By Li Wei

Research Report Vol.20 No.4, 2018

The 19th National Congress of the Communist Party of China and the Central Economic Work Conference declared that “socialism with Chinese characteristics has entered a new era, and so has China’s economy”. This important conclusion points to the basic characteristic of China’s economic development in the new era, that is, a transition from rapid growth to high-quality development.

I. High-quality Development has six Connotations

Promoting high-quality economic development is an essential requirement to adapt to the new changes in China’s development and is also a fundamental guideline for planning economic work now and in the future. With the rapid growth over the past 40 years, the problem of “unavailability” has been successfully solved, while the crux for realizing high-quality development is to solve the problem of “low quality”.

High-quality development means the supply, demand, allocation, input and output, income distribution and economic cycle are all of high quality.

To promote high-quality supply is to improve the quality of goods and services supplied. China has the world’s most complete system of industries and supporting networks, with more than 220 kinds of industrial products ranking first globally. However, many products are still in the middle or low segments of the value chain, and some key technologies are still controlled by other countries. It is necessary to improve the quality of supply so as to better meet the ever-increasing and diversified demand, and keep up with the pace of consumption upgrade.

To promote high-quality demand, we must strike a balance between supply and demand at a higher level. China now has the world’s largest middle-income group which, coupled with the continuously improving urbanization process, contributes to a huge domestic market. However, the quality of employment is not high, the residents’ income is on the low side, the supply of public services is insufficient, and residents’ spending on elderly care, medical care and education is still relatively heavy. These problems must be solved so as to release the suppressed demand and upgrade the supply side.

To realize high-quality allocation is to give full play to the decisive role of the market in allocating resources, to improve the property right system, to base the price mechanism on the market, to reduce distortion in allocation, to facilitate the shift of resources from inefficient sectors to efficient sectors, and to improve the efficiency of resource allocation.

To realize high-quality input and output is to lay more stress on quality and inner structure and reverse the decline in the real economy’s return on investment over the years. While the demographic bonus gradually recedes, the human capital bonus should be further brought into play to improve labor productivity. The intensive use of land, minerals and energy resources should be improved to enhance the sustainability of development. Finally, the total factor productivity should be improved and the economy should shift the emphasis from a mere increase in GDP to a more viable growth.

To realize high-quality distribution is to promote reasonable primary distribution and fair redistribution. In primary distribution, unreasonable pricing of land, capital and other factors should be gradually solved to promote the distribution of various factors according to market values and to promote the continuous growth of residents’ income. In the redistribution process, we should enhance the regulatory role of tax and bring into full play the role of targeted poverty alleviation and other measures in the building of the safety net. We should pay attention to the problem of huge wealth gaps, work hard to adjust taxes for high-income groups, expand the proportion of middle-income groups, and ensure the basic living standards of low-income groups, so as to improve social mobility and prevent social stratification from becoming entrenched.

To promote a high-quality economic cycle, it is necessary to open up channels for matching supply with demand, to facilitate the provision of financial services for the real economy, to fight against speculation on houses, and to gradually alleviate the three major imbalances in the economic operation, that is, between supply and demand, between finance and real economy, and between real estate and real economy, and to ensure the stable and sustainable operation of the economy.

High-quality development is a long process which requires a down-to-earth attitude and a step-by-step approach. Transition to high-quality development would not be easy. While ensuring no systemic risks would occur, we must remove long-term accumulated risks, and effectively deal with the impact of external uncertainties, thus creating favorable conditions and environment for high-quality development.

II. Eight Priorities in 2018

The year 2018 is important for creating favorable conditions for high-quality development. Overall, the economic performance in 2018 is expected to remain stable in terms of growth rate, employment, prices and economic returns. Steady economic growth at a medium-high rate will help shift the focus of the economic work to high-quality development. In 2018, policy consultation and research must focus on the following eight aspects.

(1) We should pay close attention to the global economic trend, actively promote economic globalization and new forms of regional cooperation including the “Belt and Road Initiative” and work together with other parties to build an open world economy. In the meantime, we must also follow the benchmark of international economic and trade rules, promote reform through opening up, and move quickly to foster new competitive edges in international trade and investment through reform and innovation in regulatory models and management systems. It is also necessary to strengthen the coordination and cooperation in international macro policies, actively participate in the formulation of international rules, and prevent and cope with the occurrence and spread of global risks, thus creating a stable environment for sustainable development.

(2) In 2018, how should China’s economy maintain a steady and medium-high speed growth and remain stable in terms of growth rate, employment, prices and economic returns, thus facilitating high-quality development?

(3) We face many challenges on the journey to fully build a modern socialist country. It is necessary to study how to establish a new development model under the guidance of the new vision for development so as to promote China’s high-quality development and the fulfillment of the Two Centenary Goals.

(4) How should we improve our capacity for original innovation and enhance the provision of new technologies to promote industrial upgrading and quality improvement? How should we accelerate the application of scientific and technological advances and promote further integration of science and technology with the real economy? How should we promote further integration of new technologies with the real economy and speed up the cultivation of new growth engines?

(5) The real estate market in China has exhibited periodic changes. Researchers should focus on a housing system which encourages both renting and purchasing and study how to speed up the improvement of the housing market system. Other important subjects of research would include how to promote the adjustment and optimization of the housing supply structure under the guidance of supply through multiple sources, and how to improve the housing security system that fits the Chinese situation so as to provide housing support through multiple channels.

(6) Research endeavors should also be made in the three areas of “abolishing”, “building” and “reducing”: vigorously eliminate ineffective supply; foster new growth engines, promote scientific and technological innovation and application, promote the optimization and upgrading of traditional industries, achieve greater military-civilian integration; and reduce the cost for the real economy.

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