2016EconomicPerformance
ToaddresstheseriousissuesanddomesticproblemsplaguingChina鈥檚economy,thegovernmentadaptedtothenewnormalofeconomicdevelopmentin2016,committedtoanewinnovative,coordinated,green,openandshareddevelopmentmodel,andpushedsupply-sidestructuralreformtosuccessfullymeetmajorprojectedgoalsforeconomicgrowthandsetasolidfoundationforaccomplishingthebuildingofamoderatelyprosperoussocietyinallrespects.
Theeconomyoperatedwithinanappropriaterange,asmanifestedin鈥渇ourstabilitiesandonedecline.鈥漈hefirststabilitywasgrowth.China鈥檚GDPgrowthrateinthefirstthreequartersof2016averaged6.7percent,asdidtheprojectedannualgrowthrate.Thefigurelandedrightinthemiddleoftheeconomicgoalof6.5to7percentsetinearly2016,indicatingthatChina鈥檚economywillnowgrowinanL-shapedpath.Thesecondstabilitywasemployment.Thefirstthreequartersof2016witnessedthecreationof10.67millionurbanjobs,whichmettheannualgoalof10millionaheadofschedule.Thisfigurewasexpectedtosurpass13millionbytheendof2016.Thethirdwasstabilityofcommoditiesprices.In2016,China鈥檚commoditiespricesrosearoundthestartandendoftheyear,butstayedlowatothertimes.TheConsumerPriceIndex(CPI)fromJanuarytoNovemberincreased2.2percentonayear-on-yearbasis,lowerthanthecontrolobjectiveof3percent.Thefourthwasthestabilityinconsumption.Thecountry鈥檚totalretailsalesofconsumerproductsfromJanuarytoNovember2016increased10.4percentyear-on-year,slightlylowerthanthegrowthrateofthesameperiodin2015.Chinahasbecometheworld鈥檚second-largestconsumermarketandfacilitatesthegreatesttotalvolumeofe-commerceintheworld.Theonedeclinereferstobothexportsandimports.FromJanuarytoNovember2016,China鈥檚totalvolumeofimportsandexportsdropped1.2percentyear-onyear,withexportsfallingby1.8percentandimportsby0.3percent.Thedroptendedtonarrowmonthbymonth.
Economicqualityandefficacyimproved,aswellascorporateperformance.FromJanuarytoNovemberin2016,theaddedvalueofindustrialenterprisesaboveadesignatedsizeincreasedby6.2percentonayear-on-yearbasis.Thecoalindustrysawprofitsdoublein2016.Theironandsteelindustryreapedprofitsofmorethan30billionyuanin2016afteradeficitofover50billionyuanin2015.InSeptember2016,theProducerPriceIndexforIndustrialProducts(PPI)turnedpositiveandhassinceincreasedmonthbymonth,reaching3.3percentinNovember.WithPPIturningpositiveforthefirsttimein54months,theChineseeconomyhasavoideddeflation.
Theeconomicstructurehasbeenupgraded.Since2010,thegrowthrateofChina鈥檚servicesectorhassurpassedthatofindustry.In2013,theservicesector鈥檚shareofChina鈥檚nationaleconomyfirstsurpassedthatofthesecondaryindustry,promotingthetransformationoftheeconomicstructurefrominvestmentandexportdriventoconsumption-driven,andoftheindustrialstructurefromindustry-dominatedtoservice-sector-dominated.Inthefirstthreequartersof2016,finalconsumptioncontributed71percentofeconomicgrowth,up13.3percentoverthesameperiodof2015.Afterstructuraladjustment,theproportionsofthethreeindustriesinrelationtothetotaleconomyare8.5,39and51.5,respectively.
Thepaceofchangeofeconomicgrowthenginesisaccelerating.In2016,traditionalindustries,includingironandsteel,coal,nonferrousmetal,buildingmaterialsandpetrochemicals,continuedtoseedeclininggrowthrates.Emergingindustriessuchashigh-endequipment,robotics,energyconservation,environmentalprotection,newenergyautomobiles,andnewinternetoperationalmodelsandserviceindustriessuchashealthcare,seniorcare,tourism,cultureandsportsaredevelopingatbreakneckspeed.Inthefirstthreequartersof2016,theaddedvalueofstrategicemergingindustriesaswellasnewandhightechnologyindustriesincreasedbymorethan10percent,fourpercentagepointshigherthantheindustrialgrowthrate.Morethan4millionenterpriseswereregisteredinthefirstthreequartersof2016,anincreaseof27percentonayear-on-yearbasis.Themajorityoftheseenterprisesareinserviceindustriessuchasdatadelivery,software,informationservices,finance,culture,sports,entertainment,education,health,andsocialwork.
