Synchronization of new industrial revolution and supply-side reform
- By He Yafei
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China Today, March 22, 2016
Fifth, the social policy must provide basic public services and basic social security for the population. The well-being of the citizens is crucial for the success of the first four points.
For the period of the 13th Five-year Plan, the supply-side structural reform boils down to reducing excess real estate inventory, production capacity, tax burden and interest rates for businesses. On the other hand, it implies a better return on investment, improved supply capacity and innovation, as well as preventive measures against regional and systemic financial risks and social risks.
In the long term, the supply-side structural reform is a necessary approach to meet the trends of China's economic restructuring. Take urbanization for example: in 2014, the urbanization rate was 55 percent, a rate that will rise to 70 percent by 2030 according to estimates. This means that 200 million citizens living in the countryside will become city dwellers. If we add to this number some 250 million migrant citizens (working far from their place of residence), there are approximately 450 million people who will settle in cities within 15 years. Thus, economic restructuring, especially reform focusing on the supply, is a necessary condition for China's stable and sustainable economic development.
Following the 2008 financial crisis and thanks to reflections on conventional economic theory and demand-driven macroeconomic levers, many countries have accorded renewed attention to neo supply-side economics and supply-side managment. In a time when China is still working to acclimate itself to and navigate the "new normal" situation, it is very important to establish a mechanism of the new engine of economic growth.
At present, China is facing severe constraints on the supply side, which must be tackled through deepr reforms and innovations. The country must both respect the decisive role of market rules in allocation of resources, and manage demand and supply. Especially during the 13th Five-year Plan and the period following it, rational supply management will be a key mission of the government in its efforts to play a better role in building a socialist market economy of Chinese characteristics.
He Yafei is former deputy foreign minister and former deputy director of the Overseas Chinese Affairs Office of the State Council.
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