The Central Economic Work Conference, which recently closed, released an important signal: China is determined to increase the contribution rate of consumption to economic growth during the new five-year plan starting next year, and change the growth model that has been over-reliant on investment carriages to promote the Chinese economy. The period of important strategic opportunities has achieved steady and rapid development. The Central Economic Work Conference emphasized that the key to achieving steady and rapid economic growth is to strive to expand domestic demand. "We must work hard to adjust the relationship between investment and consumption, and increase the consumption of residents, especially farmers, as the focus of expanding consumer demand, and constantly expand the consumption sector and improve the consumption environment." Experts pointed out that this means that China has placed expanding consumption in an important strategic position. Substantial progress will be made in the coming years. "The Chinese economy still has potential dangers of ups and downs during the 11th Five-Year Plan period. This has an important relationship with the current strong growth structure of investment and weak consumption. Therefore, we must seriously solve this problem." Asian Development Bank China Representative Office Senior economist Zhuang Jian said. Since 2002, China has entered a new round of economic growth, but the growth momentum mainly comes from the investment vehicles of “high investment, high consumption, high pollution and low efficiency”. As fixed asset investment has continued to grow at a rate of more than 20% over the past three years, current investment accounts for 44% of China's GDP, while consumption (GDP as a share of GDP) has fallen to 53%. The average level is 20 percentage points lower.
“Investment is an intermediate demand. Before it was built, it was demand, and when it was built, it became a supply.” Dr. Wang Xiaoguang, from the Macroeconomic Research Institute of the National Development and Reform Commission, said, “Investment may be the 'heat source' that causes China’s economy to rise. 'It is more likely to be the 'cold source' that caused the downswing." In the context of the surge in fixed asset investment, in the second half of 2003, some industries such as steel, cement, electrolytic aluminum, and real estate in China experienced overheating, resulting in coal-electric oil. The tension is tight, and the prices of production materials are rising too fast. In order to avoid the overheating of local investment and turn into full inflation, China has taken decisive measures to curb the excessive growth of fixed asset investment.
Since the beginning of this year, the Chinese economy has shown a good trend of moving from high-speed growth to stable growth. However, the investment of high growth for several consecutive years has also reached the stage where the projects have been completed and put into production. The release of production capacity has greatly enhanced the supply of electricity, electrolytic aluminum, ferroalloy and calcium carbide. Problems such as over-products, falling prices, and expanding corporate losses in coke and other industries have emerged. Wang Xiaoguang pointed out that if consumer demand cannot be effectively expanded, the situation of overcapacity will become more and more serious, and the Chinese economy may have a "great cold" in the next few years. The resulting collapse of enterprises and unemployment of workers will pose a threat to social stability. In response to this problem, the Central Economic Work Conference clearly stated that next year it will focus on expanding consumer demand and strengthening regulation of fixed asset investment. The recent executive meeting of the State Council specifically discussed the problem of overcapacity, indicating that overcapacity in some industries will be one of the major issues to be solved by macroeconomic regulation in the next few years and in the next few years.
Obviously, expanding consumer demand will become the "big part" of China's economic development. The Central Economic Work Conference put forward specific measures to expand consumption at different levels, including efforts to increase the income of urban and rural residents, gradually rationalize the relationship between income distribution, solidly promote the construction of a new socialist countryside, and insist on expanding employment in economic and social development. The location and so on. Zhuang Jian pointed out that China's urban consumption has been difficult to expand, and the rural areas with a population of 800-900 million people have huge consumption potential. The central task of the new rural construction is to develop the rural economy and promote the continuous increase of farmers' income. The government will invest heavily to strengthen infrastructure construction such as rural roads, drinking water, power grids and communications, and increase investment in social education such as rural education, culture and health. "These measures will increase farmers' spending power, improve the rural consumption environment, and stabilize farmers' consumption expectations," said Zhuang Jian. "If the consumption potential of the vast rural market becomes a reality, China will not have to worry too much about overcapacity."
The fact that China's economic growth is over-reliant on investment also reflects the fact that local governments are accustomed to taking economic growth as a political achievement, and thus “investing in projects and paving the way” by influencing investment, thus exacerbating economic volatility. To this end, the Central Economic Work Conference proposed that the main task of reform next year is to resolve deep-seated contradictions and problems in economic and social development. The first priority is to focus on transforming government functions and focus on reforming the administrative management system. Zhuang Jian pointed out that compared with investment, consumption is an important factor in maintaining stable economic growth, and it is also a sustainable growth driver that enables people to obtain benefits. In the first three quarters of this year, the gap between China's consumption and investment growth rate has shrunk by 1.3 percentage points from the previous year. If the consumption rate can continue to increase and investment growth maintains a moderate scale, the Chinese economy will be able to achieve its position during the 11th Five-Year Plan period. Expected "fast and good" growth. (Xinhua)