—— Study on Historical Experience from Stabilizing Growth

By Jiang Yu, Department of Macroeconomic Research, DRC

Research Report No 136, 2015 (Total 4821)

Abstract:

The present economic downturn shares some characteristics with the previous five times but also differs significantly: insufficient consumption demand turned into simultaneous falling of the three major demands (i.e. consumption demand, investment demand, and export demand); adequate factor supply turned into tightened constraints on factors such as labor, resource, and technology; traditional sources for economic growth began to turn into negative forces including local governments' competition for investment expansion, advantage of low-cost labor, fragmented industrial structure, commercialized public utilities, and "excessive emphasis on material factors, and less on human ones" in public expenditures. Compared with the economic downturns since the founding of New China on different occasions, supply-demand relations have changed from one of pent-up and excessive demand and structural surplus to one of insufficient demand and surplus aggregate supply; factor constraints have changed from undercapitalization to overcapitalization and shortage of other factors. As a result, policy means should change from primary reliance on management of the supply side to more equal stress on management of the demand side. It is suggested that the government should sum up historical experience, restore overall economic balance, grasp the overarching relationship between urban and rural areas, between centralized and decentralized policy making, and between income distribution and economic growth, grasp major issues and make timely decisions, achieve a smooth transition between old and new mechanisms, foster a national cohesion with public support for coping with crisis, and make consistent efforts at theoretic innovation.