Bal­anc­ing hand of govern­ment An ex­plicit na­tional devel­op­ment strat­egy with macroe­co­nomic reg­u­la­tion tar­gets can pro­mote health­ier mar­ket re­la­tions

China Daily (Hong Kong) - - COMMENT - XU SHAOSHI The au­thor is min­is­ter of the Na­tional Devel­op­ment and Re­form Com­mis­sion. This is an abridged ver­sion of an ar­ti­cle pub­lished in Peo­ple’s Daily.

In a move to pro­mote the healthy and sus­tain­able devel­op­ment of the na­tional econ­omy and el­e­vate China’s eco­nomic and com­pre­hen­sive na­tional strength to a new high, the Third Plenum of the 18th Cen­tral Com­mit­tee of the Com­mu­nist Party of China vowed to push for more sci­en­tific macroe­co­nomic reg­u­la­tion and ef­fec­tive gov­er­nance. Ac­cord­ing to a guide­line passed by the ses­sion, to im­prove the coun­try’s macroe­co­nomic reg­u­la­tory sys­tem, China should pay more re­spect to mar­ket rules, more rea­son­ably de­fine the bound­ary of macroe­co­nomic reg­u­la­tions and bet­ter han­dle some key re­la­tion­ships.

The re­la­tion­ship be­tween the govern­ment and the mar­ket should first be ap­pro­pri­ately han­dled. The coun­try should not just abide by mar­ket rules and give the mar­ket a de­ci­sive role in the dis­tri­bu­tion of re­sources, it should also work hard to pre­vent mar­ket dys­func­tions and make up for mar­ket short­com­ings. The key to a sound macroe­co­nomic reg­u­la­tory sys­tem is to trans­form govern­ment func­tions and re­duce its in­ter­ven­tions into mi­croe­co­nomic is­sues as much as pos­si­ble. To this end, the govern­ment should take prac­ti­cal mea­sures to del­e­gate some of its power to other play­ers and can­cel the rigid ex­am­i­na­tion and ap­proval pro­ce­dures over those eco­nomic ac­tiv­i­ties that can be more ef­fec­tively reg­u­lated by the mar­ket mech­a­nism. Ef­forts should be ac­cel­er­ated to set up a mod­ern mar­ket sys­tem in which en­ter­prises can de­cide eco­nomic ac­tiv­i­ties on their own and com­modi­ties and other fac­tors can re­al­ize free flow and ex­change on an equal foot­ing. The govern­ment should try to draft its devel­op­ment strat­egy, poli­cies and stan­dards, and strengthen their im­ple­men­ta­tion in a bid to cre­ate a stan­dard­ized mar­ket or­der and eq­ui­table com­pe­ti­tion en­vi­ron­ment, which will help strengthen over­sight and rea­son­ably guide mar­ket play­ers.

The re­la­tion­ship be­tween the cen­tral and lo­cal gov­ern­ments should also be han­dled well. Macroe­co­nomic reg­u­la­tions are aimed at not only main­tain­ing the author­ity of cen­tral govern­ment reg­u­la­tions but also giv­ing lo­cal gov­ern­ments enough space to play their own role based on dif­fer­en­ti­ated con­di­tions. Lo­cal gov­ern­ments should be em­pow­ered to fully re­al­ize their ad­van­tages and man­age all grass­roots eco­nomic and so­cial ac­tiv­i­ties.

For more sci­en­tific macroe­co­nomic reg­u­la­tion, the coun­try also needs to prop­erly han­dle the re­la­tion­ship be­tween long-term and short-term is­sues. It should try to pro­mote a gen­eral de­mand-sup­ply bal­ance through rea­son­able macroe­co­nomic reg­u­la­tions, iron out short-term eco­nomic fluc­tu­a­tions, con­trol in­fla­tion, en­sure full em­ploy­ment, defuse var­i­ous kinds of risks, and pre­vent the dras­tic rise and fall of eco­nomic devel­op­ment. The coun­try should also tar­get macro reg­u­la­tions at im­prov­ing its mid­dle- and long-term sup­ply ca­pa­bil­i­ties, rais­ing pro­duc­tion ef­fi­ciency through in­no­va­tion and in­dus­trial up­grad­ing and op­ti­miza­tion, boost­ing its eco­nomic growth po­ten­tial and im­prov­ing the qual­ity and ef­fi­ciency of na­tional eco­nomic devel­op­ment.

