China's economic blueprint
From Li Keqiang…. Prime Minister of China
For the Chinese economy, 2016 is a year of reform, openness and international cooperation. These priorities may sound surprisingly familiar to China-watchers. Their potent combination has been instrumental in China's growth story over decades. We are taking them further.
Given the size of China's $10 trillion economy, over-dependence on investment and exports is not tenable. What is called for is not temporary fixes: my government has resisted the temptations of quantitative easing and competitive currency devaluation. Instead we choose structural reform.
We are pushing through market reforms, to speed the transition to a sustainable growth model markedly more driven by innovation and consumption. Employment, income levels and the environment are all high on our list of priorities.
We are combining myriad policy tools into two major drivers of growth. The first, essential to structural reform, highlights entrepreneurship and innovation. The second focuses on better provision of public goods and services—which in turn contributes to stronger demand and a higher quality of life.
It is all about striking a better balance between the state and the market by offering individuals, small and medium-sized companies as well as major corporations a more enabling environment for business development and innovation, thereby unlocking growth potential. A leaner government can play a better role as macroeconomic fine-tuner, regulator for fair competition, champion of the reform agenda and ultimate backstop when systemic risks threaten.
These efforts are already paying off. The services sector, accounting for half of China's GDP, keeps widening its lead over manufacturing. Entrepreneurship and innovation are the new fashion. Over 10,000 new businesses are registered every day. Growth in high-tech industries is leading that of the industrial sector by a wide margin. Innovations in technology, business models and management keep widening the economic horizon in previously unimaginable ways.
We are creating over 10m jobs a year and disposable-income growth is outstripping that of GDP. Consumption, already responsible for 60% of growth, keeps going strong and up-market. Take outbound tourism, for example: Chinese citizens made over 100m trips overseas in 2014, and the first half of 2015 saw year-on-year growth of 10%.
In short, despite moderation in growth, the Chinese economy is moving in the desired direction of stronger domestic demand and innovation. One by-product is a fall in the relevance of indicators such as power consumption, rail-cargo volume and new bank credit in gauging economic performance. Yet this transition from "bigger is better" to "less is more" is a good thing. I would otherwise be worried whether the reforms were working as intended.
Structural reform is not only about exploring new sources of growth, but also about making traditional industries more competitive. China's massive industrial sector remains a vital part of our plan for growth. We are working on upgrading "Made in China" with "China Manufacturing 2025", "Internet Plus" and other initiatives. We are deepening integration with the world economy with deregulation in many areas to improve access for foreign investments, not least in service sectors.
Make no mistake. Competition is growing tougher as the Chinese market matures. But we are confident that China is a worthwhile market, a pivot of the global supply chain and a partner for the wider world market.
The best of all worlds
This is not yet a world of plenty. Billions in developing countries are yet to benefit from large-scale industrialization and proper infrastructure. The demand is enormous, but largely subdued for lack of proper funding, affordable equipment and technology.
This can be changed. On connectivity, we have the "Belt and Road" initiative. On industrialization and urbanization, we offer partnerships in industrial-capacity co-operation. Combining China's manufacturing prowess with the cutting-edge technologies of the developed economies, we can, together, supply good equipment at good prices to the developing world, sustaining robust growth with supply-side innovation. If development for 1.3 billion Chinese has helped buoy world growth, imagine what such growth spurts for many more billions could do for the commodities market, manufacturing and many others.
Structural reform featuring entrepreneur-ship and innovation, greater openness and win-win international co-operation—these are our priorities for 2016 and beyond. This is our answer to the call for sustainable growth—a blueprint for sharing with the world China's market opportunities and Chinese ingenuity. ■