Congress, based on a comprehensive analysis of the long cycle revealed by the world economy and the new rules underpinning the Chinese economic development, the CPC Central Committee with Comrade Xi Jinping at its core has kept rolling out reforms and innovative measures in the macro economic field, realized the sustained, healthy development of the Chinese economy and society, and contributed more inspirations to Xi Jinping's economic thinking for new-era socialism with Chinese characteristics.  

In the past five years, China has secured historic progresses towards stabilizing growth, advancing reforms, adjusting structure, improving people's wellbeing, and forestalling risks. These achievements fully attest that the CPC Central Committee with Comrade Xi Jinping at its core has made scientific and correct judgments on the macro economic landscape, adjustments in approaches to macro regulation, introduction of new macro policy tools, and grand decisions made at critical moments. Under the leadership of the CPC Central Committee, China, with its outstanding economic development, has greatly impressed the international community, especially those who badmouth China by advocating "shorting China", the "China collapse theory," and the "theory of China's hard landing." China's gross domestic product (GDP) has risen from 54 trillion to 82.7 trillion yuan, registering average annual growth of 7.1%; and its share in the global economy has grown to roughly 15%, up from 11.4%. As a result, economic strengthen has reached a new high. Over the same period, the structure of the Chinese economy has seen a major transformation. We are making big strides towards the structuring objective that was long on the agenda but never realized. In the past five years, with the share of the service sector rising from 45.3% to 51.6% of the economy, consumption's contribution to growth has increased from 54.9% to 58.8%, becoming the main driver of growth. Equipment manufacturing and high-tech manufacturing have achieved an average annual increase of double digits, with the structure of real economy improved remarkably. With a commitment to deepening reform across the board, we have made major breakthroughs in some critical and fundamental areas. Especially driven by the supply-side structural reform, we have conquered many touch challenges, which plays a pivotal role in allowing market to allocate resources more efficiently and lifting total factor productivity. In terms of benefiting people's wellbeing, over the past five years, employment has outpaced what was expected. More than 66 million new urban jobs have been added, personal income has increased by an annual average of 7.4%, over 68 million people have been lifted out of poverty, and the poverty headcount ratio has dropped from 10.2% to 3.1%, all of which stand at evidence to the great raise in people's living standards. These enormous achievements give a good advertisement for the theoretical scientificity and solid practical foundation of Xi Jinping's economic thinking for new-era socialism with Chinese characteristics. It is the latest development in the political economics with Chinese characteristics for profoundly grasping the laws that underlie the Chinese economic development and efficiently solving the Chinese economic problems. The theory on new-era macro regulation with Chinese characteristics which is based on Xi's economic thinking for new-era socialism with Chinese characteristics is a passkey to solving the macro economic problems facing the modern China.  

Over the past five years, specific innovations in macro economy have greatly stimulated innovations in the theory of macro regulation with Chinese characteristics. Firstly, the centralized, unified leadership of the Party over the economic work has been strengthened, as a move to improve the scientificity and influence of macro influence on all fronts. Secondly, with a fundamental commitment to high-quality development, efforts have been made to expand objectives of macro regulation into stabilizing growth, advancing reforms, adjusting structure, benefiting people's wellbeing, and forestall risks, and coordinate all sorts of long-term goals and short-term targets. Thirdly, in addition to removing the doctrine of the Western crisis management that emphasizes strong stimulus, we have refrained from resorting to a deluge of strong stimulus policies, creatively developed the idea of and ways to achieve range-based regulation, defined the reasonable range of economic growth, and rolled out new measures to enhance targeted, well-timed, and precision regulation. Fourthly, getting rid of the Western doctrine, the short-term macro regulation has been executed as required by the goals of medium-long state development plans and the targets of economic reforms, so that it can maintain its strategic consistence and serve the overall picture of modernization and national rejuvenation. Fifthly, endeavors have been made to deepen reform across the board, so that the micro foundation and institutional environment required by the implementation of macro economic policies can be reshaped. For instance, macro-prudential policy has been deemed as one of the three major macroeconomic policies (in parallel with fiscal policy and monetary policy); with creative monetary policy tools, private financing size has been listed as part of intermediary control targets, thus efficiently overcoming many problems that were caused by banknote issuance simply based on funds outstanding for foreign exchanges; the ceilings have been put on the gross local debt and financing, with a view to keeping a tighter rein on local financing platforms; steps have been taken to improve the socialist market economy, thus creating a sound environment for macro regulation. Sixthly, given the principal contradictions and problems confronting the macro economy, we have continued the supply-side structural reform, and required macro regulation to attach equal importance to both demand side and supply side, both aggregate management and structural deficiency; both implementation of general policies and institutional reform; both short-term fluctuation and cultivation of potential for medium-long growth and new growth drivers; and both financial risk and substantial support of finance for real economy. Seventhly, with a commitment to the general principle of pursuing progress while ensuring stability, we have been able to exert an appropriate control over timing, degree and effect, while judging macro situation, grasping macro strategies, choosing macro policies and executing specific policies.  

