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Improved structure helps China beat economic forecast in 2017

ZHANG JIE, WANG GUANGLU | 2018-02-01
(Chinese Social Sciences Today)

According to preliminary estimates, the gross domestic product (GDP) of China exceeded 80 triillion yuan in 2017, an increase of 6.9 percent at a constant price compared with last year, marking the first acceleration in annual growth pace since 2010, data from the National Bureau of Statistics (NBS) showed on Jan. 18.


 

According to preliminary estimates, the gross domestic product (GDP) of China exceeded 80 trillion yuan in 2017, an increase of 6.9 percent at a constant price compared with last year, marking the first acceleration in annual growth since 2010, data from the National Bureau of Statistics (NBS) showed on Jan. 18.


Scholars said this performance should be attributed to the improved economic structure, with new growth drivers emerging and outdated capacity fading.


According to the NBS, China’s economy “maintained the momentum of stable and sound development and exceeded expectations” in 2017. In the 2017 government work report, the official target was set at around 6.5 percent.


Chen Long, a research fellow from the Chinese Academy of Fiscal Sciences, said a breakdown of the data showed that China’s economic resilience, stability and sustainability have strengthened while new economic drivers have improved the quality of economic growth. To be specific, in the internet era, new industries, technologies and business models have enlarged the room for economic growth, Chen added.


“The highlight of 2017 major macroeconomic indicators is rising producer prices for industrial goods,” said Zhang Bin, a research fellow from the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.


Zhang said that the rebound in industrial goods prices has led to an increase in a series of macroeconomic indicators, such as corporate profits, taxes and jobs as well as a pick-up in investor confidence and economic growth. At the same time, export growth has performed better, given that monetary and financial markets remain stable while the high ratio of corporate debt to GDP has also been curbed following several years of rapid growth, Zhang noted.


Chen said supply-side structural reform has contributed greatly to better-than-expected economic performance. According to NBS data, the value added of the high-tech industry and equipment manufacturing respectively increased by 13.4 percent and 11.3 percent year on year, 6.8 and 4.7 percentage points faster than that of the industries above the designated size.


Qiu Bin, executive director of the China Society of World Economics, pointed out that the steel and coal industries have successfully met annual targets for cutting overcapacity.


China’s investment in ecological protection and improvement, water conservation and agriculture went up by 23.9 percent, 16.4 percent and 16.4 percent, respectively, over last year, outpacing growth in total investment, Qiu noted.


Going forward, Chen said that China needs to focus on the reform of fiscal policies, optimizing the allocation of state-owned economic resources, preventing risks and speeding up systemic innovation to further release economic vitality and promote high-quality economic development in the medium and long term.


First, on the basis of reducing administrative public expenditure and improving the efficiency of financing, China needs to comprehensively adjust the tax and regulatory fee system, forming a fiscal environment conducive to the development of innovative and entity enterprises.


Second, efforts should be made to speed up deleveraging in state-owned enterprises, so that it can focus on the main industry and thus enhance the core competitiveness. At the same time, the disposal of zombie enterprises and poor enterprises and deleveraging, cutting capacity, industrial restructuring should be integrated to better allocate state-owned economic resources, support emerging industries or enterprises with innovative potential, and form the new engine for economic development.


Lastly, it is important to strengthen the supervision of structural risks in private loans and local government debts to prevent systemic financial risks, Chen said. 

 

 

ZHANG JIE, WANG GUANGLU are correspondents at Chinese Social Sciences Today.

 

(edited by CHEN MIRONG)