What will feature in China’s economy?

By Xu Xingtang and Fang Dong

While others project the growth rate in the world’s second largest economy, China itself is reconsidering its growth pattern for 2013 at its tone-setting economic conference.

Chinese top leaders agreed to take enhancing quality and efficiency of economic growth as the central task during the next year at the two-day central economic work conference.

It marks the first time that quality and efficiency, rather than speed, are center-staged in China’s economic growth.

This echoes the earlier remarks of Xi Jinping, newly-elected general secretary of the Communist Party of China Central Committee, who emphasized that economic growth must be concrete and unadulterated, with benefits, quality and sustainability.

It also marks a major shift of the country’s central task from solely pursuing economic growth speed to paying more attention to the fitness of its economy.

The key points from the conference include transforming the growth pattern through expanding domestic demand, eliminating imbalances in development through structural adjustments and achieving sustainable and stable social progress through reforms in key sectors.

Unadulterated growth, as was stressed by Xi, not only refers to abandoning exaggerated statistics, but also indicates a growth that needs no sacrifices of the environment, overlapping construction and high resources cost.

So far, China’s efforts in transforming growth pattern has paid off. Official data showed that domestic demand contributed 105 percent of the economic growth in the first three quarters of this year, and 55 percent of domestic demand comes from consumption.

The figure is expected to be propped up further by rural dwellers and low-income urban residents, who will be more inclined to increase their consumption as they gradually benefit from improved medical care and social security systems.

In addition, the progress of urbanization will also contribute to rising domestic demand.

In developed countries, over 70 percent of people live in cities, while in China that ratio is just marginally over 50 percent.

In a country with a population of more than 1.3 billion, each percentage point of urbanization ratio represents an increase of 1.3 million urban residents, which can translate into trillions of yuan of investment and consumption.

Vice premier Li Keqiang noted earlier that with the weakening effect of demographic dividends, continued reforms will be the most remunerative dividends for China’s development.

Although the ongoing reforms on income distribution system, household registration system and land management system are all “hard nuts” to crack, once breakthroughs are made, they will be a boon to China’s economy and enhance the growth quality and efficiency.

Stressing quality and efficiency will make the country’s economy more environmental friendly.

Over 30 years of extensive growth has left serious damage to the environment, now that trend is to be reversed. The country has been paying increasingly greater significance to circular economy, by now it already leads the world in solar power, wind power, biomass power and other new energy fields.

At the 18th National Congress of the Communist Party of China (CPC) in November, ecological progress was for the first time incorporated into the country’s overall development plan, putting it side by side with economic, political, cultural and social work.

With its per capita national income surpassing 5,000 U.S. dollars, China has been repeatedly warned of the middle-income trap, which many countries in the world have experienced. Stressing quality and efficiency of economic growth will also be the key for the country to break that trap.

Adjusting the development pattern in a scientific way will help China overcome the rising labor cost and narrow the gap between the country and developed nations in high technology and innovative capacity, so as to provide continuous growth power and avoid stagnation of the economy.

The current global economic headwind is widely believed to continue, and the external demand for China is unlikely to improve. However, this can also be an opportunity for the country to concentrate on the improvement of economic growth quality and efficiency and the transformation of growth pattern through reform, innovation and industrial upgrade.

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