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2013-February-16

Quality, Not Speed
Central Economic Work Conference Sets the Tone for 2013

 

By staff reporter LU RUCAI

 

THE Central Economic Work Conference, the country’s highest-level economic meeting, was held last December by the Central Committee of the Communist Party of China and the State Council. It received widespread coverage in both domestic and foreign media.

Against a background of the lackluster EU and U.S. economies and flagging Chinese exports, the conference was looked to for answers on how Beijing plans to sustain robust growth in the world’s second largest economy.

Economic policy goals presented during the work conference focused on qualitative structural adjustment. Ensuring healthy economic development, stepping up the reconfiguration of industry, strengthening agriculture, accelerating urbanization, continuing to improve people’s livelihood and intensifying reform and opening-up policies were presented as the key components of structural adjustment.

The conference also laid out the specifics of the proactive economic policies to be pursued in 2013. These included expanding domestic demand alongside rising incomes and making Chinese industry more competitive through further regulatory reform. Other policies focused on the countryside: planners aimed to promote the development of the countryside and agriculture, reduce the rural-urban income gap, raise education standards in rural schools and ensure the latest industrial and agricultural scientific techniques penetrate the countryside.

The conference followed on from 2012 in stressing stable growth focused on quality, rather than quantitative “growth at all costs.” China’s economy is still confronted with a range of problems that find no solutions in the short term. Long-term considerations are necessary in tackling issues such as real estate bubbles, industrial overcapacity, tax reform and the rapid, unchecked growth of the nation’s cities.

Proactive Fiscal and Prudent Monetary Policy

While “stability” was the focus of the Central Economic Work Conference, this wasn’t interpreted by Chinese economists as “sticking to old policies.” As Tang Min of the Counselors’ Office of the State Council said: “Stability refers to stable, comprehensive change to China’s economy. It means progress: economic growth through deepening reform and improving economic efficiency.” Sticking to old policies” would probably generate fast growth, but structural problems would become more pronounced over time.

Jia Kang, director of the Research Institute for Fiscal Science under the Ministry of Finance, noted that 2013 would feature two fiscal measures that should have a pronounced effect on the country’s economy: improving policies for structural tax reductions and smarter allocation of government funds.

Shanghai pioneered a pilot scheme starting from January 1, 2012 to replace the business tax with value-added tax. By the end of 2012 the scope of the scheme had been broadened to 12 cities and provinces, including Beijing, Shenzhen and Anhui Province. By October 2012, 710,000 companies had benefited from the reform and another 200,000 were due to see tax reductions in the near future.

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