Source: Scientific Development

Abstract: It is suggested that we accelerate the formation of a systematic policy system with the new development concepts as the guide and the supply-side structural reform as the theme, to lead higher-quality, more efficient, fairer, and more sustainable development of the economic society. We must uphold development as the primary task and lead development with the five development concepts; continuously implement the five development concepts with an overall and comprehensive vision; practically promote systematic integration and coordinated advance of various reform measures; and develop systems, mechanisms, and institutions, for implementing the five development concepts with new breakthroughs in opening-up and reform.

At the Fifth Plenary Session of the 18th Central Committee of the CPC, Xi Jinping, General Secretary of the CPC Central Committee, raised a set of five new development concepts, innovation, coordination, green development, opening up, and sharing. This is the concentrated reflection of the new understanding of China’s development and has far-reaching significance for solving development problems, strengthening development momentum, and promoting sustainable development.

I. Five achievements

The new development concepts have shown five achievements in less than two years:

Firstly, a new landscape of opening-up has formed, showing a distinct image of comprehensive opening-up to the world. This is highlighted by the great progress in the construction of the pilot free trade zone, and an institutional framework complying with international practice is basically formed, promoting China’s opening-up to a higher level. The One Belt, One Road construction has made substantive progress, with a number of key cooperation projects implemented in countries along One Belt, One Road receiving worldwide response. Shanghai Free Trade Zone, for instance, has accomplished registration of about 40,000 enterprises in the past three years, which is more than the sum of over 20 years before its establishment. Consequently, 45 multinational corporations set their headquarters up in Shanghai in 2016, and the import and export of services increased by 15% from the previous year.

Secondly, innovation-driven development has achieved great breakthroughs, with a strong atmosphere of mass entrepreneurship and innovation initially formed. A number of system and mechanism barriers that restricted scientific and technological innovation for a long time have been broken, and the concept of innovation-driven development enjoys popular support. The inputs in innovation investment have increased substantially, and innovation carriers and achievements emerge in great numbers. The industrial structure is further optimized, and a new engine for economic growth is forming. In Shanghai, for example, the overall research and development expenditure was 3.8% of the city’s GDP in 2016, invention patents granted increased by about 40%, and economic growth speed reached 6.8%, exceeding the national average for the first time. Industrial added value of the tertiary industry in the city’s GDP rose above 70%, and an industrial structure with emphasis on the service economy has taken shape.

Thirdly, a system and mechanism for promoting green development has gradually formed, effectively curbing further deterioration of the ecological environment. With the implementation of the new development concepts, the recognition of lucid waters and verdant mountains as invaluable assets has been widely established, and the traditional GDP-dominated concept of development has gradually turned towards the new development concepts, environmental protection input increases greatly, and energy consumption per unit of GDP and emissions of major pollutants are in decline. In 2016, Shanghai’s environmental protection input in the city’s GDP remained at around 3%, energy consumption per unit of GDP decreased by over 3%, the annual average concentration of PM2.5 lowered to 43μg/m3, down 14% year on year, and the city’s inefficient construction land was reduced by 7.3km2.

Fourthly, urban-rural and regional coordinated development has made great progress, with weakness in development strengthened. Regional integration represented by Beijing-Tianjin-Hebei integration has achieved major breakthroughs, Yangtze River Delta integration is further advanced, the income gap between urban and rural residents has further narrowed, excellent traditional Chinese culture has been gradually restored, cultural confidence is remarkably improved, and social governance capability is greatly strengthened. In Shanghai, the income growth of rural residents has been faster than that of urban residents for eight consecutive years, and the infrastructure level and public service ability in the suburbs has been notably enhanced.

Fifthly, the people-oriented development concept has been practically implemented, which greatly increased public satisfaction and the sense of gain. To be specific, employment policies are more active and effective, the employment situation is generally stable, inclusive, and fundamentally, people’s livelihood construction is greatly advanced, the livelihood guarantee network is tighter, and the income growth of urban and rural residents is in step with economic growth. In Shanghai, the per capita disposable income in 2016 increased by 9% from the previous year, 9% and 10% respectively for urban residents and that of rural residents, which were 2.2% and 2.4% higher than GDP growth speed.

II. Problems

In practice, there are also problems that need to be solved in implementation of the new development concepts:

Firstly, the economy faces increasing downward pressure, which restricts implementation of the new development concepts. With increased downward pressure, it is more difficult to double resident income, narrow the income gap, and keep economic growth and environmental improvement; the growth of fiscal revenue lacks momentum, influencing equalization of basic public services and improvement of livelihood guarantee; risks in economic operations increase, restricting opening-up of RMB internationalization and finance. In particular, real estate bubbles and high housing prices lead to a crowding out effect in mega cities, which greatly inhibits innovation development.

