New Trend in Economic Development

By+staff+reporter+JIAO+FENG

THE 2013 Central Economic Work Conference， an annual tone-setting economic meeting attended by top Chinese leaders， listed six major tasks for 2014： ensuring food safety， industrial restructuring， controlling debt risks， promoting coordinated development between different regions， improving peoples livelihood and deepening reform and opening-up.

The keynote for 2014 economic work will be making progress while ensuring stability， reform and innovation.

Proactive Fiscal Policy and Prudent Monetary Policy

In the face of economic downward pressure and an uncertain world economy， China will maintain its proactive fi scal policy and prudent monetary policy in 2014.

“Maintaining policy and growth will create conditions for comprehensively deepening reform. The combination of proactive fiscal policy and prudent monetary policy is the optimum pairing under the current situation， which will not only encourage investment， but also curtail new risks as far as possible，” said Zhu Baoliang， director of the Economic Forecast Department， State Information Center.

According to Zhu， following a proactive fi scal policy means continuing to implement structural tax reduction， which will promote enterprise development. In addition， it means maintaining a proper scale of deficit， increasing investment in infrastructure and social welfare， and improving peoples livelihood. Prudent monetary policy will control the risk of infl ation.

Deepening the Understanding of GDP

The conference stressed the need to fully understand the relationship between sustainable and healthy development and GDP growth， which does not simply evolve into an increase in the gross value of production. China should improve the quality of growth while avoiding side effects. With regard to the assessment of local Party and government officials， the conference emphasized strengthening education and assessment， thus minimizing improper conduct. Improvement in peoples living standards in povertystricken regions should be considered a key assessment criterion of local governments performance.

“Chinas economy has entered a critical period of transformation and upgrading that requires a deeper understanding of GDP growth， achievable by performance assessment，” said Wang Jun， deputy director of the Consultancy and Research Department， China Center for International Economic Exchanges（CCIEE）.

Wang believes that development comprises a lot more than just GDP growth； structural adjustment， improvement in peoples livelihoods， realizing social equality and justice， and protecting the environment are also development targets that can be achieved with a scientific government performance evaluation system.

Guarantee National Food Safety

Chinas grain output exceeded 600 million tons in 2013， achieving a new record of successive increases over a decade. The conference made ensuring food security the nations top priority and emphasized that China should enhance its own ability and integrate domestic resources to achieve basic selfreliance in and the absolute safety of grain supply.

“Grain quotas are of great importance to guarantee normal life and basic economic order. They are necessary in order to ensure a higher degree of selfsufficiency. Moreover， from the point of economy and technology， it is feasible for China to maintain the comparative advantage of wheat and rice production，” said Ye Xingqing， director of the Research Department of Rural Economy， Development Research Center of the State Council.

Experts believe that to guarantee food security China must protect arable land from falling below the “red line of 1.8 billion mu，” strengthen agricultural infrastructure construction， boost scientific and technological progress in agriculture， promote moderate scale management and increase related subsidies.

Two-Pronged Industrial Restructuring

The main contradiction in Chinas current economic development is no longer between gross production and speed， but in the adjustment of its internal structure. China needs to step up efforts in resolving the problem of overcapacity and implementing innovation-driven development. The conference demanded that tackling overcapacity should be unswervingly implemented without compromise and that the idea of survival of the fittest should be held fast through healthy market competition.

“To some industries， serious overcapacity is the most prominent structural problem， the main reason being that the local governments administrative power dictates industrial development. The fundamental solution is to rely on the market mechanism， which will give play to the market effect of survival of the fittest，” said Feng Fei， director of the Research Department of Industrial Economy， Development Research Center of the State Council.

The conference pointed out that the fundamental way to address the problem of overcapacity is innovation. The government should strengthen the protection of intellectual property rights and improve tax policies for enterprises to promote innovation. According to Feng， the old pulling power and comparative advantages of Chinas economy are weakening. Therefore， it is necessary to form new comparative advantages through innovation， which can ultimately upgrade China to the middle and upper reaches of industry and value chains.

Prevent and Control the Risks of Local Government Debt

To achieve steady economic growth， the country must remove risks and hidden dangers in its economic operation. In recent years， fast-growing local government debt is one such issue. The conference pointed out that China should make the control and elimination of local government debt risk a critical task of its economic work. China should both take short-term measures and build permanent systems to efficiently preclude the risk of local government debt.

According to Jia Kang， director of the Research Institute for Fiscal Science at Chinas Ministry of Finance， although current local government debt totals are generally controllable， administrators should pay close attention to risk prevention in specific areas so as to avoid exacerbation of the overall problem.

“Raising this question at present is a precaution； we dont have to panic. Most local government debts are in the area of urban construction and can be resolved by asset securitization and franchising，”said Zhu Baoliang.

Comprehensively Deepen Reform

The conference also stressed that China should incorporate reform and innovation in all aspects of economic and social development. The government must honor its word with resultsoriented actions to earn peoples trust. By focusing on the outcomes of the reforms， China should achieve big wins via the accumulation of many small victories so that the public finds tangible benefits and the whole society notices improvements in the market environment and working conditions day by day.

According to Chi Fulin， head of the China （Hainan） Reform and Development Research Institution， these announcements identify two important signs of comprehensively deepening reform： the determination to firmly push forward reform and the pragmatic style to do so. These measures will enhance public confidence in reform and build a consensus.