Toward a slower but stronger economy
- By Zhang Lijuan
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E-mail China.org.cn, November 4, 2015
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The Fifth Plenary Session of the 18th Communist Party of China Central Committee is held in Beijing from October 26 to 29 [Xinhua] |
The 13th Five-Year Plan (2016-2020) is now under discussion in China. It is widely expected that the Plan will help to establish a sound policy framework for accomplishing key goals for future Chinese economic development. But it is a very challenging task for policymakers in Beijing.
Slower economic growth should be of no surprise. The central government has already begun its process of transferring the economy from GDP-driven to quality-driven since the 12th Five-Year Plan. This mission will not be completed in just one or two five-year periods. Instead, it might take decades.
Structural upgrading is also desperately needed for a stronger economy. China has to manage structural transformations in its industry, consumption, trade, and growth.Since China's open door policy was launched thirty years ago, China's economy has been structured and based mainly upon domestic factors. For decades, China has been producing more but consuming less, and investing more but innovating less. That has to be changed, and the era of creative destruction is about to begin.
Take trade as an example. China's trade to GDP dependence ratio began to drop. Trade in services will inevitably have a larger role to play in future trade and economy. Although "Made in China 2025" has laid out the plan to transfer China from a world-factory nation into an intelligent manufacturing nation, it will not be easy to upgrade and optimize China's vast manufacturing capacity in the short term. On the other hand, the service sector will be speeding up to spread its influences on domestic and international markets. Financial issues in China will create substantial world-shaping effects in the global financial market.
Reshaping the relationship between businesses and the government should also be on the top of the economic agenda. On one hand, the government has a critical role to play in China's economy in order to avoid market failure. On the other hand, the government has to position itself well enough to overcome disruptions created by policy intervention. Compared to its role in the 1990s, today the Chinese government has to take on new roles, managing multi-angle and multi-level complex issues including an aging population, job creation, income disparity, environment downgrading, and financial challenges in particular.
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