China unveils economic blueprint for 2016

(CHINADAILY)China'stopleadership,whichispreparingtolaunchthe13thFive-YearPlan(2016-20),onMondayannouncedanoverarchingstrategytoleadtheeconomy'songoingtransition.

PresidentXiJinpingsaidthecountry'semphasisnextyearwillbeonsupply-sidereform,orapackageofsupply-sidepoliciestoreleasenewdemandandboostnewproductivity.

HewasspeakingattheconclusionoftheCentralEconomicWorkConference,whichwasheldalongwiththeCentralUrbanWorkConference.

EconomistssaidthismeansthatChinawillnolongerseektofueleconomicgrowthsolelybyusingfiscalandmonetarymeasurestoboostcapitalinvestment,consumptionandexports.

Instead,thegovernmentwillbemorefocusedondevisingpolicieswhich,fromthesupplyside,areaimedathelpingtheindustriesitwantstosupport.Outdatedbusinesseswillalsobephasedout.

TheCentralEconomicWorkConferencehaspledgedtolaunchaseriesofpoliciesnextyearthathavebeendiscussedforalongtime,includingmoretaxcuts,incentivesforspecificindustries,regulatoryreformsandmoreaidtoliftpeopleoutofpoverty.

Supply-sidereformcoverstwoareas,accordingtothepoliticalmagazineOutlook.Oneoftheseistoreadjusttheeconomicstructure－cruciallybysheddingexcessiveindustrialcapacity.

Theotheristouseinstitutionalreformsandinnovation－notmerelyfinancialstimulusmeasures－toboostgrowth,suchassubsidizedsalesofemptyhousingtomigrantworkersfromruralareas.

Themagazinesaidthemoreimportantsupply-sidereformistocontinuetostreamlinethegovernment'sadministrativepoweroverbusinessandtoprovidepolicy-levelconvenienceforprivateentrepreneurs.

BaShusong,chiefeconomistattheChinaBankingAssociation,saiditwasthefirsttimethattopleadershadraisedsupply-sidereformasguidanceforthefutureandforallrestructuringefforts.

GuanQuan,aprofessorattheSchoolofEconomicsatRenminUniversityofChina,saidsupply-sidereforminevitablyfocusesonlong-termstructuralchangeratherthanshort-termstimulus."Itisastrategyleadingmoredirectlytohigherproductivityandloweroperationalcosts,"Guansaid.

Industriesthatcannotsatisfymarketdemandwillbeupgraded.Thoserelatedtoconsumption,logistics,medicalandhealthcarewillprobablyseestrongergrowth,Guanadded.

QuHongbin,chiefChinaeconomistatHSBCHoldings,saidChina'ssupply-sidereformislikelytocontinueto2020,adding,"Urbanization,industrialupgrading,financialliberalizationandgreeninvestmentwillbethetoppriorities."

ZhuHaibin,chiefChinaeconomistatJPMorganChase,saidthatbypromisingaseriesofsupply-sidereformefforts,Chinahassent"averypositivesignal".

Whatsupply-sidereforminvolves

Chinausedtorelyonthreemajorforcestodriveeconomicgrowth－investment,exportsandconsumption,whichareclassifiedasthedemandside.

Astheeffectivenessofboostinggrowthinthedemandsidewanes,thegovernmenthasstartedtoreformthesupplyside,orthesupplyandeffectiveuseofproductionfactors,includingfunds,resources,skilledworkers,equipmentandtechnologies.

Thereformaimstoaccelerateeconomicgrowthbyfreeingupproductivityandraisingsupply-sidecompetitiveness.Measureswillincludecuttingexcessindustrialcapacity,reducinghousinginventoriesandcuttingproductioncostswithpolicesupport.