Will China's economy hit an inflection point next year?
(People's Daily Online)Updated: 2006-10-31 14:40
Q: What are the driving forces behind China's sustained economic growth?
Wang Tongsan: From an economic perspective, there are three driving forces influencing economic growth: investment, consumption and net exports. All three forces are currently very powerful.
The scale of investment is relatively large with a fast growth rate. Investment is still the main factor stimulating the country's economic growth, and momentum is still strong. What we need to do in terms of implementing macro-controls, is to scale back and control further investment. The rate of investment should not grow too fast. In particular, we need to adjust the investment structure and ensure it is conducive to the overall economic restructuring.
The growth rate of consumption is also increasing. If retail sales are used to analyze the social consumer goods situation, we see that retail sales of social commodities are growing faster and faster. The growth rate in the first three quarters of this year is higher than that of the past two or three years, which demonstrates that consumption is playing a more important role in boosting economic growth.
The net export surplus is huge. This has become a major problem that may impact the stability of China's macroeconomic operations. Therefore, as a strategic planning requirement of the 11th Five-Year Plan, the central authorities are demanding to adjust the growth mode of foreign trade. As an important part of the reform, China strives to achieve a basic balance in foreign trade, which means that there should not be such a large trade surplus. Last year, China's trade surplus totaled US$101.9 billion. Most people predict that the gross volume will reach US$150 billion this year, a 50 percent increase. In the short-term, this could be a very strong economic driving force. However, if the economic situation is viewed as whole, this is actually a negative factor and special attention must be given to the issue.
Consumer demands to be promoted
Q: What problems should China focus on for future economic development?
Wang Tongsan: Economic operations are very complex. We have to understand how to maintain an overall balance. The most important thing is of course to strengthen macro-controls, expand reforms, and gradually perfect the socialist market economic system. It basically comes down to bringing the role of the market into full play and strengthening macro-controls.
We need to do more to promote domestic demand, especially consumer demand. The key point here is to formulate a favorable income distribution policy. Many issues and problems currently emerging in macroeconomic conflicts are related to the income distribution policy.
In the long-term, China needs to base its economic growth on domestic demand and ensure that investment and consumption occurs smoothly. Our main purpose is to raise the quality, adjust the structure, and enhance the efficiency of investment. In the meantime, we need to prevent excessive investment as well as work around the problems resulting from excessively rapid economic growth and economic overheating. We should promote consumption and ensure that consumption and investment play an equal role in stimulating economic growth.
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