Deepening Reform by Micro Stimulation, Cinha’s Economy Has Been Successfully Regulated

譯|張茹

Deepening Reform by Micro Stimulation, Cinha’s Economy Has Been Successfully Regulated

譯|張茹

Summary： Stabilizing growth, promoting reform, adjusting structure and improving people's livelihood are the policies pushing forward in the first half year in China, and the effects of these policies have been emerging. Since this year, China has taken directional policy control measures to cope with economic downturn. China's regional development has been speeding up, a series of major regional planning policies were introduced successively, and the regional economic structure has been further improved. It’s necessary to take into consideration that the implementation of policies and measures must both fit for the current and long-term benefit. The Government need to be alert the current micro stimulation policies go out of shape, and to avoid it change into a strong stimulus by the end.

Index Terms： reform, micro stimulation, macro stimulation, regional economic development.

Although China’s economy was facing big downward pressure in the first half year, Chinese government has not taken any strong stimulation to spur it. On July 16th, the "The Mid-term Examination” result of China’ economy has been announced, as most institutions expected, the economic growth of the first half year is7.4%, while a growth of 0.1 % slightly rebound in the second quarter reflects the economy is trending towards stabilization. Stabilizing growth, promoting reform, adjusting structure and improving people's livelihood are the policies pushing forward in the first half year in China, and the effects of these policies have been emerging. China’s measures that deal with the problems in the new and normal phases have withstood the test.

Deepening reform by decentralizing power to spur the market players’ activity.

Over the past half year, China was facing an situation that risk-interwoven both at home and aboard, while the government kept composure and steady, and strived to balance in reform and growth, thus a number of important reform and deployment has been steadily moved forward and worked well, furthermore this made a good beginning for“ comprehensively deepen reform” in China.

Chinese government has abandoned the "rigid pursue" on economic growth rate, and the annual growth target was set to "about 7.5%" -- "about" brings the outside world not only refreshing but the transformation of macrocontrol ideas under the background of economic structural reform.

The new government has always stressed to fully play the decisive role of the market in resource allocation, continue to liberalize market economy, and create a favorable market competition environment. Since the beginning of this year, a series of reform measures about simplifying governance and decentralizing power, especially the implementation of “the negative list” management mode of administrative approval and the government power list, have further curbed the government’s "idle hands" and "random hands” to enterprises. All the measures have let free the market players, spurred the market, and accelerated the development of the fair competition environment needed by all types of enterprises.

During the inspection in Hunan province in early July, Premier Li Keqiang Pointed out, the government should continue to play well “the first move” of decentralization, deepen the business registration order system reform, regulate the government's power list, and find out the negative list of market access.

In the first half of this year, 1235 ongoing items of administrative approval were made public by 60 departments of the State Council, and it’s the first time for the government to”bask” power list. Meanwhile, a number of newly registered enterprises spurted by fully implementing the registered capital system reform and lowering the threshold of enterprise legal person registration. In order to further promote startups and employment, the State Council has canceled and distributed dozens of administrative approval items not only in batches but by several times, besides partially lessened occupation qualification licensing and recognition, adjusted 36 industrial and commercial registration items from pre-approval to after-approval. On June 12th, Li Pumin, the national development andReform Commission Secretary General said, the Development and Reform Commission will be in accordance with the deployment of the State Council to cancel and decentralize a batch of administrative approval items; meanwhile the task for once again revise the investment items list that approved by the government but planned to start in the next year are asked to be finished this year in advance.

Practice proves, as long as the government let go “the hands of power” slightly, the market would show great vitality instantly. The data provided by the State Administration for Industry and Commerce display that from March to June, the number of newly registered enterprises is up to 1.2693 million, registered capital (gold) amounted to 6.54 trillion Yuan; the respective year-on-year growth rate is 66.85% and 56.9%.

The State Statistical Bureau spokesman Sheng Laiyun said, the Party Central Committee and the State Council has introduced a series of policies and measures on stabilizing growth, promoting reform, adjusting structure and benefiting people's livelihood, these policies are interrelated and multi-functioned, policies that promote reform could also stabilize growth, besides, adjust economic structure, to some extent.

