China highlights need to transform economic development mode

How the Communist Party of China (CPC) will launch a new round of economic reform has drawn close attention from the global media.


Mauritius has obtained so much investment from China that what is happening in Beijing will greatly impact the African island country, a journalist from Mauritius told The China Press.


Despite the rapid economic growth and 30-plus-year opening up, China still faces major economic problems, such as imbalanced and unsustainable development and irrational economic structure, which needs deeper reforms to deal with.


“We must shore up our confidence in deepening the reform of the economic system and accelerating the transformation of the economic development mode in an effort to strengthen our economic vitality and international competitiveness,” Hu Jintao, outgoing Chinese president and former general secretary of the Central Committee of the CPC, said in his report to the 18th CPC National Congress held between November 8 and 14 in Beijing, China.


Paramilitary policemen salute while a Chinese national flag is raised at sunrise on Tiananmen Square before the 18th National Congress of the Communist Party of China is held at the nearby Great Hall of the People in Beijing, China, Thursday, November 8, 2012. China's ruling Communist Party opened a congress November 8 to usher in a new group of younger leaders faced with the challenging tasks of righting a flagging economy and meeting public calls for better government. Photo: AP


“Two hands” to reshape economy


According to Hu’s report, the underlying issue in accelerating the reform of the economic system is how to strike a balance between the government and the market. It calls for the Chinese government to respect the market rules and improve its performance, said Hu in his report. It means that the government should comply with the market rules and moderately intervene in the market. Only a combination of the “invisible hand” of the market and the abstemious government intervention can reshape China’s economy.


Guangdong province is taking a leading step in economic reform by launching a pilot project of the administrative approval system reform. Li Chunhong, the head of the development and reform commission of Guangdong, said in a panel discussion during the 18th CPC Congress that the local government will continue to relax its grip on the administrative approval process.


Promoting private sector in China’s economy


How to define the status of the private sector in the Chinese socialist market economy is another burning question in the economic reform.


In the report, Hu said that the government would unswervingly promote and support the development of the non-state sector in China’s economy, allowing them to have equal and legal access to the market and the factors of production.


For example, private investment has been increasingly permitted in the banking industry, which has been monopolized by the state-owned banks.


“The entry of the private capital into the banking industry is not restricted by any legal barriers,” Shang Fulin, chairman of the China Banking Regulatory Commission, told a press conference, adding that the proportions of the private capital in the small- and medium-sized commercial banks and rural financial institutions have respectively reached 50 percent and 90 percent.


Zhang Ping, head of the National Development and Reform Commission, revealed that the private investment accounts for 62 percent of the total investment this year.


Three-pronged approach to economic restructuring


Hu put forward a three-pronged approach to promoting China’s economic restructuring in his report: enlarging domestic demand, developing real economy and bridging urban-rural gap.


“The economic restructuring and sustainable development should be predicated on the improvement of demand structure, the optimization of industrial structure, the coordination of regional development and the promotion of urbanization,” said Hu.


The Chinese economy has been driven by exports and investment for a long time, but the situation has changed since domestic demand became the top driving force of the economy. Statistics show that the contribution of domestic consumption to GDP growth increased to 55 percent in the first three quarters while the role of investment was 50.5 percent. The role of external demand to the economic growth decreased to -5.5 percent.


“Expanding domestic demand gives China more leeway in developing its economy,” said Zhang Ping.


Since the onset of the international financial crisis, the bubble economy has posed a big risk to the global economy. For nations, therefore, promoting the real economy is the most sustainable option.


Hu talked about the need to upgrade the real economy in his report. He said, “China must put the measures and policies in favor of the real economy in force, promote the healthy development of the strategic emerging industries and the advanced manufacturing industry, accelerate the upgrading of the traditional industries, support the modern service industry and subsidize the small and micro enterprises.”

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