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Li Zuojun: China's Economy Begins with Comprehensively Deepened Reform for 2015

Jan 29,2015

The year 2015 remains a period of important strategic opportunities for the Chinese economy, with the generally positive trend of economic growth remaining unchanged. Efforts should be made to accelerate reform in administrative examination and approval, investment, pricing and franchising. Meanwhile, the way to reform should be reformed as well to integrate top-down and bottom-up reform to look for the best solutions to current problems.

China made remarkable achievements in deepening reform and structural adjustment in 2014. 2015 remains a period of important strategic opportunities for the Chinese economy, and a generally positive economic development trend has been maintained. However, it must be acknowledged that China is also faced with difficulties and challenges. The world economy faces continuous deep adjustments, The national economy might continue to slow down. Structural adjustments generate problems. Companies have difficulties in production and operation, and some economic risks have emerged. Under such circumstances, it is crucial to ensure the economy has a good start in 2015.

There are different options in this respect, including launching macroeconomic policies to stabilize economic growth, accelerating structural adjustments to transform the way of economic development, boosting emerging industries and fostering new economic growth points, promoting regional development to optimize spatial layout, solving problems concerning people's livelihood to ensure social stability and initiating major reforms to promote innovation. Each option has its own focus, but comparatively speaking, the best choice is to deepen reform in a comprehensive way.

First, this strategy helps implement the already existing work plan. It was pointed out at last year's Central Economic Work Conference that "2015 is crucial for China's comprehensively deepened reform and is the starting year for comprehensively advancing governance of the nation by rule of law". It is stressed that "reform needs to make breakthroughs and needs to be driven by innovation". "Reform should be conducted centering on major problems that impede development, and reform moves should have features aligning to the year and be favorable for long-term arrangements". Hundreds of reform tasks have been proposed at the third and fourth plenary sessions of the 18th CPC Central Committee. As many of them are still in the phase of top-level design; 2015 is a good time to start them.

Second, it helps boost market confidence. China was in a special period going through its economic transition, experiencing the growing pains of restructuring and dealing with the consequences of previous stimulus policies in 2015. As the economy enters into a new normal of slower but quality growth, the possibility cannot be ruled out that China's economic growth will further slowdown with the pressures from domestic and international economic operation. If so, some economic risks might gradually emerge. Structural adjustments might cause more problems. Companies will find it more difficult to continue their production and operation, and the government's financial revenue and expenditure pressure will mount up. All these problems will affect market confidence. If GDP growth was made a major goal, even with the possible use of major stimulus polices, after-effects would mushroom to aggravate pessimism about the market. If emphasis is put on deepening reform in an all-around way, despite economic growth currently slowing down, those in the market will feel positive about economic prospects as continuous efforts are made to push forward reform, thus helping boost market confidence.

Third, it is favorable for fulfilling all five economic tasks in 2015. To maintain stable economic growth, China will first continue its proactive financial policy and prudent monetary policy, and in the meantime promote the development of new industrialization, informatization, urbanization and agricultural modernization. The simultaneous development of those four "izations" demands deepened reform, otherwise no one can explain why their development was not simultaneous in the past. Finding and culturing new growth points depends on a flexible market, genuine innovations and wide-range policies. The three will be achieved only by means of deepened reform to play the market's decisive role, form an innovative driving force and stimulate the market's vitality.

The key to transforming agricultural development requires a long-term method that benefits agricultural development through deepened reform to improve the competitive edge of agriculture in the market and of farmers in the labor market. The focus of optimizing the layout of economic development is to boost cooperation and labor division among different regions and between rural and urban areas and improve the efficiency of resources allocation in different regions. But cooperation and labor division can't do without reform and innovation. In addition, the key to improving livelihood-related issues including basic social security, employment and education lies in improving and reforming systems, especially the systems of income distribution, welfare and social security, employment and the educational system. So it is evident that reform and innovation are crucial for China's economic performance in 2015, and some effective outcomes can be expected to start with deepened reform.

There are many difficult reform tasks in 2015. First, efforts should be made to accelerate reform in administrative examination and approval, investment, pricing, monopolistic industries, franchising, government procurement of services, capital market, private banks and overseas investment so as to boost reform in other major sectors. Second, the way of reform itself should be reformed. The top-down and bottom-up reform should be integrated. The local, grassroots and innovative spirit should be respected, while the country also needs to look for ways of reform based on problems and find the best solutions in practice. Meanwhile, emphasis should be laid on drawing up and implementing reform plans, measures and supervision.  

The author is Li Zuojun, vice-director-general of the Research Institute for Resource and Environment Policies at the Development Research Center of the State Council (DRC). The article appeared on page 9 of Economic Daily published on Jan 9, 2015.