New thoughts can guide innovations in new-era macro regulation with Chinese characteristics.  

Since the 18th CPC National Congress, as socialism with Chinese characteristics and the Chinese economy entered a new era, macro regulation with Chinese characteristics has realized revolutionary innovations. At present, guided by Xi Jinping's economic thinking for new-era socialism with Chinese characteristics, we will further introduce new and better approaches to macro regulation with Chinese characteristics as a close response to the evolution in the principal contradiction confronting the Chinese society and the requirement for high-quality development.  

At the same time, we will uphold the centralized, unified leadership of the Party over the economic work, and make macro regulation more strategic, systematic, and coordinated in every field. Besides, we must become deeply conscious of the need to maintain political integrity, think in big-picture terms, follow the leadership core, and keep in alignment, oppose decentralism, behavior in disregard of the rules, a silo mentality, sectarianism, and regional protectionism, and refrain from setting unrealistic objectives or selective execution. Since the 18th CPC National Congress, there have emerged many new schemes: the Standing Committee of the Political Bureau of the CPC Central Committee and the Political Bureau study and analyze economic landscape and make decisions on major economic issues regularly; the Central Committee (Leading Group) for Financial Economic Affairs timely studies major economic issues, and the Central Committee (Leading Group) for Comprehensively Deepening Reform promptly studies issues relating to economic reform. Based on these systems, we will further experiment with rolling out the information gathering system, research and analysis system, decision-making system, and implementation system which altogether ensure the Party's leadership over macro economy can become more institutional, regulated and scientific.  

We will deepen the basic reforms with a view to creating a sound environment where macro regulation can be executed efficiently. Obstructed transmission channels and inefficient execution of macro policies have long remained two major problems confronting macro regulation. We will deepen the basic reforms and streamline the macro policy transmission mechanism, and create a sound environment where macro regulation can be executed efficiently. Some feasible measures are listed as below: structural fiscal and tax reforms are introduced so that the fiscal policy can give its role of automatic stabilizer into better play; exchange rate formation mechanism is put in place to intensify the function of the exchange rate policy as a jetty; reform of bringing interest rate under market-based operation is intended to increase the efficiency of price-type monetary policy tool; reforms in financial sector and crackdown against market disorder help making macro-prudential policy more effective; and reform of SOEs facilitates laying the micro foundation for high-quality development.  

We should pursue supply-side structural reform as our main task, and take high-quality development as a fundamental requirement, while further improving the function of macro regulation. New-era macro regulation with Chinese characteristics must develop a quality and efficiency-oriented system and put focus on real economy for advancing revolution in quality, efficiency and growth drivers and making progress in high-quality development. While pursuing supply-side structural reform as our main task, we will exercise a proper control on pace and intensity of demand management, and improve the functions of new-era macro regulation with Chinese characteristics in terms of aggregate side, structural side, demand side and supply side. Using state plans as better strategic guides for the short-term macro regulation, we will focus our efforts on the annual tasks and indicators that are broken down from the Two Centenary Goals, put in place a sound mechanism to coordinate fiscal, monetary, industrial, regional and other policies, and add more expected guiding functions to various macro policy tools.  

We will uphold the overall principle of pursuing progress while ensuring stability, by updating our understanding of "stability" and "progress" up to date. In different stages of development, macro economy adopts varying criteria to measure and interpret "stability." The standards for bottom line management are also different accordingly. In the meantime, as supply-side structural reform and basic reforms move forward, the connotation of "progress" has also changed. Therefore, we need to comprehend the two concepts in a way that keeps up to the times. Specifically, specific objectives towards "stability" and "progress" shall be determined given the present development situation.  

(Author's affiliation: Renmin University of China)


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