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China’s Economic Situation of Stability with Improvement Has Further Consolidated

Submit Time:19-09-2018 | Zoom In | Zoom Out

Author:Zhang Liqun | Source:People’s Daily (August 16, 2018)


  This year, in the face of complex and changing situation at home and abroad, under the strong leadership of the Party Central Committee with Comrade Xi Jinping at its core, we adhered to the general work tone of seeking improvement in stability, constantly strengthened the party's leadership over the economic work, resolutely implemented the new outlook of development, and energetically promoted the development of economy with high quality, as a result, the structural contradiction of supply and demand has significantly improved, the economic growth has gradually stabilized, the economic development quality and efficiency improved significantly, with remarkable enhanced tenacity and sustainability, and the situation of improving economy in stability has been further consolidated.

  Steady economic growth has been basically secured

  Influenced by favorable factors such as world economic recovery, active domestic consumption market and new progress in supply-side structural reform, China's economy operated smoothly in the first half of this year, with GDP growth rate of 6.8%. By quarters, the GDP grew by 6.8% in the first quarter and by 6.7% in the second quarter, and remained in the range of 6.7% to 6.9% for 12 consecutive quarters, basically securing the trend of steady economic growth.

  The world economic recovery became clear and the export situation improved. In 2017, the world import and export trade volume (USD) increased by about 10.6% over the previous year, 7 percentage points higher than the world economic growth rate (3.6%) that year. This indicated that, after nearly 10 years of continuous efforts, the impact of the international financial crisis was fading, and the production, employment and market are all on recovery worldwide. In 2017, China's exports grew by 10.8%, reversing the negative growth trend and the growth rate was 12.7 percentage points higher than that of the previous year, which strongly supported the increase in production and sales of export-oriented enterprises. In the first half of this year, China's exports grew by 4.9%, with surplus in goods import and export further narrowed and the trade structure continually improved. Although populism has sprung up in some western countries recently, trade and investment protectionism is on the rise and anti-globalization ideas are surging, it is difficult to change the basic situation of world economic recovery and in-depth development of economic globalization. It is predicted that China's export will maintain a positive growth with certain fluctuations in the future.

  Positive progress has been made in the new type of urbanization, and the endogenous power of investment has increased. In recent years, a series of positive changes have been taking place in the new urbanization process in China. First, the leading cities of urbanization have expanded from first-tier cities to several second-tier cities. A number of second-tier cities, such as Nanchang, Suzhou, Wuhan, Zhengzhou, Hangzhou and Nanning, have surpassed the first-tier cities of Beijing, Shanghai and Guangzhou in terms of their youth index, reflecting the rapid improvement of their popularity as the level of infrastructure and public services in a number of second-tier cities continues to rise, the market environment has been greatly improved and the degree of integration between cities and industries has significantly increased. Second, urban development space has expanded, with enhanced synergy. The planning and construction of urban clusters has driven up the integrated development of large and medium-sized cities and effectively bolstered the weak links of infrastructure and public services in small and medium-sized cities, improving the environment, raising the level of city and industry integration, and increasing the urbanism popularity in a number of small and medium-sized cities. All these have effectively expanded the space for urban development, further activated investment in real estate and infrastructure, and increased the endogenous motive force of investment. As a result, the sales situation in the bulk commodity market has improved significantly, the utilization rate of industrial production capacity has increased, and the capital turnover situation of enterprises has turned for the better, with improved returns.