Since financial reform has a domino effect, the government must walk a fine line on between system evolution and risk control. Policymakers have been keeping a pragmatic attitude to promote financial reform and improve the market price discovery abilities of interest rate and exchange rate, at the same time, guide financial resources orderly support the development of real economy. In the first half of this year, the central bank announced that RMB’s daily trading band would double to 2%. It also announced the deposit rate will be freed up in the recent one or two years, and this made a clear deadline for realizing market-oriented interest rates in China.

Let social capital especially private capital enter into some fields with natural monopoly, funded by the government and dominated by state owned enterprises in the past, which is good for expanding domestic demand, increasing supply, optimizing the investment structure, activating the vitality of enterprises and the internal impetus of economic development, besides, breaking the "the glass door" and "the swing door" that the social capital had to face before. The State Council decide to open up the market to social capital in infrastructural field such as railways, ports; the next step will be to open up the market to social capital in exploration of oil and gas, utilities, water conservancy, airport and so on. The Chinese government has also announced the first batch of investment demonstration projects list totally 80 items on 5 major areas including infrastructure, oil and gas pipelines with storage facilities and a new generation of information infrastructure that will be opened to social capital.

Take micro stimulation, directional cutting the required reserve ratio highlight the fresh thought on economic regulation.

It is crucial to match with structural reforms to maintain macro economy operates well.

One of the characteristics of the current government is, in spite of facing the economic downward pressure, there’s no strong stimulation has been taken. Take the real estate market as an example, from January to June, new floor area under construction were down 16.4% year-on-year, the national commercial housing sales area were down 6.0% year-on-year, and the national residential property sales were down 6.7% year-on-year. In the past six months, the executive meeting of the State Council that studies the deployment strategy of development neither talked anything on real estate, nor put forward strong stimulus on "rescues real estate", even if the development momentum has declined.

Since this year, China has taken directional policy control measures to cope with economic downturn. Someone named this kind of macro adjustments as "micro stimulation", and it’s obviously highlights the differences between "strong stimulation”- previous dependence on investment growth.

In fact, this kind of "micro stimulation" is the economic policy that realized on the base of interval and directional regulation conducted in last year. Interval control can be roughly described as, according to the economic potential and the actual situation, scientifically define the reasonable interval of economy, and ensure economic growth will not break the “l(fā)ower limit” of employment, at the same time, the CPI will not break the “upper limit” of anti inflation without any short-term strong stimulation. Directional control is, with "the lower limit" and "the upper limit" as the warning line, and the macroeconomic policies unchanged, take both the current and long-term situation into consideration, taking pre-regulation or micro regulation measures to stimulate the vitality of the market, increase the effective supply of public products, and support the real economy development well.

From the beginning of the second quarter, a number of micro stimulation policies and measures have been successively announced. Lian Ping, the chief economist of Traffic Bank think that according to the trend of this year's policy, the government has focused more on directional control while conducting the interval control, series of timely and appropriate steady growth policies are gradually taking effects, policies on investment, foreign trade, finance，monetary and credit are gradually influencing the market.

In the recent 3 months since April, China has introduced about 19 micro stimulation policies, there are "state 16" which is introduced for stabilizing foreign trade, expanding the scope of in replacing business taxes with a valueadded tax, twice cutting the reserve by the Central Bank, delegating the power of different departments to lower levels, and stimulating the economic activity of the market players and so on.

"The Three Rural" and the restricted access to credit for the small micro enterprises are the two weak links of China’s economic development. Targeting at these problems, the Central Bank has twice cut the required reserve ratio in April and June respectively in this year, so this is widely viewed as an effective “Micro stimulus” by totally releasing liquidity about 19 billion Yuan. Since June 16th, the People's Bank of China has cut the reserve requirement ratio by 0.5 % for commercial banks that meet both prudent operation requirement and have loaned up to a certain parentage to “The Three Rural” and small micro enterprises.

From 2011 to 2013, net imports and exports of goods and services once was regarded as one of the "troika" of the national economy, it has "negative contribution" for China's GDP growth for the last three years. In view of this situation, the document “A Number of Supporting Opinions on Steady Growth of Foreign Trade”has been published by General Office of the State Council on May 15th. In the followingtwo months, China has intensively issued policies and supporting measures related with each field and local area on stabilizing the external trade growth, which can be divided into four categories as： reducing the burden, facilitation, providing services and taking reforms. Mr. Bai Ming, the deputy director of the International Market Research at the International Trade and Economic Cooperation Academy, which is leaded by the Commerce Ministry, points out, besides the four categories, there is a more crucial one, that is the orientation of the policy measures, "It is far from enough only to promote foreign trade without optimizing the structure of itself.”

