State to ac­cel­er­ate struc­tural re­form

Na­tion’s in­vest­ment-boost­ing move set to shore up ‘weak spots’, pro­mote both short- and long-term growth

China Daily (USA) - - POLICY REVIEW - By XIN ZHIMING xinzhim­ing@chi­

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.

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