  Domestic consumer market has been kept active. Since 2010, the growth rate of China's exports and investment has somewhat declined, but the growth rate of consumption has been relatively stable. In the first half of this year, the contribution of final consumption expenditure to GDP growth has increased to 78.5%, and the basic role of consumption in economic growth has been further strengthened. The reasons are mainly on three aspects: first, the fundamental purpose of economic development in China is to improve the livelihood of the people, the constant pursuit by more than one billion people for a better life and their persistent and arduous efforts in social production and construction for this purpose has promoted the sustained and rapid expansion of consumption market in China, and also supported the prosperous development of industry, services and urban and rural construction, resulting in a benign circle of mutual promotion. Second, the supply of all kinds of consumer goods and services related to living consumption has become increasingly abundant, with continuously improving standard and quality, and daily enriching varieties of commodities and services, thus continually expanding the consumption demand. Third, the Party and government have made unremitting efforts to ensure the basic livelihood of the people. To overcome the negative influence of economic downturn pressure on the basic livelihood of the people, the Party and the government in recent years have done a lot in guarantee for employment, targeted poverty alleviation, assistance and support for people with difficulties and stabilizing the income of residents, and achieved remarkable results, having effectively stabilized employment and promoted the rapid income growth, thus ensuring the continued active operation of consumption market.

  The dynamic adaptability of supply to demand has been obviously improved. On one hand, after a long period of rapid growth during the reform and opening up, the market supply capacity in China has been greatly increased, changing from a general shortage of goods to a certain degree of overcapacity. As a result, the “forcing” effect of market competition on enterprise transformation has significantly strengthened, giving rise to daily increasing selection of the fittest for enterprises and production capacity. In the field with a high degree of market adjustment, a large number of small, medium and micro-sized enterprises and private enterprises transform and upgrade in the market competition and the selection of the fittest. Market demand has become the lifeline that determines their survival and development. On the other hand, with the continual advancing of the supply-side structural reform with cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening areas of weakness as the main tasks, large enterprises and state-owned enterprises are speeding up their pace of merger and reorganization, transformation and upgrading. Especially, efforts have been made to deepen the reform in basic and critical areas with eliminating ineffective capacity, fostering new growth drivers and cutting cost of real economy as the main; the institutional weakness that restricting the role of market competition has been strengthened centering on the completion of property right system and marketized allocation of elements, to that the new growth drivers pushing the economic growth have been obviously strengthened and prosperous development has realized for new industries and new products. For example, a number of major scientific and technological innovation achievements have emerged in the fields of aerospace, artificial intelligence, deep-sea exploration and biomedicine, giving a strong boost to the high-quality development of China's economy; in 2017, China's total investment in research and development reached 1.75 trillion yuan, up 11.6% year-on-year, accounting for 2.12% of GDP. With the continual advancement of market competition in the selection of the fittest and supply side structural reform, low-level capacity and ineffective supply exited from the market more quickly, industry development environment has kept on improving, the quality and efficiency of China's economic development has significantly upgraded, the self-discipline ability of industries has enhanced, enterprises have increased quality and efficiency, with significantly more innovation and development activities, greatly strengthening the market competing power of enterprises. The supply system of China has significantly improved its ability to dynamically follow up and adapt to changes in market demand in terms of total volume and structure.

  It should also be noted that the current economic operation still faces some problems and challenges, such as obvious changes in the external environment, the difficulty of enterprise financing has not yet been fundamentally solved, and China's economy still faces short-term downturn pressure. However, as the effects of macro-control policies are gradually released, and the endogenous driving force of the economy is further strengthened, the economic risks in China are under control, and the stable situation with improvement will not change.

  Further consolidate the trend of stable economy with improvement

  There is still much work to be done to maintain and strengthen the trend of stable economy with improvement in China according to comprehensive analysis of the favorable and unfavorable factors facing China's economic development. We must, under the guidance of Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era, implement the new development concept and take targeted measures to address the new economic situation and changes according to the present economic situation, especially the obvious changes in the external environment.

  Energetically improve the quality of supply system. First, we will take bolstering weak links as a key task in deepening the supply-side structural reform at present, make greater efforts to bolster weak links in infrastructure sector, strengthen innovation power, develop new driving forces, remove institutional obstacles to cutting overcapacity, and reduce enterprise costs. Second, we will enhance the market competitiveness of enterprises, select the superior and eliminate the inferior through fair, open and orderly market competition, promote enterprise transformation and upgrading, improve quality and efficiency, and have more and more outstanding enterprises stand out. Third, we will unswervingly deepen reform, energetically improve the property rights system and strengthen the decisive role of the market in resource allocation. Fourth, we need to open more widely to the outside world, implement the important actions to open more widely and significantly relaxing market access, speed up connection with the world economy on all aspects of industries, market and rules, and take an active part in and push forward the economic globalization.

