Focus on the “Supply-side”, and Develop “New Economy”
Nowadays, the structural differentiation of Chinese economy is getting clearer. In order to adapt to the change, there is an urgent need to improve supply- side environment through supply-side reform, optimize supply- side mechanism, motivate microeconomic units and add new driving forces to sustain a long and steady ecnomic development in China. Therefore, “supply side reform” and the development of “new economy” are major topics of the NPC and CPPCC this year.
Sounded the horn of supply side reform
“Supply side structural reforms”, a word was enlisted into China’s political discourse a few months ago, but it was mentioned five times in this year’s government work reports at NPC & CPPCC. It means the supply side structural reform is not only a hot topic under “discussion”, but a sign for compresive implementation.
According to the reports, “to solve acute problems in key areas, we must work faster to remove institutional obstacles and carry out supply- side structural reform to improve the quality and efficiency of the supply system, and further stimulate market vitality and the creativity of society”.
Moving from the three driving forces of investment, consumption and export, to “supply side structural reform”, this change delivered a clear signal: China’s making a major transformation in macro-control ideas, meaning transfering regulation and control on demand side to supply side.
Liu Yingjie, director-general of Information Department of the State Council Research Office, and member of the government work report drafting group, said, boosting the supply side structural reform needs not only subtraction but also addition.
“The ‘three cuts, one reduction, and one strengthening’ is a whole. ‘ Three Cuts’, refer to cut overcapacity, cut excess inventory and deleverage, and these are of subtraction; ‘one reduction’ refers to reduce costs and improve the profits, and it involves both subtraction and addition; ‘one strengtheing’ is of addition, meaning strengthening the points of weakness and increasing the supply, including both market supply and especially the institutional supply. Talking of the supply side structural reform, Prime Minister Li Keqiang mentioned three tasks, namely streamlining administration and delegating more powers, stimulating business startups and innovations by the general public, reducing taxes and fees for enterprises. All the three are of the supply side structural reform, and innovation in institutional supply, too, aiming at invigorating the market and the creativity of society,” he said.
Liu Yingjie mentioned, it had to follow the following three principles at least to follow the idea of structural reforms. First, emphasis on the supply while focus on the demand. In other words, it does not mean carrying out the supply side structural reform has to give up expanding the demand. In market economy, supply and demand are like two sides of a coin, interdependent and indivisible. Demand relies on the supply to meet, and the supply has to meet the demand. Second, strengthen the supply side structural reform. Third, develop the potential of domestic demand.
Chief economic manager at China International Center for Economic and Technical Exchange (CICETE), Chen Wenling, considered the structure was the key to the supply side reform. Overcapacity removing does not mean simply shutting down all the production capacity, but removing outdated capacity while keeping and protecting these high- quality ones. She pointed out that, now there are four kinds of capacities needed to be removed: absolutely excess capacity in both international and domestic market, the inefficient steel capacity constructed under blinded administrative orders, the capacity with high pollution and high energy consumption, and the illegal or
As to the manufacturing industry, this transformation of idea is not only industrial upgrade and opportunities for leapfrog development, but also the toughest challenge.
Li Jie, executive vice prisident of foreign affairs and public policy department of Daimler Greater China Ltd. ( DGRC), told China’s Foreign Trade, “Enterprises have to take part in the supply side reform, and the market mechanism must play a core role in the allocation of resources. This is the core of the supply side reform.”
Board chairman of Tang West Market Group, Lv Jianzhong also believes that enterprises are of an important force promoting the supply side structural reform. “I am very optimistic about the future of service industry and service trade,” he said.
Develop new economy with full power
It was the first time for “new economy” to appear in this year’s government work report.
Premier Li Keqiang said bluntly, developing “new economy” is to cultivate new driving forces, in order to promote the transformation of Chinese economy. “Small and micro businesses could benefit from the development of ‘new economy’, and larger enterprises would play better,” he said.
“New economy” covers a great lot of fields, and involves the primary, the secondary and the tertiary industry, namely not only those emerging sectors as Internet plus, cloud computing, e - c omme rc e and s o on of the tertiary industry, but also intelligent manufacturing and mass customization of the primary industry. Besides, it also includes familiy farm and shareholding cooperative system of the primary industry that can promote moderate scale management, integrated development of three industries and so on.
In fact, boosting the development of new economy has been a focus for years, such as “made in China 2025”, “encouraging business startups and innovations by the general public” and “Internet plus” and so on. It needs to say that the new economy and the new driving forces have a performance exceeding our expectations. Last year, in the context of slower economic growth, China had a stable employment, resident income and price level, creating more than 13 million new urban jobs. In face of weak global economy and prominent domestic problems, China’s economy operated within an appropriate range, becoming a highlight among the world. From a certain point of view, “new economy” played an important role.
Especially now, new economy will continue to bring more new opportunities, since the global information technology revolution speeds up, and the application of information technology represented by Internet is getting wider and wider. New economic forms of Internet plus has emerged, and will become important forces for economic growth. The number of netizens in China reaches 600 million, and it is still growing fast, so that opportunities for new business represented by Internet plus will boom in the foreseeable future, and it will certainly promote China’s economic development to new era, more innovative and more efficient.
Li Keqiang said: “It is natural that conventional driving forces will weaken when economy reach a certain stage of development. Experiences of many countries have proved it, especially those of developed countries. There are many examples. When it happens, we need find new forces, to inspire the industrial revelotion. Besides, integrating the new economy, and making transformation and upgrade of the conventional can make mixed driving forces. New forces are of great significance. For example, now we need to cut the excess capacity, which involves heavy chemical industry. Many such enterprises have a great number of employees, and shutting down outdated plants will result in surplus stuff. Meanwhile, when new driving forces get stronger, more jobs will be created, helping overcapacity cutting in turn.”
For some cities, it is not necessary to follow old rules to develop new industries. New technologies, new industries and new formats, all these will add new engines for China’s economy, and provide new momentum for the new economy.
Surprisingly, Yinchuan in western China now has become a world famous city for “E-sports”. World Cyber Games, the highest level e-sport competition, are held here. Fans can watch games and check the ranking every day, every month. The average daily online view reaches 82 million person times. Thanks to this new feature, Yinchuan is seeking for the deployment of new “Internet plus” industry cluster.
Coincidentally, the total import and export volume of Chongqing increased by more than 5 times during the 12th Five-year period, and actual inflow of foreign investment topped 10 billion US dollars for the fifth consecutive year. 262 of the world’s top 500 enterprises have offices in Chongqing. The main contributor may be the export-oriented industrial cluster of laptop computer, core electronic components, general aviation and aerospace engines, etc. According to Tang Zongwei, deputy director of Administrative Committee of Liangjiang New Area, all of the top 5 computer manufacturers in the world have set up plants in Chongqing, as they are attracted by the industrial cluster. Beside, 80% of the spare parts are localized.
“Developing new driving forces are especially important for these places with a relatively weak economy, or undergoing economic reconstruction,” Liu Yingjie said, taking Northeast China as an example, “We all pay close attention to the economic development in the Northeast. At present, the revitalization of the old industrial base in the Northeast faces challenges, as there may be less new driving forces here compared to the South. But we believe there are new sources of economic growth.”
It was the first time for “new economy” to appear in this year’s government work report.