China Deepens Strategy of Domestic Demand Expansion in the Course of Reform and Opening-up

Promote economic and social development in a steady and coordinated manner

The year 2012 is significant for China's development. To better implement the principle of making steady progress, we should maintain steady and rapid economic growth, stabilize overall price level and press ahead with transforming patterns, promoting reform and improving people's wellbeing. To achieve these goals, we should accelerate the transformation of economic growth modes in all linked aspects and all areas of economic and social development. When boosting economic growth, we must pay attention to social construction and strike a balance between economic and social advancements.

Improving social construction is also conducive to boosting domestic demand and optimizing development, and will, in addition, help improve the quality and standard of people's lives. We should separate basic and the non-basic issues in a sensible manner. Generally speaking, the public service system we are about to improve can be divided into two categories: basic and non-basic public services. According to China's specific conditions, the first category includes public employment services, basic old-age care, compulsory education, basic medical care, low-income housing, public culture programs, basic environmental protection and public security. These services aim to safeguard the basic subsistence and development demands of citizens, especially those on low incomes. Possessing a salient non-profit feature, these services constitute the most fundamental and important part of public services. The government is duty-bound to carry out work in this field. By comparison, the second category includes services which aim to meet citizens' diversified demands for development. The market can satisfy most demands of most people. At the same time, we can also work to satisfy their demands by utilizing social forces and supporting and guiding mutual support mechanisms. This will create more scopes for nongovernmental investment, utilize market mechanisms to accelerate social development, promote social harmony and help the government put more energy and financial clout into safeguarding people's basic demands. However, we should be mindful of the fact that there is no fixed division between basic and non-basic issues. We should sensibly expand the coverage and improve the standard of basic public services in line with both national economic growth and government financial means.

To improve social construction, we should ensure balance in the relationship between public welfare programs and social service industries. These include programs under government control such as compulsory education, public medical care, public culture and public sports, as well as services provided by the market, such as training, non-basic health care, the culture industry and physical recreation. These programs and services have many advantages. Being energy efficient and environmentally friendly, they can create numerous jobs and have great market demand and potential. It is clear, therefore, that the development of these programs and industries holds great promise. In order to coordinate economic development and social construction, we should maintain the non-profit nature of public welfare programs; promote the commercialization and industrialization of social service industries and work hard to cultivate new contributors to economic growth. Take medical and health care as an example. It is a large industry and should develop so as to become an important part of China's tertiary sector. According to World Bank statistics, the spending on health care in some developed countries accounted for more than 10 percent of the national GDP. In the US, the figure was as high as 17.6 percent. In some developing countries, it ranged between 6 percent and 8 percent. However, in China it was below 5 percent. If we can integrate this industry with other services such as old-age care, health improvement, disabled services and household management, we can begin to unleash its full potential.

To enhance social construction, we focus on addressing problems related to people's immediate interests. For example, price is closely related to people's lives, so we should balance price reform and price stabilization. Before formulating price policies and reform plans, we should carefully consider all factors concerned. We should take into account people's capacity to adapt to price change, seize every opportunity open to us, and ensure that progress is steady, but not rushed. We must also guarantee people's basic standard of living and strive to exert rational control over the impact of changing prices. Similarly, the supply of coal, electricity, gasoline, gas and transportation facilities is closely associated with both industrial and agricultural production and people's everyday lives. Such resources and services are always in great demand. We should adhere to the principle of ensuring people's wellbeing and promoting social harmony, improve coordination and cooperation between different departments and regions, and optimize organization and relocation. We should also take measures such as increasing production, conducting demand-side management and improving the construction of transport corridors. Meanwhile, we should improve emergency plans, ensure the effective safeguarding of national energy security, guarantee people's quality of life and standard of living and tap the full potential of domestic demand, especially consumption power.

The author of this article, Li Keqiang, is Member of the Political Bureau of the Central Committee of the Communist Party of China and Vice Premier of the State Council.

This is an excerpt from his article which was first published in Chinese in Qiushi semimonthly's fourth issue of 2012 and translated into English by He Shan and Chen Xia.