Key tasks identified in transfer of China's economic growth mode

15:41, January 31, 2011      

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China officially proposed transferring its economic development mode when it drafted in 1995 the period of its 9th Five-Year-Plan on National Economy and Social Development (1996-2000); it once more proposed taking the economic development mode as the "main line" in the "11th Five-Year-Plan" period (2006-2010), the 16th Central committee of the Communist Party of China announced in its fifth plenary session in October 2005. Upon drafting the 12th Five-Year Plan (2011-2015), China again called for an "urgent" need to "speed up" transfer in the mode of growth. Apparently, the transfer of economic growth mode was not so smooth or a "plain sailing" in the past two decades or so, and why was it so?

First, the institutional barriers have still not been done away with. When the 11th Five-Year-Plan (2006-2010) was in deliberation, a series of "institutional barriers" were enumerated. For instance, the government kept its oversize disposition authority as it had done before and took achievements in GDP growth as the assessment criteria. With an income structure that relies mainly on tax increment financing (TIF) put into practice, the major disburse responsibility draws down to the excess liquidity to its usual level, so localities had no alternate but to pursue fast GDP growth. Hence, the factor prices distorted with the waste of resources encouraged. And these barriers could not be eliminated gradually.

Besides, the environment for innovation and business undertaking is yet to set up. Since the start of the reform and open-up policy started in the late 1970s, China has made great progress in its capacity for technological innovation, and a lot of its technologies have reached the advanced world level or approached the forward positions. But the commercialization and production of these inventions, nevertheless, still "hobbled along with difficulty."

The very reason behind is that the financing environment capable of encouraging innovation and business undertaking, including the economic environment, the rule-by-law environment and public poll environment, has not yet been established. A case in point to enunciate the stern reality is the outflow surge of material capital and human capital over recent years.

Only by adhering to the reform, can the institutional barriers to the transfer of economic growth mode be eradicated, and the environment be built to attract talents from both at home and overseas and spur business undertaking. So, the reform is a powerful engine to speed the economic growth and to advance the reform in each domain with a great resolve and courage, in a bid to promote reform in all realms, and adapt the superstructure to changes in the economic foundation.

Hence, we have come to see the need to advance vigorously the reform of the state-owned economy, further improve the current finance and taxation institutional reform and the monetary market, step up the basic social security reform, the reform on the scientific research and education setup, establish the complete legal system and carry out the government's own reform.

Of all these reforms, I think that the practical reform to the government itself is more essential. In my opinion, the providence of a sound system environment and comprehensive public service is its due responsibilities.

So, the government should be clear-cut that enterprises constitute the main body of technological innovations and, in the course of spurring the growth mode, the government should do something while refraining from doing some things and, hence local governments at various levels should not go into investment projects or organize direct financing, because the practice will reduce efficiency and result in "great leap forward" evil consequences.

In the meanwhile, the government should also not assign the technical routes, as each and every kind of new technical-how has its own route. The domain of private investment needs to extend. The government and state-owned companies should not compete with people's businesses for making a profit. The administrative organs should not set forth administrative permits or permits in disguised form. Furthermore, the government should also improve the way of support for high-tech industries rather than jeopardize fair competitions.

By People's Daily Online and its author is Wu Jinglian, an ace professor at the Chinese Academy of Social Sciences (CASS) and a noted researcher of the Development Research Center of the State Council.


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