Na­tion to press ahead with sup­ply-side re­form next year

China Daily (Hong Kong) - - BUSINESS - By XIN­HUA

Sup­ply-side struc­tural re­form has been a catch­phrase in China this year, and is set to re­main a cen­tral theme of the na­tion's eco­nomic work in 2017 as it is ex­pected to in­ject vi­tal­ity into the world's sec­ond big­gest econ­omy. The re­form has wit­nessed steady progress since China’s pol­i­cy­mak­ers pro­posed it at the end of 2015 to re­solve struc­tural im­bal­ances in the econ­omy.

Thanks to sup­ply-side re­form, the Chi­nese econ­omy is end­ing 2016 on a firm footing with the coun­try look­ing like it will hit its an­nual growth tar­gets.

In the first three quar­ters, the econ­omy ex­panded 6.7 per­cent, well within the gov­ern­ment’s tar­get range of be­tween 6.5 and 7 per­cent.

Through­out the year, au­thor­i­ties have pressed ahead with five tasks: cut­ting in­dus­trial ca­pac­ity, re­duc­ing the hous­ing in­ven­tory, cut­ting lever­age, low­er­ing cor­po­rate costs and im­prov­ing weak eco­nomic links.

A large num­ber of zom­bie en­ter­prises have been shut down this year. In­dus­tries plagued by over­ca­pac­ity and lag­ging tech­nol­ogy have been urged to move up the value chain to stay com­pet­i­tive.

China has met this year’s tar­get of re­duc­ing 45 mil­lion met­ric tons of steel and 250 mil­lion met­ric tons of coal pro­duc­tion ca­pac­ity, ahead of sched­ule.

The coun­try has seen a con­tin­ued de­crease in the hous­ing in­ven­tory. By the end of Novem­ber, the in­ven­tory had fallen for nine con- per­cent sec­u­tive months.

With busi­ness tax re­placed by value-added tax, com­pa­nies are ex­pected to cut costs by over 1 tril­lion yuan ($145 bil­lion) this year.

Due to tar­geted poverty al­le­vi­a­tion mea­sures, the coun­try's poor pop­u­la­tion is fore­cast to fall by more than 10 mil­lion in 2016.

Un­sur­pris­ingly, China has also met with mul­ti­ple chal­lenges in car­ry­ing out re­form.

Un­ex­pected home price spikes in the first nine months pushed up res­i­den­tial debt and swelled as­set bub­bles. Down­siz­ing of the steel and coal sec­tors led to shrink­ing sup­ply and shored up short-term prices, which im­peded fur­ther re­form. “Zom­bie com­pa­nies” caused risks with un­em­ployed work­ers and un­re­solved debts.

De­spite the dif­fi­cul­ties, pol­i­cy­mak­ers have de­cided to stick with the re­form in 2017 in a bid to ad­dress en­trenched prob­lems and find long-term growth mo­men­tum.

China will deepen sup­ply-side struc­tural re­form next year, ex­pand­ing re­forms to more ar­eas: over­haul­ing the agri­cul­tural sup­ply­side, re­viv­ing the real econ­omy and sta­bi­liz­ing the prop­erty sec­tor, ac­cord­ing to the Cen­tral Eco­nomic Work Con­fer­ence held ear­lier this month.

the growth rate in the first three quar­ters, within the gov­ern­ment’s tar­get range of be­tween 6.5 and 7 per­cent

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