New engines will sustain growth drive

Internal, external opportunities to help the nation in consolidating momentum

China will utilize internal and external opportunities to consolidate economic growth momentum in the medium to long term, with some new engines playing a key role, Justin Yifu Lin, a policy adviser and senior economist, told China Daily in an interview.

In the next five years, China will benefit from the international market, which is part of the “external circulation” under the new development paradigm, Lin said. Products and technology arising from China’s comparative advantages and investment will find their way to overseas markets.

At the same time, China will continue to increase imports, such as natural and mineral resources from resource-rich countries, high-end equipment from advanced countries as well as some labor-intensive products from other low-and middle-income countries. In this respect, developing pilot free trade zones will reduce tariffs in certain areas, with a “negative list” indicating the available fields for foreign investment, he said.

The draft of the 14th Five-Year Plan (2021-25) and the country’s development objectives through 2035 says that China plans to further open its economy. As a member of the Standing Committee of the 13th National Committee of the Chinese People’s Political Consultative Conference, Lin was part of a special committee involved in drafting the plan.

The plan aims to promote deeper integration with the global market, which requires China to participate in various regional economic cooperation mechanisms, including the Regional Comprehensive Economic Partnership and the Belt and Road Initiative, which are “the best ways to increase China’s imports and inbound foreign direct investment as well as make Chinese products, technologies and capital accessible to the international market,” he said.

To foster more friendly investment environment domestically and overseas, China has completed the talks in principle with EU on the EU-China Comprehensive Agreement on Investment. The country is also actively promoting a free-trade agreement among China, Japan and the Republic of Korea. Meanwhile, China is willing to participate in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a trade agreement that evolved from the Trans-Pacific Partnership and covers a number of economies in the Asia-Pacific and Latin American regions. All these aspects will enable the world’s second-largest economy to enhance external circulation, said Lin.

“Under the framework of the new development paradigm, one of the priorities is to implement the signed agreements and actively promote those still under negotiation.”

Lin said it is possible to achieve the “above 6 percent” growth target this year, with possibility of the actual growth rate coming in at around 8 percent.

For China’s domestic development, in the next five years, 5G and other related infrastructure will be the key sectors to boost, said Lin. China will emphasize the coordinated development of regions, such as the Yangtze River Delta region and the Beijing-Tianjin-Hebei region.

“Encouraging investment does not contradict with boosting of consumption. On the contrary, they have a positive correlation,” Lin said. It was necessary to improve the quality and efficiency of investment, which is still a key driver of economic growth.

In the new five-year plan, China has outlined a series of projects which are under preparation. “If the economy shows signals of overheating, we can postpone the investment. Similarly, if the growth is slowing down, we can accelerate the projects to stabilize growth.”

Lin said when the economic growth faces headwinds, it would be better to increase investment in qualified infrastructure projects.

“I call it a new proactive fiscal policy framework which goes beyond the Keynesianism. Generally there are no concerns about bubbles developing during the investment process, except in some individual cases. So we need to plan well in a five-year or even longer term, to ensure there is a reservoir of good projects for investment.”

In face of sanctions that some countries impose on products from China, Lin reiterated that “the most important thing is to do our own jobs well”, and products of high quality and low price will always be competitive.

“No matter where to develop production, in which country or region, it should follow the theory of comparative advantage,” Lin said. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and achieve higher profits.

One example is that some Chinese companies are moving their production lines on their own to some places with lower labor costs. The move can also help other countries, such as those along the Belt and Road routes, to develop their domestic economies. The migration of some labor-intensive industries from China will help the destination countries to create new jobs, as well as boost their exports and investment, according to Lin.

The domestic market is expanding consistently, with internal market already accounting for about 83 percent in the dual-circulation pattern in 2019. The nation will not close its doors and will remain attractive for foreign investors and products, said Lin.