China鈥檚EconomicOutlookfor2017
In2017,theinternationalenvironmentanditsrelationtoChina鈥檚economyareboundtobecomemorecomplicatedasuncertaintyincreases.ThemostglaringuncertaintylieswithforeignanddomesticpolicyadjustmentstocomefromU.S.President-electDonaldTrumpafterheformallytakesoffice.Actually,Trump鈥檚policyadjustmentspresentbothprosandconsforChina.Onthepositiveside,Trumppromisedtoincreaseinfrastructureinvestmentandcuttaxesduringhiscampaign,whichwillincreaseU.S.demand,stimulateinvestment,andpromoteimports,furtherstimulatingtheeconomicgrowthoftheU.S.andtheworldwhileimprovingChina鈥檚environmentforinternationaldemand.
AlthoughtheChineseeconomyisfacingchallengesandrisksdomestically,itscomparativelyhighgrowthratecreatesmanyadvantages.First,China鈥檚deepenedreformswillcreateamorefavorableenvironmentforentrepreneurshipandinnovation,releasingthereformdividend.Second,China鈥檚furtherimplementationoftheBeltandRoadInitiativewillpromoteaheaviervolumeofimportsatadvancedlevelsaswellasexportsthroughvariouschannels,re-shapingtheopening-updividend.Third,thecomprehensiveimplementationofChina鈥檚innovation-drivendevelopmentstrategywillkindleenthusiasmfromtheworld鈥檚largestgroupofengineersanduniversitystudents,cultivatinganewprofessionaldividend.Fourth,theimplementationofregionaldevelopmentstrategiessuchastheBeijing-Tianjin-HebeiintegrationinitiativeandtheYangtzeRiverEconomicBeltinitiativewillreinforcecooperationbetweenmoredevelopedandlessdevelopedareasinChina,buildinguptheregionaldevelopmentdividend.Fifth,progressinnewurbanizationwilleffectivelyenhancethelaborproductivityofaround100millionpeoplewithruralhouseholdregistrationlivinginChina鈥檚urbanareas,enlargingtheurbanizationdividend.Basedonthefivedividends,theChineseeconomywillmaintaincomparativelyhighgrowthin2017withanexpectedrateof6.5percentorgreater.
Promotingsupply-sidestructuralreformisakeypointinChina鈥檚13thFive-YearPlan.Thenewyearwillbringdeepenedsupply-sidestructuralreform.The2016CentralEconomicWorkConference,whichconcludedinDecember,mandateddeepsupplysidestructuralreformin2017,whichmeansthatreformwillbefurtherintensifiedinthecomingyear.
Intermsofsolvingovercapacity,Chinahasalreadyissuedtwogeneraldocumentsonthesteelandcoalindustries,andeightsupportingdocumentsonrewardsandsubsidies,taxation,finance,employeeresettlement,landresources,environmentalprotection,quality,andsecurity.Thekeyworkfor2017remainspolicyimplementation,especiallyemployeeresettlement.
Intermsofreducingthenumberofunsoldhomes,insteadofrelyingonadministrativemeasuresandrapidlychangingregulatorypoliciesasin2016,in2017,Chinawillfocusonexploringalong-termmechanismtoboostthehealthydevelopmentoftherealestateindustry.
Intermsofreducingleverage,Chinawilltransformbanks鈥檔on-performingloanstoenterprisesintoequityheldbyassetmanagementinstitutionsthroughdebt-for-equityswaps.
Intermsofreducingcosts,Chinawillimproveitspracticeofreplacingbusinesstaxwithvalue-addedtax(VAT)andatthesametimefurtherreducetaxesandfees,especiallyreducingtheVATrateonthemanufacturingindustry.
Intermsofimprovingweaklinks,Chinawillincreaseitsinvestmentinagriculture,povertyalleviation,improvingpubliclivelihood,ecologicalprotectionandinnovationin2017.
Intermsofthecountry鈥檚macroeconomicpolicyin2017,Chinawillcontinuetoadheretoaproactivefiscalpolicyandaprudentmonetarypolicy,butwithdifferentintensity.Fiscalpolicywillbeevenmoreproactive.TheChinesegovernmentwillraisespendingbyincreasingitsbudgetdeficit,butatthesametimereducethecostoftherealeconomyandpromoteupgradestotheindustrialstructurethroughstructuraltaxcuts.China鈥檚monetarypolicywillremainprudentandneutralin2017.Sinceexpectationsaboutthecountry鈥檚inflationin2017areontherise,thecountry鈥檚broadmeasureofmoneysupply(M2)needstoavoidbeingtoolooseortootighttokeepcommoditypriceswithinareasonablerange.ItisexpectedthattheM2growthrateinChinawillstayat12percentin2017,thesameas2016.Prudentmonetarypolicyfostersstableexchangerates,andtheChinesegovernmentwillkeeptheRMBstablein2017tomaintainthebalanceofincreasedexportsandcapitalflow.
Theauthor,HuangHanquan,servesasdirectoroftheInstituteofIndustrialandTechnologicalEconomicsundertheChineseAcademyofMacroeconomicResearch.