Secondly, the five development concepts of collaborative promotion are not enough; a linkage development mechanism has not been established. The key of implementing the five development concepts lies in overall promotion, which is the fundamental difference between the new concepts and the past concepts. The concepts have achieved great effects individually but are not inter-connected enough. In the case of Shanghai, how to realize inter-connected construction of the pilot free trade zone and the scientific and technological center, so as to promote innovation with opening-up? How to realize ecological protection and residential income growth in the construction of Chongming world-class ecological island, so as to achieve positive interaction of green development and regional coordinated development? How to further promote integrated development of Shanghai and the Yangtze River Delta, so as to form an inter-connected development mechanism at regional level? All are issues to be further researched and are problems awaiting solution.

Thirdly, some system, mechanism and ideological barriers that restrict implementation of the new development concepts need to be overcome. Some places and departments haven’t completely changed their traditional concepts, thoughts, and ways of work, which are soft constraints at system and mechanism level for the implementation of the new development concepts. For instance, free trade zones in the world generally exercise tax reduction or exemption policies. Shanghai pilot free trade zone aims to become a free trade zone with the highest degree of openness, but there hasn’t been much breakthrough in tax policy. Furthermore, a preferential tax policy for introducing high-level talents is yet to be solved.

Fourthly, systematic integration of relevant policies isn’t sufficient, affecting the implementation effects. The implementation of the new development concepts requires systematic integration of policies. However, due to departmentalization, when a reform policy comes out, tax, legal, foreign exchange and supervision departments can’t follow up effectively with corresponding implementation plans, thus affecting the implementation results. For instance, in order to enlarge talent introduction, Shanghai pilot free trade zone doesn’t include setting up talent intermediaries in the Negative List, but shareholding and registered capital requirements of the human resources and social security department keep some foreign enterprises from getting a license.

III. Solutions

In light of the problems, we must accelerate the formation of a systematic policy system, with the new development concepts as the guide and the supply-side structural reform as the theme, to lead higher-quality, more efficient, fairer and more sustainable development of the economic society.

Firstly, we must always uphold development as the primary task and lead development with the five development concepts. Over the past 40 years of reform and opening-up, the key to our considerable achievements in economic development is sticking to development as the primary task, so that our overall national strength and people’s living standards are greatly enhanced. There are economic, social and ecological problems in the process, but the problems arising in development can only be solved through further development. Further development needs the guidance of new development concepts. It is the only way to uphold development as the primary task and solve new contradictions and problems in development. The Chinese economy is going through a transition of development pattern, and economic development enters a new normal. Generally speaking, China is still in the primary stage of socialism and in danger of falling into the middle-income trap. Given the new development stage, and the complicated and changeable domestic and international situation, we must continue to uphold development as the primary task and guide development with the five development concepts so as to overcome the middle-income trap and realize the Chinese dream of national rejuvenation.

Secondly, we must always implement the five development concepts with an overall and comprehensive vision. The five development concepts are overall guidelines for the current economic development, so all aspects and tasks of economic development must be guided by the concepts. In actual work, we must look at the five development concepts as an inter-connected body, and implement the concepts together and comprehensively, rather than emphasizing individual concepts or some of them. For example, the transition to new from old economic engines involves resettlement of a number of those laid-off. How to scientifically and reasonably coordinate various social resources, to guide reemployment and strengthen government’s livelihood support, falls into the category of innovation development and embodies the concepts of coordinated and sharing development.

Thirdly, we must conscientiously promote systematic integration and coordinated advance of various reform measures. Efforts must be made to comprehensively sort out various reform measures, strengthen evaluation and tracking of the reform policies implemented, intensify responsibility ascertaining, target management and coordination, promote department coordination, superior-subordinate coordination and government-society coordination, and perfect the working mechanism featuring division of labour, individual responsibility, and joint promotion.

Fourthly, we must form systems, mechanisms, and institutions for the implementation of the five development concepts with new opening-up and reform breakthroughs. Efforts must be made to work out free trade zone tax policies according to the aim of building a free trade zone with the highest degree of openness; study tax policies for introducing high-level talents to meet the needs of building a great innovation nation; study and work out the schedule and road map of RMB internationalization to promote global trade liberalization. Through daring breakthroughs and trials, we will develop paths and mechanisms for pressing reform with opening-up and promoting implementation of the new development concepts with opening-up and reform.

(The author is Vice President of Shanghai Academy and Deputy Director of the Development Research Center of Shanghai Municipal People's Government)