State to accelerate structural reform
Nation’s investment-boosting move set to shore up ‘weak spots’, promote both short- and long-term growth
The State Council, China’s Cabinet, vowed to deepen systematic reforms to encourage social investment and strengthen the “weak links” of the national economy, such as health, education, water conservancy projects and infrastructure. Analysts said the move will not only serve the short-term purpose of boosting growth, but contribute to middle- and longterm development.
At an executive meeting on Sept 5, the State Council decided that the country will implement systematic reforms to “shore up the weak spots” of the economy, a task that is part of the country’s structural reform agenda. In December 2015, the Central Economic Work Conference listed five major tasks facing the country, including cutting overcapacity, destocking, deleveraging, reducing corporate costs and shoring up the weak spots.
Premier Li Keqiang presided over the meeting and said that major investment projects and systematic reforms must be carried out promptly. “We should continually deepen reform, bring out systematic dividends, and release the potential of ‘shoring up the weak spots’ and expanding effective investment.”
The weak spots mainly refer to fields where China lags behind other major economies, such as access to public goods in per capita terms, the rural-urban development gap, education, health and care for the elderly. “Through systematic reforms (in such fields), the government can drive up investment and we should make more efforts to promote our work in that respect,” Li said.
“Shoring up the weak spots is one of the five major tasks of China’s structural reform and progress is relatively slow in that aspect,” said Li Zuojun, an economist at the State Council’s Development Research Center. “Therefore, the State Council has put a major emphasis on it.”
Zhong Ying, a researcher at the Chinese Academy of Social Sciences (CASS), pointed to eight major fields where China should improve: sustainable economic growth; infrastructure; people’s livelihood; coordinated rural-urban development; environmental protection; technological innovation; training of professionals and prevention of financial risks.
“We have had many bills to pay, both in industrial and social fields,” said Song Qinghui, a Shenzhen-based independent economist. “Wemustcatchupinsomefields toavoid setting pitfalls for the economy in the future.”
Song saidChina’s efforts to improve in those fields are a prerequisite for its middle- and high-rate economic growth in the long term.
The premier has paid a great deal of attention to the public-private partnerships (PPP) model in encouraging private investment, which has seen a sharp decline in growth since the start of this year. He urged relevant departments to accelerate steps in carrying out PPP-based investment cooperation between the government and private investors, and lift restrictions on investment in infrastructure as well as education, health and old-age care. Relevant investment project lists should be revised promptly, and the investment and financing system reformed to attract investors, he added.
It is a major challenge, however, to carry out systematic reforms, analysts said. “It is a challenge to lead capital into ‘weak spots’,” said Xu Hongcai, researcher of the China Center for International Economic Exchanges. “For example, in fields related to people’s livelihood, policymakers usually emphasize social benefits (instead of corporate profits), which dampens enthusiasm of private investors.”
Regarding the PPP model, it is necessary for some large infrastructure projects because the government may be financially capable of carrying out those projects independently. “However, some officials may be unfamiliar with the newmodel of investment cooperationandtherefore unwilling to adopt it,” he said. “As a result, it has often been shunned in reality.”
The National Development and Reform Commission, the country’s top economic planning body, held a meeting on Sept 9 to explore ways to implement the guideline of the State Council on deepening reform and carrying out the work to “shore up the weak spots”.
The commission said more efforts will be made in some key sectors and weak spots, such as poverty reduction, post-disaster water conservancy and other types of infrastructure, sustainable agriculture, services, fostering of new growth engines and corporate technological upgrading.
It will also launch major projects of strategic importance and better bring out the role of central government funds in leading social investment into targeted fields.
Meanwhile, the priority will be to increase private investment, and the PPP model will be adopted in key infrastructure projects to encourage private investors to increase investment.
The task of “shoring up the weak spots” should be tackled on two fronts, said Huang Qunhui, an industrial economics researcher at the CASS. China should build up information, data and network infrastructure while, in the mean time, focusing on systematic reform to, for example, encourage entrepreneurship, promote competition, and reduce the costs of transaction, he said.