A quantum leap forward

As China's economic growth prospects subject to resources and environmental constraints and air and water pollution are at dangerous levels, China has to build an environmentally friendly and resources saving society as the foundation for better quality growth.

There are also a number of other challenges that cannot be ignored. One of them is that in the short term it will be difficult for China to wean itself off its over-dependence on real estate. If property prices continue to soar it will inhibit urbanization and hinder the optimization of the demand structure. The long-term boom of the real estate industry has attracted excessive investment and human resources, which has been detrimental to the upgrading of enterprises' products and their independent innovation capabilities. High housing prices also curb consumption and are detrimental to social fairness and stability.

The ever-increasing flow of funds to the virtual economy instead of the real economy is another major problem. The flow of funds to the real economy should be guaranteed through regulatory requirements, credit guides and adjusting the government spending structure. Over the years, many industries and enterprises have witnessed a sharp rise in their debt ratios, excess production capacities, declines in profitability and rising debt pressures. In addition, monopolies, the local government financing platform, real estate's extrusion on the private sector and the real economy restrict the efficient allocation of resources.

There is also growing pressure, as a result of the economic slowdown, to create jobs. In this regard, decision-makers need to strengthen their policy fine-tuning to achieve a steady growth in employment opportunities.

The government has introduced a series of policies and measures this year to ensure that funds flow from the financial departments, credit and capital markets to small businesses, emerging industries, service industries, shantytown renovation, municipal construction, environmental protection, the agricultural sector and other real economy sectors, while eliminating enterprises with high energy consumption, high pollution and excess capacity. And it will accelerate the pace of reform in a lot of important areas, ranging from reform of the rural land system and social security to reducing the number of administrative examinations and approvals, adjusting fiscal and taxation policies, opening-up the financial system, liberalizing capital accounts, and reforming the mechanism of resource prices.

The new Chinese leadership's calm and confidence while facing this year's economic slowdown shows it is determined to place more emphasis on green growth, domestic consumption, and improving urban and rural residents' livelihoods. This is a genuine people-centered development mode.

Besides stabilizing economic growth, China needs to reform its income distribution system to increase the incomes of low-income groups and release consumption potential, reform the technological innovation mechanism to release the potential of enterprises, and reform the urban and rural management system to release the labor potential.

The author is a senior research fellow with the Institute of World Economics and Politics, Chinese Academy of Social Sciences.

(China Daily 09/16/2013 page8)