Making the cake bigger must be focus of reforms

Editor's note: In a recent interview with the Xiakedao, a WeChat account of People's Daily Overseas Edition, Zheng Yongnian, a researcher in East Asia studies at the National University of Singapore, points out that China has no choice but to press ahead with reform. The following are experts of Zheng's points of view on the topic:

In China, some people joke that houses are for speculation, and the stock market is for living in. Although it is absurd, it does point to the close connection of the stock and housing markets. About 30 percent of China's population is considered middle-income. But most of their wealth exists in forms of houses.

An important reason that the Chinese stock market remains weak is that the people lack confidence in the future, so they don't want to invest in the real economy. Since 2008, houses have proved to be the most reliable hard currency in the country helping common citizens to minimize inflation's attenuating effects on their wealth.

The low profitability of the private sector－it is even lower than bank deposit interest rate in some industries－is another reason making the investors hesitant. The State-owned enterprises monopolize too much market space which should have been a stage for market competition among private companies, which naturally forces capital to flow elsewhere.

The fall of private companies directly reduces the government's tax revenue, which affects its investment in the SOEs and public services.

This is a vicious cycle, and reform is the only solution to break it and stabilize the economic growth within a rational range.

China is still in a stage when it must focus on making the cake bigger, instead of how to divide it fairly. Even if the economy can maintain its current growth rate, China's per capita GDP will still be markedly below even its neighbors, such as the Republic of Korea and Singapore, by 2035.

In the process of catching up, Beijing should always keep a balance between improving its public services and boosting the economic growth through playing up the government's role in the former and the market's role in the latter－it is the other way round at present.

It is more difficult and slower for a developing country to increase its per capita income above the threshold of developed economies, but it is very easy and fast for the economy of even a developed country to fall into recession. The foremost challenge does not arise from the outside but from some long-term internal problems.

Deepening reform should no longer be a slogan but incur concrete actions－most of which will be painful to vested interests－to fill people, particularly the talents who can make the cake bigger, with confidence about the future. If emigration becomes a popular choice among the cake makers, China will only repeat its old path in a new era.