It was decided during the 2013 Central Economic Working Conference that efforts will center on raising the quality and results of economic growth with “six musts.”
Namely, the nation must (1) speed up its economic restructuring; (2) change the pattern of economic development to ensure that the sustained development of the economy is based on expanding domestic demand; (3) continue working effectively and tirelessly on matters concerning agriculture, rural areas and farmers, as well as advancing urban-rural integration; (4) persist in implementing the strategy of invigorating China through science and education, and increase economic and social development; (5) maintain the interest of the people above everything else and further secure and improve work concerning people’s well-being to make development results benefit the whole nation more widely and fairly; (6) deepen reform in an all-round way and clear away all obstacles in the system that hinders development, and be more proactive and aggressive in implementing the opening strategy, creating a competitive edge and raising the openness of the economy. The key to fulfilling the “six musts” lies in handling the relations between steady growth in the short term, economic restructuring in the intermediate term and systematic transformation in the long run.
This said, the prospect of global economic growth remains troubling in 2013.
First, the global economy will continue to grow slowly in 2013. It’s been five years since the financial crisis of 2008, but the global economy has barely risen from its bottom. For example, the International Monetary Fund (IMF) predicted that the global economic growth rate in 2012 would be 3.3 percent (the lowest since 2009), and marked down China’s and India’s rates to 7.8 percent and 4.9 percent respectively. Purchasing manager indexes around the world, and in European and American economies in particular, are mostly below 50 percent, which is also the lowest since June 2009. This raises the question: will the predicted 3.3 percent global economic growth rate and China’s 7.8 percent become constant in 2013? How long will they last if this happens? Suppose the world economy and China does slow down this year, it’s only more reason for China to focus on improving the quality and results of its economic development by handling the relations between stable growth in the short term, and restructuring in the intermediate-to- long term. Fundamental to all of this is the deepening of reform.
Second, the prevailing macro-economic policies in major developed countries around the world in 2013 will be increasing jobs by creating inflation. The United States has already activated QE4. The Federal Reserve Board will keep the basic interest rate at or close to zero, while linking the country’s inflation and unemployment rates, so that the policy will remain as long as inflation does not rise above 2.5 percent and unemployment does not fall below 6.5 percent. This will hold the global economy hostage until the US unemployment rate reaches its desired level by creating worldwide inflation and asset bubbles to achieve its own economic recovery. The European Union is now doing the same, while Japan plans to follow suit very soon. Faced with an expected influx of excessive liquidity from the Western world, China must step up its financial assistance for efforts to expand domestic demand and develop the real economy, as well as deepening reform to soften the impact of foreign capital invasion.
Third, in 2013 major developed economies around the world will resort to trade and investment protectionism more than ever to break free from the limbo of industrial hollow-rization. This means that China will see trade disputes extending from tactical to strategic dimensions and spreading from the economy to political, social, cultural and military affairs.
China’s economy will enter an important period of transition in 2013.
This year China’s GDP growth potential will be adjusted downward to between 7 and 8 percent, and its foreign trade is expected to slow down as well. Economic growth in the more developed regions along the East coast will remain relatively slow while the central regions will grow slightly faster, and western regions quicker still. The country’s heavy chemical, construction and real estate industries, including their related equipment manufacturing output, will enter a long period of adjustment, while the increase of electricity, steel, a range of industrial materials and car output will also slow down. At the same time the cost of industrial essentials such as labor, land, water, power and gas as well as the yuan exchange rate, interest rate and consumer price index will continue to rise. All these developments make it even more important to improve the quality and result of growth in 2013.
The author is secretary-general of the Academic Committee of the National Development and Reform Commission.