The coun­try also needs to han­dle the re­la­tion­ship be­tween over­all ar­range­ments and reg­u­la­tions in in­di­vid­ual fields to achieve bet­ter reg­u­la­tory ef­fects through ef­fec­tive im­ple­men­ta­tion of macroe­co­nomic poli­cies in dif­fer­ent fields. While en­sur­ing the en­force­ment of its macroe­co­nomic reg­u­la­tion poli­cies, the coun­try should also strengthen pol­icy as­sess­ment and make timely im­prove­ments and ad­just­ments based on new cir­cum­stances emerg­ing in their im­ple­men­ta­tion.

For bet­ter macroe­co­nomic reg­u­la­tions, the coun­try should first de­fine their main tasks in a sci­en­tific way. These are to main­tain a bal­ance in terms of its eco­nomic ag­gre­gate, pro­mote its eco­nomic struc­tural co­or­di­na­tion and op­ti­miza­tion of its pro­duc­tion pat­tern, re­duce cycli­cal eco­nomic fluc­tu­a­tions, pre­vent re­gional or sys­tem­atic risks, sta­bi­lize so­cial ex­pec­ta­tions, and pro­mote sus­tain­able and healthy devel­op­ment of na­tional econ­omy.

A macroe­co­nomic reg­u­la­tory sys­tem guided by the na­tional devel­op­ment strat­egy and based on the coun­try’s fi­nan­cial, fis­cal and mon­e­tary poli­cies should be put in place.

An ex­plicit na­tional devel­op­ment strat­egy with macroe­co­nomic reg­u­la­tion tar­gets re­mains the main foun­da­tion of the coun­try’s fis­cal and mon­e­tary poli­cies. The na­tional devel­op­ment lay­out should play its co­or­di­nat­ing role in the ar­range­ment of the coun­try’s pub­lic bud­gets, the use of its fi­nan­cial cap­i­tal, the devel­op­ment of land, as well as the dis­tri­bu­tion of re­sources. The coun­try should re­gard mak­ing im­prove­ments to its fis­cal and mon­e­tary poli­cies and giv­ing them a full role as the main means of na­tional macro reg­u­la­tions. Given that fis­cal poli­cies can play an im­por­tant role in pro­mot­ing eco­nomic growth, op­ti­miz­ing struc­ture and reg­u­lat­ing in­come dis­tri­bu­tion, the coun­try should try to make im­prove­ments to the im­ple­men­ta­tion of its fis­cal poli­cies. At the same time, mon­e­tary poli­cies should also be given a full part in reg­u­lat­ing the ra­tios of the coun­try’s cap­i­tal ad­e­quacy, liq­uid­ity and lever­age.

Ef­forts will be strength­ened to pro­mote co­or­di­na­tion be­tween the coun­try’s fi­nan­cial and mon­e­tary poli­cies and its in­dus­trial and pricing poli­cies to make its macro reg­u­la­tions more tar­geted and more far-sighted. De­part­ments in charge of macroe­co­nomic reg­u­la­tions should strengthen pol­icy co­or­di­na­tion among them­selves and with other de­part­ments to pre­vent these poli­cies from be­ing off­set or ex­ces­sively over­lap­ping. Mea­sures will also be made to pro­mote in­sti­tu­tion­al­iza­tion of the coun­try’s macroe­co­nomic reg­u­la­tion tar­gets and pol­i­cy­mak­ing. A demo­cratic de­ci­sion-mak­ing mech­a­nism will be set up so that pub­lic opin­ions can be heard when ma­jor poli­cies are made. At the same time, ef­forts will be ac­cel­er­ated to form an in­ter­na­tional macroe­co­nomic pol­icy par­tic­i­pa­tion and co­or­di­na­tion mech­a­nism. Such a mech­a­nism can help China keep a close watch on in­ter­na­tional eco­nomic and fi­nan­cial con­di­tions and pol­icy changes in some ma­jor coun­tries and strengthen pol­icy co­or­di­na­tion and com­mu­ni­ca­tion with them. More ac­tive par­tic­i­pa­tion in mul­ti­lat­eral eco­nomic co­op­er­a­tion can also boost China’s voice on the in­ter­na­tional arena, push for­ward the re­form of in­ter­na­tional eco­nomic gov­er­nance and pro­mote a more rea­son­able in­ter­na­tional eco­nomic or­der. It will also help cre­ate a China-fa­vor­able in­ter­na­tional en­vi­ron­ment, ex­pand its devel­op­ment space and main­tain its open­ing-up in­ter­ests.

Prac­ti­cal mea­sures will also be taken to deepen the coun­try’s in­vest­ment sys­tem to give en­ter­prises a big­ger role in in­vest­ment ac­tiv­i­ties. For the sake of the es­tab­lish­ment of a sound macro reg­u­la­tory sys­tem, China should limit its ex­am­i­na­tions and ap­provals and re­duce its in­ter­ven­tions into cor­po­rate ac­tiv­i­ties.

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