BEIJING: The decision of the 2013 Central Economic Working Conference is
to raise the quality of economic growth and make it more
result-oriented by focusing on “six musts”.
The first is expediting economic restructuring. The second is
transforming the pattern of economic development to ensure that it is
based on expanding domestic demand. The third is continuing to work
effectively on agriculture, rural areas and farmers, as well as
advancing urban-rural integration. The fourth is continuous
implementation of the strategy to invigorate China, and boost its
economic and social development. The fifth is prioritising people’s
interest above everything else and working tirelessly for people’s
well-being so that development benefits reach the whole nation in a
fairer manner. And the last is deepening reform in an all-round way,
clearing obstacles in the system that hinder development, proactively
implementing the opening-up strategy and creating a competitive edge.
The key to fulfilling the “six musts” lies in handling the relations
between steady economic growth in the short term, economic restructuring
in the intermediate term and systematic transformation in the long run.
The prospect of global economic growth, however, remains troubling in 2013.
First, the global economy will continue to grow slowly this year, for it
has not fully recovered from the global financial crisis of 2008. For
example, the International Monetary Fund had forecast that the global
economic growth rate in 2012 would be 3.3 per cent, the lowest since
2009, and lowered China’s and India’s growth rates to 7.8 per cent and
4.9 per cent.
Purchasing manager indexes across the world, particularly in the
European and American economies, are mostly below 50 per cent, also the
lowest since June 2009. This raises two questions: Will the growth rate
of 3.3 per cent forecast for the global economy and 7.8 per cent for
China become constant in 2013? And how long will the rates last?
The fear of the global and Chinese economies slowing down this year is
one important reason for China to focus on improving the quality of its
economic development by handling the relations between stable growth in
the short term, and expediting economic restructuring in the
intermediate-to-long term. Fundamental to all this is the deepening of
Second, the prevailing macro-economic policies in major developed
countries will increase the number of jobs by creating inflation in
2013. The United States has already implemented its fourth round of
quantitative easing, or QE4. The US Federal Reserve will keep the basic
interest rate at or close to zero and link the country’s inflation and
unemployment rates to ensure that the policy remains as long as
inflation does not rise above 2.5 percent and the unemployment rate does
not fall below 6.5 per cent. This will hold the global economy hostage
by creating inflation and asset bubbles across the world until the US
unemployment rate falls to the desired level and the American economy
starts real recovery.
The European Union is following in the US’ footsteps, while Japan is
likely to join the trend soon. Faced with an influx of excessive
liquidity from the West, the Chinese government must step up its
financial assistance to expand domestic demand and develop the real
economy while deepening reform to soften the impact of foreign capital
Third, developed economies will take more protectionist measures in
trade and investment this year to break free from the limbo of
industrial vacuum. This means China will have to tackle more trade
disputes, from the tactical to the strategic front, and from economic,
political, social and cultural matters to military affairs.
Nevertheless, the Chinese economy will enter an important transitory
phase this year. The country’s GDP growth potential for 2013 is likely
to be lowered to between 7 and 8 per cent, and its foreign trade is
expected to slow down. Economic growth in China’s more developed region
along the coast will remain relatively low, while the central region
will grow slightly faster with the western region growing even faster.
China’s heavy, chemical, construction and real estate industries,
including their related equipment manufacturing output, will enter a
long period of adjustment this year, while the growth rates of power
generation, steel, other industrial materials and automobiles sectors
will slow down.
At the same time the cost of labour, land, water, power and gas — all
essential for economic growth — will continue to increase, and so will
the yuan’s exchange rate, interest rate and consumer price index. These
signs make it even more important for the government to improve the
quality of economic growth and make it more result-oriented in 2013.