Editorial: How Can China Achieve High-Quality Growth?
China’s annual Central Economic Work Conference, a key event to review the country’s economic performance and discuss new directions, ended last week. Following the Communist Party’s 19th National Congress in October, the conference reiterated the declaration that China’s economy has been transforming from high-speed to high-quality growth. The meeting also laid out plans for the country’s economic work in 2018, centering on how to achieve quality growth.
So how exactly can China make high-quality growth happen? The answer is obvious: deepening comprehensive reform and opening-up, and nurturing a new economy boosted by technology, recreation and other new drivers.
In fact, shifting to high-quality growth is more of the setting of a goal than a conclusion of what has happened. High-quality growth implies high efficiency, intensive operation, a proper economic structure, and powerful and sustainable development. It does not happen overnight, but takes perseverance and determination.
The conference last week stressed that quality growth will be the principal requirement when drafting development plans or economic policies for years to come. A number of parameters will be designed shortly to assess the quality of economic growth. As long as economic growth stays within a reasonable range, the decision-makers will be more tolerant about slowing growth than they were before. Of course, balancing speed and quality will be an arduous task, as hidden dangers, known as “black swans,” and obvious but often-neglected threats, known as “gray rhinos,” often stand in the way.
China has been exploring paths to enhance the quality of its economic development for years. More than two decades ago, the government stated in its Ninth Five-Year Plan (1996-2000) that the country would seek a shift from extensive economic growth to intensive growth. In the 21st century, “changing the economic growth mode” has been a main theme in economic policies. Quality growth is an inevitable and much-needed choice for China to step up its game.
China is ready to do so now. The country’s per capita gross domestic product (GDP) has surpassed $8,000. The country has been investing heavily in science and technology; enterprises boasting world-class technological capability have been sprouting up in China; cities featuring creativity and innovation have been taking shape. The country has been embarking on the right track to seek high-quality growth.
However, the transition has just started, while challenges remain formidable. China has been investing a higher rate of energy and resources to produce goods than many developed countries have, which has resulted in serious pollution and ecological damage. The unbalanced development has not fully met people’s need for a quality life. The latest Mastercard Caixin BBD China New Economy Index showed that new-economy industries that feature “high human resources investment, high technology investment and light capital” account for only about one-third of the entire economy, in some months even falling below 30%. It indicated that the progress in embracing the new economy is yet to be achieved.
To ensure quality growth, China has to uphold and deepen reform and opening-up, and as the Central Economic Work Conference said, the nation has to “clear out discriminating restrictions or other hidden hurdles.” The conference also urged a faster pace and intensity in structural reform, which will focus on improving the property-rights system and the role of the market in allocating resources. These plans do address the right issues, but whether the goals can be achieved depends on how the plans are carried out.
The conference has put reform of the supply chain on top of eight tasks it has laid out. To give the market a greater role, the government will try to take out ineffective supplies by phasing out “zombie enterprises” that have been hopeless money-losers for years. The government will also foster new economic drivers by helping upgrade traditional industries and boosting technological innovation. The authorities will also reform monopolistic industries like power and transportation to lower costs for other companies. If these measures are effectively carried out, China’s economy will see renewed growth momentum.
The conference also stressed that the reform in state-owned enterprises will focus on the management of “state capital” instead of the operation of state-owned enterprises. The government also emphasized the protection of property rights in order to ensure healthy growth of private enterprises. The government will also continue to improve a “negative list” for market access so that companies of different ownership can have fair competition and the country’s economy can be invigorated.
The structural upgrade of China’s economy comes along with the upgrade of development quality. It also needs a higher level of systemic reform. In recent years, services have overtaken industry to become the largest contributing sector to China’s GDP. The development of the modern service industry can enhance the efficiency of the entire economy. Compared with the era dominated by the industrial sector, the new era of an economy led by the services sector will be more sophisticated and involve more transactions between different individuals, which requires more guarantees for contract enforcement. This puts a higher requirement on the country’s standards for rule of law and governance. The new situation needs the government to change its role, making itself a limited government that aims at providing better service.
Raising economic development quality cannot be realized behind a closed door. It has to be tested in international competition. The conference vows to open the country further up to the outside world and “ease up market access to a larger scale” in a bid to speed up the process for “all-over opening-up.” It is clear that China’s determination to further open up will not waver despite geopolitical changes from outside.
2018 marks the 40th anniversary of China’s launching its transition from a rigid planned economy. Letting the market play a decisive role in market allocation and let the government better fulfill its own function is a hard-won basic principle. A market economy has intrinsic motivation to raise efficiency, and the government should work hard on creating and improving the environmental framework.
Shifting from rapid growth to quality growth is a step as well as a hurdle. To clear it, China’s economy will embrace a new space and momentum. The result depends on the effectiveness of the government reform.
- 1Two China Firms Miss $526 Million Bond Payments as Woes Grow
- 2General Motors’ Chinese Venture to Sink $4.3 Billion Into Electric Vehicles by 2024
- 3 China’s Economy Set for More Pain in 2020 as Growth Forecast to Sink Further
- 4 In Depth: Chinese Automakers Feel Winter’s Chill
- 5Overseas Deposits Pour Into Singapore’s Banks
- 1Power To The People: Pintec Serves A Booming Consumer Class
- 2Largest hotel group in Europe accepts UnionPay
- 3UnionPay mobile QuickPass debuts in Hong Kong
- 4UnionPay International launches premium catering privilege U Dining Collection
- 5UnionPay International’s U Plan has covered over 1600 stores overseas