Deeper reform can lead to sustainable development

Although China and the United States have agreed to resume the trade talks, China should keep in mind that it needs to strengthen its economic and strategic capability to deal with external challenges.

And since promoting socialist market economy is China's key task, it is all the more important that it strengthens its sovereignty and better protects its core interests, as well as helps boost economic globalization.

Besides, in the process of becoming self-dependent, China should be ready to learn from other countries' experiences while further opening up its economy, in order to achieve the goal of improving the resource distribution mechanism.

China has become the world's second-largest economy thanks to four decades of reform and opening-up. Its per capita income reached nearly $10,000 in 2018. And it has comprehensively bolstered its national strength.

Industrialization and urbanization play key roles in China's modernization. But only its coastal regions have stepped into the middle-or late-industrialization stage, while its western and central regions are still in the early to middle stages of industrialization.

However, China's urbanization process still has great development potential. The urbanization rate in terms of household registration population is only about 43 percent of the total, although the permanent urban resident population has reached 59 percent. That's because about 300 million migrant workers don't have urban household registration, which means they still don't have access to basic urban public and social welfare services.

So China has to further boost its domestic demand in order to expedite industrialization and urbanization. Also, by more resolutely embracing economic globalization, China can improve its productivity and supply of goods and services.

In the next stage, China should release institutional dividend by deepening reform. The aim of China's supply-side structural reform is to accelerate social and economic transformation through institutional innovation. From 2010 to the first half of 2018, China's total retail sales of consumer goods registered a double-digit growth rate despite the national economic growth declining from more than 10 percent to below 7 percent a year.

It is therefore safe to say that the per capita income and national economic growth rates have played a key role in consumption upgrading.

Even in the shadow of the trade fictions with the United States in 2018, total retail sales of consumer goods grew by about 9 percent－higher than the growth rates of GDP and residents' income. In fact, domestic consumption has become the main factor boosting China's economy. China also ranks among the top economies with a complete industrial chain, which helps it to cope with external economic pressures, which was evident during the 2008 global financial crisis.

Still, China needs to further improve its business environment, as it would prompt foreign companies to place greater value on China's market potential and industrial advantages. As long as China enjoys comparative cost advantages in international competition, large-scale withdrawal of foreign enterprises from the Chinese market can be ruled out.

Despite the external uncertainties and some internal contradictions, China's economy remains resilient. And if China achieves qualitative development and greater economic efficiency by deepening reform and opening-up, it will surely achieve sustainable development.

The loopholes exposed by the trade frictions with the US indicate China has to make greater efforts for industrial upgrading and transform its production-and export-driven growth model into an innovation-and domestic consumption-led development model, which in turn will boost its industrial and technological development. The trade frictions with the US have made it even more important for China to deepen reform and opening-up in an all-round way so as to boost its economic development.

The author is head of China Academy of New Supply-Side Economics. This is an excerpt from the author's interview with CCTV. The views do not necessarily reflect those of China Daily.