‘New normal’ needs some work
Shifting gears properly are key as economy slows to middle range
“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.