BEIJING, Dec. 31 (Xinhua) — China’s supply-side structural reform holds the key to its structural adjustment in the short term and will solidify the bedrock for the sustainable development of its economy in the long run, overseas experts have observed.
Marking a crucial year for China to comprehensively deepen its reforms, 2015 saw the birth of its development blueprint for the next five years amid a decelerated domestic economy and an unstable global one.
At a recently concluded key economic meeting in Beijing, the Chinese government pledged to take steps to push forward a “supply-side structural reform” in 2016 and beyond to support growth through new demand and productivity.
China’s announcement of a supply-side structural reform came at a critical moment, and is considered as an innovative move to guide the world’s second-largest economy under the “New Normal” and a proactive decision to make it internationally more competitive.
NEW IDEAS, NEW MOMENTUM
The choice of supply-side structural reform indicates that China does not intend to employ traditional stimulus measures, Ulises Granados, professor of international relations at Mexico Autonomous Institute of Technology, told Xinhua.
It shows that China is seeking an innovative way to stabilize growth and adjust its economic structure with fresh ideas, thus trying to find a new path for its sustainable economic development, the scholar added.
The Japanese newspaper Nikkei said in a recent report that China’s push for a supply-side structural reform is markedly different from the massive stimulus policies used since the outbreak of the Lehman crisis that triggered the financial earthquake in the global market.
Under the “New Normal,” flooding stimulus measures would no doubt boost economic growth in the short term but not be able to increase potential growth with an ideal rate, while risking huge waste.
The International Monetary Fund said the decline of the global potential growth rate was the major contributor to the sluggish recovery of the world economy.
Figures showed that the average potential growth rate of the emerging economies between 2008 and 2014 was 6.5 percent, 2 percentage points lower than the level before the financial crisis.
As its population dividend dwindles and land resources become more scarce, China’s potential growth rate has also shrunk. However, this leaves room for a supply-side structural reform under the “New Normal” that aspires for more sound growth.
MORE EFFICIENT, BETTER GROWTH
Further shifting China’s focus on the quality instead of quantity of the economy, a supply-side structural reform attaches more importance to structural adjustment and innovation in technology and the system in a bid to make the economic structure more efficient.
The Indian newspaper Economic Times paid attention to China’s reformative move.
“As the effectiveness of boosting growth on the demand side, the government has started to reform the supply-side to make effective use of production factors, including funds, resources, skilled workers, equipment and technologies,” it quoted China Daily as saying in a recent report.
El Pais, a Spanish newspaper, noted that China is attempting to shift its growth model from one dependent on exporting low value-added products and government investment to one driven by domestic demand, innovation and the service industry.
In addition, overseas experts have observed that China’s implementation of the supply-side structural reform also serves its long-term need of sustainable development as well as avoiding the “middle-income trap.”
According to the World Bank standard, China has already become a middle-income country, but a higher ranking requires the Asian nation to register a per capita GDP higher than 12,000 U.S. dollars and escape the so-called “middle-income trap.”
Data revealed that since 1960, out of 101 countries and regions which had managed to be categorized as middle-income economies, only 13 became high-income ones later.
Those that did not reach the high-income category had failed to achieve a technological breakthrough, make economic structural adjustments or innovate their systems. However, a supply-side structural reform may be the answer.
Peter Drysdale, economist and editor at the East Asia Forum at the Australian National University, was confident about China’s progress, describing its transition as “so far so remarkably good.”
Despite the massive size of the country, “China has enjoyed a faster transition to middle income than any country before it,” he said. Enditem