Xinhua Insight: China economy firm on structural reform

The world is waiting anxiously as China's growth target for this year and the 2016-2020 period is set to be announced at the opening of the national legislature's annual session in Beijing on Saturday.

China's slowing economy has caused many outsiders to worry. Among them was rating agency Moody's, which cut its outlook on China's sovereign bonds from "stable" to "negative" on Thursday.

While admitting the world's second largest economy is facing mounting difficulties, policymakers and lawmakers insist that the ongoing structural reform should not be distracted, calling for continuous confidence in China's economy.

"The challenge level is similar to what we had during the 2008 global financial crisis," said Xiang Dong, an official with the State Council's policy research office who took part in drafting the government work report this year.

"We must take a firm stand on structural reform and industrial upgrading. Once we make it through, China's economy will open a new chapter," he said.

SOLID FOUNDATIONS

In 2015, China's economy grew 6.9 percent, the lowest in 25 years, but its economic volume topped 10 trillion U.S. dollars for a second year. China and the United States are the only two economies overstepping the threshold.

Economies with more than 2 trillion U.S. dollars in volume usually see a growth rate below 5 percent. The larger the size of an economy, the more significant its growth rate matters to the global economy.

Unlike in previous years, when investment was a major contributor to growth, consumption accounted for 66.4 percent and investment only 10 percent last year.

It marked a "revolutionary transition," Xiang said, noting the 8.9 percent growth in per capita disposable income last year was another upward signal.

In addition to annual data, Fang Weifeng, director of the provincial development and reform commission in northwest China's Shaanxi Province and deputy to the National People's Congress (NPC), pointed out five "ground bases" for China's economy: economic volume, technology strength, vigorous private sector, human resources, and government macro management.

Take human resources as an example. China has 900 million laborers, 150 million of whom hold college degrees or above.

"We have gone through many difficulties since the reform and opening up. This time the problem is more systematic and we just need more time to work on it," Fang said.

SUPPLY-SIDE REFORM

Several lawmakers agree that China must carry forward the supply-side reform.

In Fang's opinion, the central government's diagnosis on the economy is "precise" and China needs the supply-side reform to tackle the "crux of the problem."

Sun Pishu, another NPC deputy and CEO of Inspur Group Co. Ltd., a Chinese information technology giant headquartered in Shandong Province, echoed the view.

"On one hand, global demand for cheap made-in-China products is declining; on the other, local consumers can afford higher-quality, better-designed products from developed countries. It leaves local manufacturers no choice but to reform or die," he said.

Chinese travelers spent 1.2 trillion yuan overseas on their credit cards last year. About six million Chinese went abroad during the week-long Spring Festival holiday.

Xiang Dong, with the State Council, recalled buying a pair of scissors from Switzerland about 20 years ago. "I still use them," he said.

Earlier media reports on Chinese bringing back toilet covers from Japan, which were in fact manufactured in east China's Zhejiang Province for export, also highlighted the trust issues that the current supply-side reform intends to resolve.

FIVE-YEAR ROADMAP

On Saturday, nearly 3,000 lawmakers will review the draft of China's 13th five-year national development plan. The world wonders what China's economic priorities are for 2016-2020, and how China may achieve its first centenary goal of building a moderately prosperous society.

The draft is not available yet, but there is little doubt that China will pursue an innovation-driven and green economy, while a slower growth rate is only normal for a strong-minded nation in the process of upgrading itself.

The economy is still resilient, giving policymakers a certain amount of leeway. China will continue with a proactive fiscal policy and prudent monetary policy. In extreme market emergencies, swift actions will be taken.

The next five years will be critical, Xiang said, adding that China must stay focused and disregard outside "noises".

"We already know what the right path is, so why not keep going?" he said. Endi