China heading for a more balanced economy
- By Zhang Lijuan
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E-mail China.org.cn, March 8, 2014
This overall transition will not be easy. It requires a tremendous amount of effort and time. A service-driven economy requires a well-developed financial market, well-designed rule of law and high-level financial professionals. To meet such requirements, both the central and local governments will have to be very careful in spelling out detailed guidelines in terms of future reform. This partially explains the slow pace of Shanghai Pilot Free Trade Zone policy announcements.
Balancing GDP growth and sustainability is even more challenging. The Chinese government has realized that the government should play a more leading role in job creation instead of chasing faster GDP growth. China has to sustain its GDP growth, but more than ever, it must implement sustainable development policies. To what extent will local governments follow in the same direction? In the face of a large number of government debt, this is another tricky question.
"To become wealthy" has been a popular slogan in China since the 1980s. Today, "to live healthily" is a much more popular slogan, because living healthily is not an easy thing to do. In daily life, air, water and food have all become major safety concerns for the public. Fast economic development has badly damaged China's basic living environment. To repair this damage, thirty years may not be enough. The administration is now facing huge pressure to solve China's environmental problems.
Two decades ago when the United States began its service-based economy in the1980s and 1990s, it was facilitated by high growth, low inflation and high employment. Today, China's economy has to deal with the opposite: slowing growth, a troubling level of inflation and growing unemployment. This has inevitably led to a wide-range of pessimistic predictions about the future for the Chinese economy.
China also has to balance economic development and social equality. For instance, how can it reduce the inequalities in social welfare between rural and urban areas? Chinese farmers have heavily contributed to economic growth over the past three decades, but they have enjoyed very little of the benefits from the fast growing economy. Yes, China has won a battle in combating poverty during the last three decades, as China's poverty ratio has fallen to around 13 percent from 84 percent in 1980. But it has not won the war on agricultural industrialization, which may become a huge obstacle in its overall economic development.
In conclusion, China's economic development will continue to be out of balance, one way or another. It seems the imbalances are too overwhelming to fix in one administrative term. But for now, the administration has to choose the battle in order to win the war. In the short run, the Chinese government seems to be playing the role of lender only as a last resort, so there is hope that China will avoid a hard landing. But in the long run, shrewd economic statecraft needs to be part of the national strategy.
The author is a columnist with China.org.cn. For more information please visit: http://www.china.org.cn/opinion/zhanglijuan.htm
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
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