Into a New Era—the Future Orientation of China’s Economy

Convened by the CPC Central Committee and the State Council, the top level Central Economic Work Conference is tasked to review and assess the current economic situation in China and set the economic policies for next year.

This year’s Central Economic Work Conference is the first top level meeting since the 19^th CPC National Congress. It directly determines general economic policy in the first year after the congress, and has sketched out a new blueprint for our country’s economic growth— a new era of economic development.

 New thoughts on economic development

Since the 18^th CPC National Congress, China has made historic and remarkable progress in many fields such as economic growth, economic structure, systematic reform, opening up, social livelihood, and ecological environment.

In 2017 in particular, according to the forecast of the 2018 World Economic Situation and Prospects from the UN, China’s economy has been estimated to increase 6.8%. This was the first higher annual growth rate since 2011. China contributed 30% of global economic growth as the major source of impetus and stabilizer. China now has the world’s largest middle-income population.

It was during these five years that Xi’s Thought on Socialist Economy with Chinese Characteristics for a New Era took shape. The new development concepts are at the heart of the philosophy.

This is the new thought guiding future economic development in China. In particular, we should fully implement the new development concepts, stick to the seven “insists”  and put them into practice in our economic work.

The Central Economic Work Conference made the following commitments:

We will continue to strengthen the party’s centralized and unified leadership over economic work and ensure that our economy develops in the right direction, with the adherence to the people-oriented development thoughts.

We will continue to adapt to and lead the new normal in economic development.

We insist that the market plays a decisive role and the government functions well in the allocation of resources.

We continue to adapt to the changes of major contradictions in China’s economic development and to improve macroeconomic regulations and control.

We adhere to the problem-oriented new strategies for deployment of economic development.

We adhere to the correct work strategies and methods.

Experience to date indicates that the principles entailed in Xi’s Thought on Socialist Economy with Chinese Characteristics for a New Era ensure that our economy develops in the right direction, and will also have a profound impact on China’s economic and social development and reform.

Transition from high-speed growth to high-quality development

The 19^th CPC National Congress made concluded that China’s economy has transformed from rapid growth to high-quality development. This conclusion has important repercussions, and confirms that China’s economic development has entered a new era.

The transition from high speed to high quality is a major change. Its focus is to promote economic reform in quality, efficiency, and power.

The development of a high quality economy needs the support of properly structured institutions.

At present, China does not have such a basic system, so it is necessary to speed up the formation of an index system, a policy system, a standard system, a statistical system, a performance evaluation, and a government performance evaluation to promote high-quality development, so as to create and improve the institutional environment, and to ensure steady progress in achieving high-quality development.

Policy orientation of macroeconomic regulation and control in 2018 is stable progress

Marking the 40^th anniversary of Reform and Opening up, 2018 is the kickoff year to implement the spirit of the 19^th CPC National Congress, and a critical year in achieving the First Centenary Goal and in implementing the 13th Five-Year Plan. With an overall goal of stable progress, next year’s economic work should strengthen policy coordination.

First, maintaining a positive fiscal policy while optimizing and adjusting the structure of fiscal expenditure so as to strengthen the debt management of local governments.

Secondly, prudent monetary policy should remain neutral. Holding the money supply stable, and maintaining reasonable growth in monetary credit and social financing can serve the real economy better.

Thirdly, structural policies should play a bigger role and promote high-quality development in the real economy, resource allocation, innovation, consumption, and effective investment.

Fourthly, social policies should focus on improving people’s lives, and strengthening basic public services and guarantors of basic living standards.

Fifthly, reform and opening up should be stepped up, focusing on improvement of the property rights system and the market-oriented allocation of economic factors in the domestic market, while promoting further opening to the outside world.

Three major challenges in the next three years: prevention and elimination of major risks, targeted elimination of poverty, and prevention and control of pollution

According to the 19^th CPC National Congress report, three major challenges -prevention and elimination of major risks, targeted elimination of poverty, and prevention and control of pollution – must be met by 2020 to achieve the First Centenary Goal.

 First, the key focus must be on preventing and controlling financial risks, to address current potential risks, supply-side structural reform is key to the formation of a virtuous circulation within the financial and real economy, finance and real estate, and internal financial systems.

Specifically, we need to resolutely crack down on illegal and irregular financial activities, and strengthen supervision over weak links.

Secondly, we should carry targeted poverty relief, focusing on the poorest people in the poorest areas and motivating them to escape from poverty through their own efforts.

Thirdly, we must lay a good foundation for prevention and control of pollution. The key lies in adjusting the industrial, energy, and transport structure to substantially reduce the total emission of major pollutants and to improve the overall quality of the ecological environment.

Eight key points to promote high–quality development:

Eight key points to promote high-quality development were presented at the conference:

• deepen the supply-side structural reform
• stimulate the vitality of various market players
• implement the strategy of rural rejuvenation
• implement the strategy of regional coordinated development
• promotecomprehensive opening up to the outside world
• guaranteebetter living standards
• speed up the establishment of a housing system with a variety ofsuppliers and protection channels, and the combination of renting and buying
• accelerate the construction of ecological civilization.

The results of the new strategy are as follows:

The focus of supply-side structural reform is on “breaking”, “establishing” and “reducing”, showing China’s determination to speed up the transformation from manufacturing country to manufacturing power.

New policy stimulates the vitality of the market. Building a new and clear relationship between government and enterprises, and improving and expanding the negative list management system means that the government will gradually reduce unnecessary interventions and restrictions on market players.

The strategy of rural rejuvenation improves the institutional mechanisms for the integration of urban and rural areas, with the removal of various obstacles that impede the delivery of elements to the countryside, which reflects the focus on the institutional shortages in the issues concerning countryside, agriculture, and farmers.

The strategy of regional coordinated development narrows down the disparities between regions so as to achieve the goal of equalization of basic public services, balanced infrastructure access, and generally equal living standards.

The overall strategy promotes balanced trade, actively expands imports, and reduces import tariffs on some products, which is in stark contrast to the current anti-globalization wave in some countries and Trump’s America First policy.

There are targeted policies on key social issues such as infant care and early childhood education that have drawn widespread attention, on the problems of gender discrimination and identity discrimination that are common in the employment process, and on severe problems of information fraud on the Internet and the reselling of personal information.

In the housing system, we emphasize the development of the housing rental market. We also improve the long-term mechanism to promote the steady and healthy development of the real estate market.

We emphasize the importance of ecological protection and restoration, and propose for the first time large-scale forestation to guide the investment of social capital from all parties, and to cultivate a group of enterprises specializing in ecological protection and restoration.

Xu Wenge (Ph.D. in Economics and assistant researcher in Chinese Academy of Macroeconomic Research)