Combined with the trend of import and export of trade in the first half year, the positive effects of the above mentioned policies are gradually appearing. In the second quarter, China's import and export value is 6.5 trillion Yuan, it means in the first quarter, it fell 3.8%, but in the second quarter it rebound 1.8%. There into, in May, the year-on-year growth rate reversed 1.5% compared with in April it dropped 1.4%, the growth rate even further expanded to 5.6% in June.

To look forward, experts believe that in order to get rid of the mode of " economic growth keep slipping down -taking micro stimulation—getting a slight rebound -- and then decline once again ", macro-economic regulation reform is requested for avoiding to play "the Lower Limit Defense" every year.

Take an overlook, to construct a new chess game of the regional economy.

Since this year, from east to west, from the coast to the mainland, along the great rivers and the trunk transportation lines, focus on the main ports of the sea route, China's regional development has been speeding up, a series of major regional planning policies were introduced successively, the chessboard of the regional development is making positive and significant changes：

The regional development planning has been approved successively, such as “The Revitalization and Development Planning of the Former Central Soviet Area in GanMinYue", " The Regional Cooperation Planning of the Golden Triangle of the Yellow River in JinShanYu ", "The Planning of Ecological Economic Zone of the Dongting Lake " and so on; The government has agreed to set up the New District along the western coast in Qingdao, the main development and openingup experimental zones at Erlianhaoter in Inner Mongolia, and the Jinpu New District in Dalian etc. Besides, it is planned to further develop the strategic conception of "Silk Road Economy Belt" and "the Maritime Silk Road ", rely on the "Golden Waterway" to construct the Yangtze River economic belt, enhance the economic cooperation of Zhusanjiao region, and strengthen the economic cooperation between the Bohai Sea and Beijing Tianjin Hebei region, and so on.

The researcher of The State Council Development Research Center of Development Strategy and Regional Economy Research, Liu Yunzhong pointed out that the current regional development of China is with further deepening and refining on the four major traditional strategic basements which are the East region is leading in development, the western region is developing in large scale, the northeast region is revitalizing, the central regions is developing at high speed. The main feature of the current regional development is to put more stress on connection and penetration from the east to the mid, then to the west, and focusing on the transregional development of different provinces and different regions. From the opening aspects, it is transferring from the coast area to fully open in the whole country both in spaces and contents in order to construct a new opening-up economic system, for example, the strategic conception of “One Belt One Road”. In content, it put more emphasis on sustainable development and the organic combination of environmental protection and economic development.

Driven by the planning, the regional economic structure has been further improved, the development accelerated in the central, the Western and the northeastern regions, the infrastructure has been improved continuously, and what’s more, the imbalance of regional development is turning into a powerful driving force for China’s economic development in gradient.

“Short boards such as the regional development imbalance provide a space for the strategic transformation of China’s economy. By taking regional development promotion in our country, we have further optimized and adjusted the productivity layout, and provided driving force for stabilizing the economic growth." Minister Feng Fei, the industry and policy development of The Ministry of Industry and Information said.

China is still in a period that the regional economy is accelerating in integration, industrialization and urbanization; this provides a great leeway for economic transition. Liu Yunzhong said that the current Chinese economy is still in the pattern that the East, the mid and the west areas are developing in gradient, meanwhile the economic content is changing. On the aspect of industrial structure, the Eastern region has gradually adapt to the macro environment with rapid growing, the development of innovative industry and service industry is speeding up, meanwhile, the industrial structure has been optimized, a new growth motivation has been gradually formed, and the traditional manufacture industry is transiting more rapidly in the central and western regions; On the aspect of urbanization process, the Central and the Western regions are the main area where China’ urbanization is accelerating, and with the liberalization of the household registration system, the cross regional population flow will turn to a plurality of economic growth pole rather than flow to the Southeastern coast massively in the past.

If the regional development goes on well, the period of China’s economic strategic golden period will last longer. At present, the eastern region of China is gradually getting more advantages, in contrast, the Central and the Western regions urgently getting more to make substantive progress on upgrading the quality and efficiency of economic development.

