The core of China's economic work in the future will be to maintain stable growth. In order to reach the goal of achieving modernization by 2035, China should secure average annual economic growth of 4.6 percent, but based on current trends, China's economic growth rate will fall below 4.6 percent within three years. Therefore, striving for long-term stable growth should be the focus of future economic work.
How can economic growth be stabilized? There is a need to return to government and market economics. The government should foster the market as well as regulate the market well while performing its functions. It should be recognized that China's economy remains relatively cold. Although there was a surge in tourism during the May Day holidays and some data is looking good, it cannot be ignored that the current consumer price index (CPI) and the producer price index (PPI) indicated a relatively cold economy.
For starters, to heat up the economy, China needs to provide a certain degree of help to consumers. The country should no longer be wedded to the old way of boosting infrastructure as there is no longer such ample room for investment in this area. New approaches should be introduced to maintain the confidence of consumers.
For instance, Shanghai recently withdrew 1 billion yuan ($144 million) from the fiscal revenue to subsidize consumers. Preliminary research found that the 1-billion-yuan subsidy can bring growth in consumption worth 4 billion yuan, and at least 30 percent of the 4 billion is tax, so in the end, the fiscal revenue will rise. This measure can help boost consumers' confidence in the short term.
Secondly, it may not be as urgent as the need for consumption stimulus, but there should be local financial restructuring. After more than a decade of infrastructure construction, local debts have grown to a high level. Excessive local debts are not sustainable. The top priority for local governments is debt restructuring. A project of local debt restructuring should be launched, with new rules and procedure for the local government debt issuance in place. Meanwhile, transferring part of the local debt to the central government could reduce the financing cost and give more space for local governments to focus on maintaining economic development and social stability.
Third, the government should cultivate new markets, including the huge carbon market. Currently, local governments are separately pushing for peak carbon dioxide emissions and achieving carbon neutrality. Nationwide coordination needs to be introduced, which requires a carbon market. As long as the government adds a little carbon tax in appropriate places, such as crude oil and coal, and gradually increases it, the market will make overall calculations by itself. If the carbon market can be launched, a large number of green investments will be profitable. Many entrepreneurs and investors will flock to this.
Last but not least, a flexible retirement mechanism should be built. It is true that China's population is declining, but considering the quality of the population, the level of education, and the level of public health, human resources are increasing, and they will basically increase until 2050. To make good use of our human resources, a flexible retirement policy is very important.
According to our calculations, if these reforms are put in place, the potential growth rate of the Chinese economy in the decade from 2020 to 2030 will be 5.9 percent, which is still relatively high. China's current low inflation shows that the economy has not yet reached its potential growth rate. In the next ten years, China's potential economic growth rate is expected to reach 4.9 percent. In order for the Chinese economy to maintain long-term growth, the government and the market must work in the same direction. While performing its function well, the government should activate the market, cultivate the market, and correct the market.
褰檽锟斤拷?