The consumer price index rose month-on-month in August, and its year-on-year growth rate continued to expand, due to high temperatures and rainy weather. At the same time, due to insufficient market demand and the downward trend of some bulk commodity prices, the producer price index fell month-on-month and year-on-year in August. The price level shows the problem of insufficient demand in the Chinese economy, which is increasingly obvious.

The government has actually released a series of policies to stimulate demand. Now it is time to enhance the accuracy, effectiveness and sustainability of these policies. The government needs to combine countercyclical policies with cross-cyclical measures and take into account both short-term and long-term goals in the process, as the economy is experiencing a mixture of problems rather than the declining phase of the loose-tight cycle that was usually formed by countercyclical adjustments in the past.

The authorities need to further accelerate the country's institutional opening-up, and make the opening-up directly affect the most needy sectors of the economy. They also need to take more concrete measures to improve the institutional mechanisms for the development of the service industry. These measures should not only focus on lowering the threshold for private capital, but also be conducive to providing private entrepreneurs with a fair, transparent and nondiscriminatory business environment.

New urbanization is another key driver to boost demand. The central authorities have long proposed that the eligible rural migrant population should enjoy the same rights and interests as their urban counterparts in social insurance, housing security, compulsory education for children, etc. Yet, how to fund this reform remains a challenge for local governments, particularly those governments facing mounting debt pressures.

Besides, although investment in innovation is necessary, it does not directly help create jobs. The progress of technology in some industries actually leads to a loss of jobs. The government is thus obliged to do more to resolve the unemployment issue of the young people to prevent it from evolving into triggers of systemic social crises.

As such, policymakers are facing systemic challenges caused by the structural issues in the economy. To some extent, the economy is entering a protracted process of digesting the impacts of the bursting of the real estate bubble that had helped sustain a borrowed prosperity for more than a decade.

21ST CENTURY BUSINESS HERALD