“On the process of strengthening the guidance of regional development planning and policies, China should focus on the system reform to eliminate the systems and mechanisms that hinder the coordinated regional economydevelopment. By taking institutional reform and constantly release the structural productive forces by reform and innovation,we could make a solid foundation for achieving a coordinated regional development pattern which is more efficiency, more fair and more sustainable " Feng Fei said.

11 province explicitly issued document for steading economic growth to avoid micro stimulation change into strong stimulation.

By the early July, the reporter of "Economic Reference News", sorted out that totally 11 provinces (areas, cities) expressly announced measures to steady economic growth, 7 of them was introduced within the recent one month. The additional investment has become an important way to steady local growth; and many provinces have launched some large-scale plans. Analysts believe, along with different provinces has issued documents intensively on expanding investment, it may appear again that provinces cluster to implement projects in the third quarter.

Expert warns, too much investment projects would not only increase the debt of provincial government, intensify the financial risk, but also squeeze the fund of industry, thereby, nudge up the interest rate of market. It’s necessary to take into consideration that the implementation of policies and measures both fit for the current and long-term benefit. We need to be alert the current micro stimulation policies go out of shape, and to avoid it change into a strong stimulus by the end.

Shen Jianguang, the chief Asia economist at Mizuho Securities said, since currently GDP is a key standard to judge political achievement of local officials, the motive to steady growth do exist in local government. The challenge facing by local governments is to find out financial support when bank loans and shadow banks are under control.

Deputy Director of China's National Economic Research Institute of the China Reform Foundation Wang Xiaolu, said, at present, under the circumstance of transforming the government functions, different levels of government has made lots of changes on political achievement evaluation system, many local government newly added some evaluation index on investment, urbanization and employment, however most of them are still related with GDP. Therefore, the local government has not changed much essentially on incentive mechanism.

Against this background, some provinces’planes will probably beyond their own abilities, so it’s possible that the phenomena of “Asking Ministries for Projects Fund” will reappear.

For example, Hebei Province has put forward“Some Opinions on Increasing Investment in Major Fields ", this year, the province plan to invest about 121 billion Yuan in constructing traffic facilities, energy projects, urban infrastructure, ecological restoration projects, key industries projects, the construction of affordable housing and shantytowns reconstruction, the province is taking effort to prevent the investment growth turning down, and working on the province's economy rebound. In the first quarter of this year, the economic growth rate of Hebei province is 4.2%, which is less than half of the same period last year, and the investment scale is equivalent to 42% of its GDP in 2013. The document also shows that more infrastructures in cities, especially in urban areas will be build and investment on this field are expected to be 45 billion Yuan. However, data shows that the investment on fixed assets is only about 27 billion Yuan totally in 2012; traffic and public facilities and other fields are included.

Statistics shows that at present, the planning investment of every province is up to 10 trillion Yuan. The deputy director of national economic accounting and economic growth research center at Peking university Cai zhizhou remind that in consideration of the prominent issues currently affecting the economic performance, policies and measures have to balance both current and long-term benefit during the process of implementation, at the same time, it need to watch out the current micro stimulation policies slide out of shape, and avoid it change into strong stimulus eventually.

If provinces cluster to implement projects, the most prominent harm is the debt of local government may increase and this would lead to greater financial risks. Take an example, by the end of June 2013; the debt of Chinese local governments has increased to 10.89 trillion Yuan. Another prominent harm is financing will get much more difficult in the other industry. Jiang Chao, the Chief Analyst of Macro Bonds at Haitong Securities said, under the background of stabilizing total credit and the contracting the shadow banking, the more capital taken by steady growth policies, there will be more difficulties for the real estate, the traditional manufacturing and some service industry to secure funding. The funding cost would maintain elevated because of the crowding out effect.

China’s economy is still facing downward pressure, in the second half year and the further longtime; China will continue to focus on reform and structural adjustment and solving the fundamental problems by changing the backward system and the unfair interest distribution paten. Meanwhile, it is needed to keep good balance of “Deepening Reform” and “Micro Stimulation", make the economy operation goes on in a reasonable interval, and make policies play stocking effect and build up stable foundation of economic development. (This article is integrated with reports from www.News.cn、www. chinanews.com、http：//gmw.cn and www. jjckb.com.)

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