Source: Qiushi

Since the 18th National Congress of the CPC Central Committee, with Comrade Xi Jinping at the core, a major judgment has been made on China's economic development into the new normal state: a policy system that is guided by the new development concept as the main line of supply-side structural reform, which is moving the economy towards better quality, higher efficiency, greater equity, and sustainability. This year, 2017, is the year for deepening the supply-side structural reform. We must win this tough battle, to make a breakthrough and ensure a guiding role of the reform.

I. Doing well in the supply-side structural reform is critically significant

Standing at a new historical starting point, the wide-ranging deep reform mapped out at the Third Plenary Session of the 18th Central Committee of the CPC is a comprehensive reform that covers economic, political, cultural, social, ecological, civilization, Party building and other fields, and is committed to achieving modernization of the national governance system and capability. That makes it very different from previous ones. Nevertheless, reform is not marching in the same pace. We need to choose a main clue and a spot from which to make a breakthrough, so as to promote social development in a focused manner.

Economic system reform has always been the focus of China's reform. As the reform on the economic system has made remarkable achievements, the framework of the socialist market economic system was basically established. Today, to achieve an overall effect in the reform of the economic system, political system, cultural system, social system and ecological civilization construction system, reform of the economic system is still a key area of reform. To promote supply-side structural reform is a strategic thinking we must establish for the macroeconomic management under the new normal. A body of facts point to the root cause of the major problems facing China's current economic development laying in the supply side and economic structure. Economic system reform must find a way out from the supply side and the structural reform. Therefore, to deepen reform in a comprehensive manner, we must start from the supply-side structural reform and carry out all work by concentrating on this major task.

From the link chain of supply-side structural reform - economic system reform – deepened comprehensive reform, we can clearly see that the supply-side structural reform is the focus of continuous economic structure reform. Via reform, more must be done to promote capacity reduction, de-stocking, deleveraging, cost reduction, and improvement of underdeveloped areas. Administration streamlining, power delegation, regulation improvement, and service optimization, are major contents of the supply-side structural reform. Continuous increase in the supply of effective systems is the only road we must take to promote deep and comprehensive reform under the new normal of economic development.

II. Remarkable achievement has been obtained in supply-side structural reform

At present, we have made positive progress in supply-side structural reform, with obvious effect in capacity reduction, de-stocking, deleveraging, cost reduction and improving underdeveloped areas. In terms of capacity reduction, some key industries, including the steel and coal industries, fulfilled the planned annual tasks ahead of time last year. Regarding the de-stocking, the area of commercial housing for sale decreased significantly. In 2016, the total area of commercial housing for sale stood at 695.39 million square meters across China, down 3.2% from the previous year. With regard to deleveraging: the debt ratio of the corporate sector has stabilized and dropped somewhat. Measures have been taken to stop financial institutions from being distracted from their intended purpose, which is conducive to the development of the real economy. In terms of cost reduction, the cost of taxes & fees, labor, land, logistics, financing, and institutional transaction charges that enterprises have to bear has declined to varying degrees. Corporate tax is expected to further drop by about 350 billion yuan, involving about 200 billion yuan of corporate fees. Regarding how to improve underdeveloped areas, more investment was made in ecological protection, environmental governance, infrastructure construction, scientific and technological innovation, people's livelihood construction, water management, primary industry and other weak areas. In this way, weak areas of economic and social development have been effectively improved.

As various measures are taken, one by one, to carry out the supply-side structural reform and a new economic policy framework gradually takes shape, China's economy is showing a stable and improved momentum. Gross Domestic Product (GDP) grew by 6.9% YOY in the first quarter of 2017; supply-side structural reform also produced a more obvious systemic effect; the economic system keeps improving in terms of supply & demand and macro & micro, which makes for a stable economy with good momentum for growth. At the same time, the economic structure optimization and shift of the old and new drivers are further accelerated.

II.Unswervingly promote supply-side structural reform

Promotion of supply-side structural reform is an arduous task, having a crucial bearing on the overall situation and great significance. At present, China's economic operation and operating mechanism is quite different from the past. It is necessary to promote and deepen supply-side structural reform with different ideas and strategies. We should avoid responding to the new situation and dealing with new problems with old thinking and must make timely adjustment to reform thinking, methods and measures. In accordance with the requirements put forward by the General Secretary Xi Jinxing at the 38th collective study of the Central Political Bureau, to promote supply-side structural reform, we should focus on the four major relations, namely, the relation between the government and the market, that between the short and long term, between subtraction and addition, and between supply and demand.

Supply-side structural reform involves a gradual and relatively long-term process. Despite that the reform has made some positive progress, and that the contradiction between supply and demand has to some extent eased, in general, supply and demand imbalance and uncoordinated structural problems are still very obvious. On the basis of consolidating existing achievement, we must improve policies and measures according to the new situation and problems that keep emerging, avoid short-sighted thinking and following the old route, and ensure a long-term effect of supply-side structural reform. At present and in the near future, we should make further efforts to ensure capacity reduction, de-stocking, deleveraging and cost reduction, further improve underdeveloped areas, deepen structural reform of the agricultural supply front, rejuvenate the real economy and encourage the real estate market to develop steadily and healthily, so as to open up a supply and demand channel, strive to achieve a new dynamic balance between supply and demand, and make constant substantive progress in the supply-side structural reform.

(The author is a member on the Academic Committee of Shanghai Academy and President of the Institute of Economics, CASS)