The recently-ended Central Economic Work Conference lauded the progress that has been made since implementing the supply-side structural reform one year ago and contributions the reform has made to stabilizing China’s economy and improving quality as well as efficiency.
For example, the task to cut steel capacity by 45 million tonnes and coal capacity by 250 million tonnes in 2016 has been done ahead of time.
This proves that the supply-side structural reform is the right solution to drawbacks of China’s economy. Its potential to foster new growth drivers in a "new normal" stage can not be underestimated.
Apart from these tangible fruits, greater efforts are needed to be done to keep this momentum by dealing with problems like overcapacity, increased stockpile, high leverage, and weak links caused by disorderly competition and blind expansion. In this regard, structural coordination on the supply-side and innovation should be given top priority by closely following changes of market demands.
First, improve product quality. Taking agricultural products as an example, “green”, “organic” should by no means become the stunt for hyping; instead, importance should be attached to the standardization of pollution-free food production in the interest of the public.
Second, shore up service reforms. Balance should be struck between reform in product manufacturing and reform in product service, which includes service supply, policy supply, capital supply, talent supply, land supply, after-sale service supply and logistic service supply.
Third, press ahead with reforms in scientific and technological innovation. The supply-side structural reform is, in the final analysis, to expand domestic market. On the one hand, new products should be introduced to lead new demands; on the other hand, production technology should be upgraded, in a bid to enhance product quality to meet the demands of the ever-advancing market.
For example, to set a stage for scientific and technological innovation, the mindset of “selecting talents by papers” should be abandoned and the divergence of research and reality should be avoided.
Besides, to back up “mass entrepreneurship and innovation”, reform should be implemented in financial services.
Given that to lend money only to big and well-funded enterprises has always been the strong suits of China’s financial industry, efforts should be made to curb this trend and measures should be taken to combat loan fraud in the name of financial innovation.
Moreover, venture capital should be offered to give more innovative enterprises opportunities to grow and flourish. With all this done, supply-side structural reform is poised to explore new paths, tap new forces, and stimulate new vitality.