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Striving toward a New balance in the New Round of Transformation



By Wang Yiming, DRC

In 2016, the performance of world economy will remain sluggish. The continued decline of bulk commodity prices will further weaken the growth of resource-exporting countries. The US dollar has started a new round of appreciation, suppressing the rise of commodity prices. The global overcapacity and swift technological innovation have resulted in a weakened demand for commodities. This may lead to the reduction of income in resource-export developing countries such as countries in Latin America, the Middle East and Africa, whose structural contradictions may become more prominent. Their growth may be put to a halt, while their import may drop sharply.

In 2016, China’s foreign trade growth is unlikely to improve markedly. The Federal Reserve has taken steps to exit the quantitative easing monetary policy and raise interest rates, which will continue to be major factors affecting the global economy. A lot of capital has withdrawn from emerging economies, causing further currency devaluation and debt risks in vulnerable emerging economies and developing countries. China is affected by it both directly and indirectly. In 2016, China’s economic downward pressure will continue to be released. With increased and stabilized investment growth, the implementation of substantial measures for the reduction of overcapacity and accelerated conversion of growth momentum, China’s economic growth is expected to achieve periodic stabilization. First, with the increased investment in real estate, manufacturing and infrastructure sectors, the fixed asset investment which has an impact on China’s economic growth is expected to become stabilized. Second, substantial measures for the cut of overcapacity will be implemented. Third, the conversion of growth momentums is getting accelerated. China’s new round of reform requires to tap potential and explore new drivers through improving factor productivity, optimizing resource allocation, and promoting mass entrepreneurship and innovation.

To sum up, in 2016, China’s annual economic growth will reach over 6.5%. In the next two years, the economic growth will gradually become stabilized, showing an L-shaped growth mode. The slowdown of China’s economic growth is caused by structural and cyclical factors, but the underlying reason lies in structural problems. Currently, the main structural problem is the unmatched, unbalanced and uncoordinated supply-and-demand relations. The major contradiction is related to the supply side. Macroeconomic policy should effectively combine the proper management on the demand side and the intensified reform on the supply side. The core of a new round of transformation is to improve the quality and efficiency of economic growth, shifting from the growth of scale and rate to that of quality and efficiency. “Quality” refers to factor productivity while “efficiency” depends on the increase of factor productivity. The new round of transformation needs to realize a shift from rapid growth to efficient growth mainly in pursuit of a different growth rate, which is based on a new growth engine, and different from that of the traditional mode. A new round of transformation needs to start from multiple dimensions by deepening reforms comprehensively. First, innovation-driven strategy needs to be implemented by the government, enterprises and non-governmental sectors. Second, the reform of education system should be accelerated, and the investment in human capital should be increased. Third, efforts need to be made to transform and upgrade industries and improve their quality and performance, and the industrial value chain and added value of products should be improved to deepen the state-owned enterprise reform and the financial reform. Four, people-centered urbanization should be carried forward, and ensure that migrant workers can become urban citizens. Five, green and low-carbon development should be promoted to enhance the capacity for sustainable development. Six, China’s economy should get further integrated with global economy and promote reform, development, and innovation through opening up.

In 2015, China’s economic growth stood at 6.9%, taking the front rank among world’s major economies and being the most important export market for many economies. The slowdown of China’s economic growth has dragged down global commodity prices. China’s economic transformation and policy adjustments will lead to certain “spillover effect”. As the world’s second largest economy, China’s economic transformation will exert an impact on the world economy, thus other economies also need to adapt to this change. China and other countries in the world need to work together to create a new global situation to usher in a strong, sustainable and balanced economic growth.


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