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Promoting Structural Adjustment with Emphasis on Expansion of Domestic Demand
2002-02-15
Liu Shijin
I. New Development in Structural Adjustment and Some Major Trends
Recently, some important developments have taken place in structural adjustment while the national economy maintained a strong growth momentum.
First, the automobile and the housing industries witnessed fast growth and started to play the role of new leading industries. Housing industry maintained a rapid growth momentum in the past few years. The growth rate of the main indicators of the space sold and sales incomes of commercial housing remained over 20%. From January to July in 2001, the accumulative investment in real estate development reached RMB265.2 billion, representing an increase of 31.6% over the same period of last year. It was 7.5 percentage points higher over the same period of last year and made the sector the fastest growing one among all the tertiary industries. In fact, the proportion of sales of commercial housing to private owners took up 85%, while the growth of demand for private housing became a major driving force for the rapid development of the housing industry. In the first half of this year, the growth in the incomes of the automobile industry rose even higher to 25%, which was only next to that of the electronic and communications product manufacturing industries. Compared with the complete automobiles manufacturing sector, the automobile parts manufacturing sector achieved an even faster increase and maintained a growth rate of over 40% in export in the first half of this year.
Second, the rate of investment growth in the western region speeded up significantly. Investment in the mid-eastern part of the region amounted to RMB197.3 billion, representing an increase of 29.4%; while investment in the middle and western parts of the region reached 36.7% and 40.3% respectively, which were remarkably higher than the overall level in the whole country.
Third, the comparative advantage of certain sectors of the Chinese manufacturing industries is gradually emerging. Since the beginning this year, international multi-national corporations have increased their efforts in shifting manufacturing bases to China. In the mobile communication area, the Philips Electronic Group moved its entire mobile phone manufacturing capacity to the joint venture in Shenzhen, China. Siemens Company raised the current output of 10 million mobile phones by its Shanghai base to 14 million next year, making Shanghai the only mobile phone manufacturing base outside Germany. Ericsson intends to expand its mobile phone production in China and turn its China manufacturing enterprise into one of the four major supply centres in the world. In addition, Motorola and Nokia are also expanding their production in China. It is reported that half of the 1143 companies listed in the Tokyo Stock Exchange expressed the intention to move the manufacturing bases elsewhere, while 70% of them have chosen China as the major destination.
Fourth, the growth rate of the previously slow-growing coal and metallurgical industries has picked up. Since the beginning of this year, the sales income of the coal industry has grown by 15%, overtaking the average rate of industrial growth for the first time. The accelerated growth of the coal industry is mainly attributable to the accelerated growth of the high energy-consuming heavy industry and raw materials industry, as well as the fluctuating international oil prices, which pulled up international demand for coal. The measures to close up and rectify small coal mines also contributed to the changing relations between supply and demand of the industry. Thanks to the accelerated growth in major steel-consuming industries, such as the construction industry, the machinery industry, the light industry and the automobile industry, as well as the increase in international demand for steel, the metallurgical industry also witnessed rapid growth since last year. However, stable bases for the sustainable growth of these sectors are still lacking.
Fifth, some cities have started to reform the household registration system. Over a period of time, some localities have started the reform in the household registration system. Significant progresses have been made in Guangdong, Zhejiang, Anhui, Shanghai, Hebei, Sichuan, Chongqing and Shaanxi provinces. Anhui has implemented household registration system reform in the whole province and extended the reform experience from small townships to large cities, including the provincial capital of Hefei. Guangdong plans to abolish the division of traditional agricultural households and non-agricultural households and adopt a principle of actual residential area registration system for the provincial population. The urban entry population control target will be replaced by entry conditions in various cities including Guangzhou and Shenzhen. Ningbo in Zhejiang Province has recently implemented an overall reform in the household registration system. The city has abolished restrictions on the urban entry target, adopted a registration system based on residential areas and relaxed requirements on the residence and income of the moved-in citizens.
Amid the above developments, the most important are the emerging leading role of the housing and the automobile industries, the transfer of the international manufacture bases to China and the household registration system reform. The impact of such developments over restructuring and economic and social development will become increasingly significant.
II. Structural Adjustment in the Near Future Should Focus on Expansion of Domestic Demand.
Since the beginning of this year, China’s export growth decreased as a result of the slow-down of international economic growth, particularly that of the American economy. China’s export experienced negative growth in June. Faced with sluggish external demand, it is especially vital to expand domestic demand. Restructuring in the near future should, therefore, focus on the expansion of domestic demand. In the mid- and long-term future, expansion of domestic demand should be considered as and may also become one of the major objectives of restructuring. In this regard, there are certain major issues that require clear understanding.
Taking the living and travel concerns of the urban population as the key areas for restructuring. One of the major characteristics of the market economy is to take consumer demand as the starting point and the objective of economic operations. At the current stage, China’s economy still remains in the dual-structural stage with significant differences between the income and consumption of urban and rural population. The upgrading of the consumption structure of urban population will lead to rapid and stable growth of the overall national economy. It will first pull up the development of a group of leading industries, expand the overall economic scale and promote the transfer of farmers to non-agricultural sectors to raise their incomes, and then create markets for a large number of traditional industries and revitalize the overall economic growth. Superficially, the slow growth of farmers’ income is caused by agricultural and rural problems. It is actually the result of insufficient employment scale afforded by the non-agricultural sectors and cities, which is caused by the constrained upgrading of urban consumption structure and industrial structure. At present, the priority in upgrading the consumption structure of urban population is to solve their living and travel problems. In fact, the leading roles of the housing and automobile industries have just emerged thereon.
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