  Unleash economic driving force in the integrated development of new type of industrialization and urbanization. At present, China is in a critical period of adjusting the relationship between industrialization and urbanization. We should adopt comprehensive policies, streamline more quickly the relationship between industrialization and urbanization, promote the better integration of new industrialization and urbanization, and constantly release the strong impetus of modernization drive in our country. First, we will accelerate the improvement of infrastructure and public services in large, medium-sized and small cities, continue to improve the integration level of cities and industries, urbanism and urbanization rate, and promote stable employment and continual increase of income for rural immigrant population. Second, we should make great efforts to make overall planning for urban cluster development, rationally arrange land use, and ensure integrated urban and rural development and rural revitalization. Meanwhile, on the basis of the long-term goal of urban development, the infrastructure and public service guarantee system covering both urban and rural areas should be constructed with a high starting point and to high standard. Third, according to the requirements of the integrated development of urban clusters, we should coordinate the application of financial funds in a wider range, and also improve local debt issuance to ensure the necessary capital available for construction. Fourth, we should be determined to solve problems of the real estate market, implement different policies for different cities, promote the balance of supply and demand, reasonably direct expectations, rectify market order and resolutely curb the rise in housing prices, and speed up the construction of a long-term mechanism that can promote the steady and healthy development of the real estate market. Fifth, we should ensure and improve people's livelihood in development, make efforts to bolster weak links in people's livelihood and promote social equity and justice.

  Improve macro-control and maintain reasonable and sufficient liquidity. We will continue to implement a proactive fiscal policy and a prudent monetary policy and make the policy more forward-looking, flexible and effective. The fiscal policy should play a greater role in expanding domestic demand and restructuring. Monetary policy should well control the total money supply floodgates, and keep liquidity reasonably and abundant. The relationship between preventing and defusing financial risks and maintaining reasonable and abundant liquidity should be well coordinated. One is to firmly clear “zombie enterprises” and reduce ineffective occupation of funds. We will continue to severely crack down on illegal financial institutions and their activities and firmly guard the bottom line that no systemic financial risk should occur. Second, local government financing activities should be improved in accordance with the principle of blocking the back door and opening the front door in issuing local government bonds, and the issuance and use of special local government bonds should be accelerated to achieve early results in promoting infrastructure projects under construction. Third, to solve problems of tightening short-term liquidity and reduced investment growth, we will maintain appropriate social financing scale and reasonable and abundant liquidity while strengthening regulation and supervision over illegal financing activities. Financial institutions should be directed to apply the RRR reduction funds to support small and micro businesses and market-oriented debt-to-equity swaps.

  Although the trend of stable economy with improvement in China is being consolidated, we still need to be more mindful of possible potential risks and challenges in economic development. At present, we should, according to the requirement of the recently convened meeting of the Political Bureau of the Central Committee of CPC, adhered to the general tone of work to seek improvement in stability, keep the economic operation within a reasonable range, strengthen overall planning and coordination, form a joint force of policies, implement policies accurately and work in a steadfast and sophisticated manner. As the prospect for the year, as long as we adhere to Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era as the guide, carry out and implement the decisions and deployment of the CPC Central Committee, and deal with risks and challenges in economic operation in a scientific manner, the trend of steady economic growth in China will not change, the economic stability with improvement will be continually consolidated, and at the same time, the financial order will be more standardized, the economic structure will continue to optimize, supply quality will continue to improve, and solid steps will be taken in high quality development.

  (Author: Zhang Liqun, research fellow of the Macroeconomic Research Department of the Development Research Center of the State Council)

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