In an important speech delivered at the first annual session of the 13th National People's Congress (NPC) earlier, President Xi Jinping laid stress on comprehensively deepening reform and expanding opening up with greater strength and more concrete measures to put new development ideals into practice, so as to push forward high-quality economic growth and build a modernised economic system. This shows China will unswervingly further advance reform and opening up to release greater momentum of growth and strengthen the world's confidence in the outlook of the Chinese economy and even of the world economy.
As a matter of fact, right now the dark clouds of a trade war gather overhead to cause fluctuations in global financial market. Among others, Hong Kong shares rose first and then fell yesterday with the Hang Seng index sharply dropped over 500 points from its highest position on the day. This reflects market worries that the good tendency of global economic recovery now faces challenges. At this moment, it highlights the great importance of China's deepening reform and expanding opening up, including easing restrictions on market access and increasing imports of goods in various ways which would not only help promote development of services and cultivate new bright spots in economic growth, but also inject positive energy into trade globalisation to counter the increasingly heating up trade protectionism.
In the past five years, China's economic restructuring and industrial upgrading has made certain progress, successfully changing its economic growth pattern from being pulled forward by investment and exports to jointly pulled forward by a troika of consumption, investment and exports. Last year, consumption's contribution to economic growth reached 58.8 per cent, remaining the leading engine for Chinese economic growth for the fourth consecutive year.
However, as Premier Li Keqiang pointed out in his Government Work Report, the internal forces powering economic growth are not yet sufficient, China's ability to innovate needs to be stronger, and the quality and performance of development need to be improved. Therefore, China must carry on structural reforms such as to reduce inventory, to cut overcapacity and to deleverage, must speed up innovative development and improve government departments' functions and efficiency through institutional reform in coordination with the needs for social and economic development. At the same time, China needs to further reduce its overall import tariff rate, ease restrictions on market access and orderly open its capital market, so as to generate new dynamic energy for economic growth.
The Government Work Report sets the growth target for China's economy this year as about 6.5 per cent, a little bit lower than last year's actual growth rate of 6.9 per cent. But this is not meant a loss of speed in economic development, but rather reflects the fact that China's economic growth has entered the stage of high-quality growth – it is more important to seek quality of growth and prevent and control risks than to pursue growth speed. Hence it is a result of proactive adjustment and control.
A more plain and practical growth target is helpful for China to maintain the healthy trend toward stable growth. This will not only provide a more favourable environment for economic restructuring and industrial upgrading, but also avoid over borrowing by local governments in order to pursue growth speed. In fact, in face of a reversal of easy monetary policy worldwide, China must enhance its prevention and control of financial risks.
In the past five years, China has reduced its poverty population by 68 million, while people's incomes grew 7.4 per cent annually on average – higher than economic growth. And China has become a country with the largest middle-income population in the world, which is estimated to reach over 400 million. China's middle-income population will continue to grow, hence orderly expanding imports and opening market becomes an irresistible trend. The power of consumption to pull forward China's economic growth will keep increasing, which at the same time also bring about opportunities for the world.
It is the only right way for China and the United States to expand economic and trade cooperation and promote mutual benefits and win-win. As its economic transformation progresses, China will gradually accelerate opening up its services and manufacturing industries. The United States on the other hand should also ease restrictions on exports of high-tech and high-value-added products. In this way, trade between China and the United States will tend to reach a balance. It is the worst strategy for Washington to wantonly launch trade protectionist measures that harm others without benefiting itself. 22 March 2018
