Synchronization of new industrial revolution and supply-side reform
- By He Yafei
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China Today, March 22, 2016
The third concerns the relationship between the government and the public. Along with the blurring of boundaries between the physical, biological, and digital worlds as well as increasing interactions between them, the social governance, the interactions between the public and government, the formulation and implementation of policies and the reactions of society have become "flattening."
It is not by chance that China raised the issue of modernizing the national governance capacity and system. The current system of public policy and political decision-making, established before the onset of the new industrial revolution, is too heavy to operate efficiently. The information sharing system is incomplete. In particular, the supervisory and regulatory systems have not adapted to the sudden economic changes, and are slow in response. The recent measures taken by the Chinese government to stanch the stock market have illustrated these limits.
The new industrial revolution is changing the lifestyles and careers of citizens through green commuting, low-carbon consumption, new channels of providing medical services, mass entrepreneurship and innovation, as well as social networking.
Are these new technologies harmful to normal human relations? With the dominance of the smart phone, the question arises as to the gradual disappearance of face-to-face exchange, which many worry will cause social problems. With the new industrial revolution, the Chinese economy is facing a restructuring and transformation. It must be based on a new concept of development, and adapt and guide the "new normal" situation to promote sustainable economic development in the long term.
Accelerate Supply-side Reform under the New Normal
What is the relationship between the new normal and the supply-side structural reform? And what is the latter about?
Chinese GDP growth and economic development have reached a plateau; to improve, the pace, structures, and engine of the economy have to be adjusted. This situation is called the "new normal." The supply-side structural reform entails providing means to release and develop productive forces, pushing forward the restructuring through reform, reducing superfluous productions and low value added, increasing medium and high value added production, and better adapting supply to fluctuations in demand; in a word, to increase the total factor productivity.
Studies show that long-term economic growth is determined by the potential growth rate. This potential is defined as the maximum growth rate for an optimal allocation of resources i.e., the maximum level of productivity for labor, capital, and technology available. The real GDP growth hovers around its potential level.
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