‘New nor­mal’ needs some work

Shift­ing gears prop­erly are key as econ­omy slows to mid­dle range

China Daily (Canada) - - SHANGHAI - By LI YANG in Shang­hai

“We still need to col­lect more than 200 red tapes to build a build­ing. If the ‘ap­proval econ­omy’ does not change, the ‘ new nor­mal’ is no dif­fer­ent from the ‘old nor­mal’.”

That was the com­ment from Zhang Xiao­qiang, a think-tank re­searcher, and de­liv­ered last week at a meet­ing with the theme of “new nor­mal and new fu­ture” hosted by China Cen­ter for In­ter­na­tional Eco­nomic Ex­changes in Beijing.

The “new nor­mal”, a term used by Pres­i­dent Xi Jin­ping for the first time last May while ex­plain­ing the Chi­nese econ­omy’s slow­down, has be­come one of the most im­por­tant eco­nomic terms in the coun­try after the gov­ern­ment made it a key word for the an­nual Cen­tral Eco­nomic Con­fer­ence in De­cem­ber, and, pos­si­bly, in China’s econ­omy in the years to come.

Three fea­tures of the “new nor­mal” are eco­nomic growth slows down from high-speed rise to mid­dle­and­high- speed growth; the eco­nomic struc­ture is up­graded; growth is driven more by in­no­va­tion than the in­put of pro­duc­tion fac­tors and in­vest­ment.

The com­plaint of Zhang, who found many lis­ten­ers hold­ing sim­i­lar views in the meet­ing, con­veys re­searchers’ high ex­pec­ta­tions for the “new nor­mal”. They be­lieve China has the chance to evolve from a big econ­omy to a strong econ­omy in the process of adapt­ing to the “new nor­mal”. Their shared con­cern is that the process could be thwarted by the re­sis­tance of vested in­ter­ests in re­forms, push­ing China into the “mid­dle-in­come trap”.

To some ex­tent, re­strict­ing gov­ern­ment power is a cen­tral task of the re­form to make the best of the “new nor­mal”.

The cen­tral au­thor­ity clar­i­fied var­i­ous roadmaps for the re­form last year. This year will be a cru­cial time to im­ple­ment the re­form plans, and set up the in­sti­tu­tional frame­work for a mar­ket econ­omy.

“I found a wor­ri­some ten­dency in the re­form this year that re­form is in­creas­ingly frag­men­tized, and a com­pre­hen­sive re­form plan is break­ing down into dif­fer­ent de­part­ments, who mark the bor­der of their own pow­ers, make their own re­form sched­ule,” said Peng Sen, a mem­ber with the eco­nomic and fi­nan­cial com­mis­sion of the Na­tional Peo­ple’s Congress.

He added: “Im­ple­ment­ing the ‘neg­a­tive list’ model in gov­ern­ment re­form is a timely cor­rec­tion of such depart­ment re­form. The gov­ern­ment’s power should be de­fined by laws, not in­di­vid­ual de­part­ments them­selves.”

The rule of law, in­stead of gov­ern­ment power, should serve as a fun­da­men­tal base to de­fine re­la­tions, ac­cord­ing to the re­quire­ments of a mar­ket econ­omy, among the key fac­tors char­ac­ter­iz­ing the “new nor­mal”, which in­clude, as the Cen­tral Eco­nomic Meet­ing out­lined, con­sump­tion, in­vest­ment, ex­port, pro­duc­tion ca­pac­ity, pro­duc­tion fac­tors, mar­ket com­pe­ti­tion, re­stric­tions of re­source and en­vi­ron­ment, eco­nomic risk, re­source al­lo­ca­tion and macro-con­trol.

With the rule of law as the prin­ci­ple, the gov­ern­ment will di­vert its at­ten­tion from a pre-mat­ter ap­proval au­thor­ity to a su­per­vi­sor and mar­ket watch­dog. The mar­ket should open up for all le­gal play­ers, and the com­pe­ti­tion should be on equal foot­ings and fair, ir­re­spec­tive of the play­ers’ back­grounds.

Con­sump­tion and in­no­va­tion, two en­gines for eco­nomic growth in the “new nor­mal”, come from the mar­ket econ­omy, rather than a gov­ern­ment-dom­i­nated “ap­proval econ­omy”.

The op­er­a­tion of China’s “new nor­mal” also re­quires the coun­try to fur­ther in­te­grate into the global la­bor dis­tri­bu­tion sys­tem, and value chains. China should deepen the re­forms in fi­nance and trade in light of in­ter­na­tional con­ven­tions, and take ini­tia­tives to pro­mote global gov­er­nance re­form in in­ter­na­tional fi­nance and trade realms.

China cre­ated the Shang­hai free trade zone one year ago, and three more in Tian­jin, Fu­jian and Guang­dong in De­cem­ber.

fo‘ I und a wor­ri­some ten­dency in the re­form this year that re­form is in­creas­ingly frag­men­tized, and a com­pre­hen­sive re­form plan is break­ing down into dif­fer­ent de­part­ments.” PENG SEN MEM­BER WITH THE ECO­NOMIC AND FI­NAN­CIAL COM­MIS­SION OF THE NA­TIONAL PEO­PLE’S CONGRESS

The FTZs are not only ex­per­i­men­tal fields to ex­plore new re­forms, but also im­por­tant chan­nels for China to ex­pand trade and co­op­er­a­tion with the tar­geted trade part­ners, as Tian­jin for the South Korea and Ja­pan, Fu­jian for Tai­wan, and Guang­dong for Hong Kong and Ma­cao.

The Silk Road Eco­nomic Belt and the 21st Cen­tury Mar­itime Silk Road, two projects pro­posed by Chi­nese gov­ern­ment to con­struct in­fras­truc­tures and pro­mote re­gional in­tegrity, are of strate­gic im­por­tance for China in adapt­ing to its “new nor­mal”.

Wang Shouwen, as­sis­tant min­is­ter of the Com­merce Min­istry, said in the meet­ing that China is ne­go­ti­at­ing with 65 coun­tries and re­gions along the eco­nomic belt and the mar­itime Silk Road to set up free trade ar­eas.

In brief, en­ter­ing the “new nor­mal” is like chang­ing a gear while speed­ing up in driv­ing. A failed gear change wastes fuel and low­ers the speed, or even causes the en­gine to shut down.

A proper gear change can make a bet­ter use of the fuel. Yet, it takes co­or­di­nated ac­tions of the foot push­ing the clutch, and the hand op­er­at­ing the clutch lever, and a clear judg­ment of the speed and sur­round­ing traf­fic con­di­tions. The re­silience, po­ten­tial and room for Chi­nese econ­omy, as some op­ti­mistic of­fi­cials be­lieve, are com­pa­ra­ble to the huge mo­men­tum of Chi­nese econ­omy as a big car.

But there is still only one golden time in the du­ra­tion of that mo­men­tum to change the gear. The re­form is to co­or­di­nate all th­ese things, and to do the right thing at the right time.

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