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How to win the tough battle of the structural reform

By Wen Sen (chinadaily.com.cn) Updated: 2015-12-31 13:24

How to win the tough battle of the structural reform

The supply-side reform will be led by a series of policies to improve public service, environmental protection, quality of production and further opening-up to the global economic system.[Photo/China Daily]

The just-concluded Central Economic Work Conference has laid out an economic blueprint for 2016. The most notable point of the conference is that strengthening and pushing up the structural reform will be next year's focus, which shows a crucial turn in the macroeconomic policy.

Strengthening the development logic under the "new normal"

Recently, the new economics of supply has become a hot topic in the economic theory field after undergoing comprehensive analysis and interpretation. Such research is targeted given the current situation and produces many valuable observations.

In fact, there's no absolute answer as to when to adopt more demand management or more supply management and how the government adjusts policies through balancing demand and supply under an economic cycle. It depends completely on the changes in the economic environment and on the needs of the production factor allocation.

In the past two or three decades, China's double-digit growth is because it unleashed huge development vitality by means of its second mover advantage in the catch-up and its comparative advantage in production factors. But now as China become the world's second largest economy and all kinds of production factors are deeply integrated with global economy, great changes have taken place in both national and international level.

The era of "factor dividend" has come to an end when fast economic growth was driven by low labor cost, low land cost and low capital cost. It is necessary for today's China to stride over the middle income trap and overcome the growing pains amid economic slowdown.

In order to meet the challenges in various profit games and prepare for the turning point of economic growth, we must accelerate the transformation of development mode, focus on the innovative drive, optimize configuration of resources, reshape the industrial structure and improve the total factor productivity to further release dividends of institutional reform to ensure a sustainable and healthy development of China's economy.

If we refer to China's development issue over the past three decades, as "for whom to produce". At present when China's economy is under the new normal, we must have a good planning on "what and how to produce". This is the basic logic of today's China's economy. It focuses on enhancing the structural reform on the supply side while moderately expanding aggregate demand and revitalizes the extending capital through correcting the distortion of factor allocation.

We should improve the quality and efficiency of the supply system through increasing the investment validity and expanding effective supply. We should speed up cultivating new growth engine, reform and improve the traditional comparative advantage, increase the total factor productivity and enhance the momentum for sustainable growth through improving the flexibility of the supply structure.

Therefore, the Central Economic Work Conference has stressed that, to promote the structural reform on supply side is a big innovation under the new normal, a proactive selection faced with competition on comprehensive national power after the international financial crisis and an inevitable requirement to conform to the new norm of China's economic development. It is a very crucial decision strategically made according with the times.

Realizing "five drops" and "five increases"

The year 2016 is the first year in the decisive stage to build a comprehensive well-off society. The Central Economic Work Conference has also stressed that next year will be crucial to promote structural reform.

Centering on a series of important tasks of strengthening the structural reform, the conference has made it clear on the economic blueprint in 2016, which includes steady macro policies, targeted industrial policies, flexible micro policies, effective reform policies and supportive social policies. The combination is very crucial for the implementation of coordinated policies.

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