By Wang Yiming, DRC

2017-8-23

To pursue economic development with a broad view of logic under the new normal is the basic principle for us to follow for the sound operation of the economic work both for now and the future, which is of great significance for consolidating the fundamentals of long-term prosperous economic development and promoting the upgrading of China's economy to a higher level with more optimized division of labor and a more reasonable structure.

In general, China's positive economic fundamentals and long-term trajectory remain unchanged under the new normal of economic development. After China's economy entered a state of new normal, the most obvious change is reflected in the change of pace in economic growth, but in nature this is a transformation of economic restructuring and a shift of development mode, which have brought about strategic opportunities for China's economy to develop into a more advanced stage. First, the positive trend of economic development has become more obvious. Since the entry into the new normal, profound adjustments have taken place in the relationship between major economic variables of the economy, and the pressure of economic downturn performance has been on the rise. Economic downturn is not only a challenge, but also a major opportunity to force the transfer of development mode and structure adjustment. Through years of unremitting efforts to promote the strategic adjustment of the economic structure, from the second half of last year, many positive changes have occurred in China's economic operation. In the first half of this year, China had witnessed a sound, stable and enhanced economic performance, which has not only boosted the world’s confidence, but also provided more manoeuvre room for China to deepen reform and achieve various macroeconomic policy objectives. Second, the structural adjustment has improved the quality and efficiency. To observe the situation and pursue development with a broad view of logic under the new normal, we cannot just cast our eyes over growth rate, but also pay attention to economic structure changes and quality improvement. These positive changes in the optimization of economic structure adjustment and the improvement of quality show that if we maintain strategic resolve and strive to turn the downward pressure into drivers for structure adjustment, we could enable the economic development to reach a new level. Third, we need to promote economic development to reach a new level and work hard for a better-quality and more efficient and upgraded economy. To pursue development with a broad view of logic under the new normal, we need to adhere to dialectics and see things as being made up of two aspects. We need to take into account both achievements and difficulties. Moreover, we should be confident, face up to the challenges and blaze a new path of development.

The economic development under the new normal needs to take the supply-side structural reform as a leading guide. The outstanding contradictions and problems facing China's economic operation is affected by periodic and aggregate factors, but the root cause lies in the poor economic circulation caused by the major structural imbalance. We need to find a solution from the supply side and the structural reform to achieve a new dynamic equilibrium between supply and demand. We must shift the focus of our economic work from the demand side to the supply side and find a solution from the structural reform. It is an inevitable choice for us to launch the supply-side structural reform when China's economic development entered a state of new normal and this is our strategic guideline to deal with macroeconomic management under the new normal. First, the supply-side structural reform has led to a stable economic growth. Since last year, the excess production capacity has been further addressed, deleveraging has obtained initial results, the efforts made to reduce costs are gaining momentum, and the weak links have been shored up in a more targeted manner. The supply-side structural reform has effectively improved the relations between supply and demand, sped up market clearing, played an important role in increasing profits for industrial enterprises and led to a stable economic development. Second, the supply-side structural reform has propelled the realization of a new economic equilibrium. At present, various contradictions and problems relating to China's economic operation give expression to different forms, but the root cause rests on major structural imbalance, mainly including the structural supply-demand imbalances in the real economy, the imbalance between finance and real economy and the imbalance between real estate and real economy. In order to effectively cope with the major structural imbalance of the economy, the supply-side structural reform has been advanced in more areas with enriched potential. Third, the fundamental approach toward supply-side structural reform is to deepen reform. The ultimate goal for supply-side structural reform is to meet the demand, with the focus laid on improving the quality of supply through further reform. To deepen the supply-side structural reform, the most basic measure is to strengthen the market’s capacity in allocating resources, ensure that the market could play a decisive role in resource allocation, and flesh out the institutional mechanism to enable the government to play its due role. At present, the most urgent task for us is to speed up the establishment of an exit mechanism for those ill-fared enterprises to withdraw from the market, accelerate the formation of industrial upgrading mechanism and flesh out the innovation and incentive mechanism.

We need to follow the master thinking of seeking progress while maintaining stability and pursue a long-term and sound development of China's economy. Seeking progress while maintaining stability reflects the practical and realistic way of thinking and the scientific attitude of observing the laws of the economy. Historical experience shows that rushing for success and disregarding reality often lead to ineffective results. Only by firmly seeking progress while maintaining stability can we better adapt to the new normal and enhance economic development, promote the constant advance of the supply-side structural reform and the long-term stable development of China's economy. We need to keep a stable environment for macroeconomic operation, give first priority to the prevention and control of financial risks, pay more attention to stable market performance and properly guide market expectations.