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Monday, August 17, 2015, 09:42

Six big issues that the country needs to address

By China Daily
Six big issues that the country needs to address

Photo by Zhang Chengliang / China Daily

With the recent stock market rout, unimpressive growth data, and yuan devaluation against the US dollar, the Chinese economy seems to be in a particularly difficult stage.

The latest data release about industry and investment in July seems to suggest that to maintain even 7 percent growth in GDP (the economy’s annual target) would be a challenge in the third quarter, in contrast with the nation’s close-to-10 percent growth rate a couple of years ago.

The stock market sell-off and yuan devaluation are to some extent only the byproduct of an economy that seems to have been fumbling its way forward for too long — if not too slow in implementing its various programs to promote growth.

However, of all the business commentators, who can say how China could have avoided so many ugly difficulties? Who can say, to start with, that the apparently long and painful transition has been wrong in its general direction? And who can come up with an easier, if not better, alternative?

In fact, there is no alternative.

To walk out of the shadow of its present slow progress and heavy risk, each industry, or each part of society, needs a new solution.

All the difficulties that China is going through are the ones it must go through, sooner or later, if only it can maintain political stability. One thing to do at the leaders’ forthcoming Fifth Plenum, scheduled in mid-autumn, is not to lose sight of the big issues and long-range goals of the reform amid the mounting difficulties of micro-economic nature.

Of course, one big issue is the anti-corruption campaign and the attempt to trim the government’s approval powers. For almost three years, it has been making courageous progress. The anti-corruption campaign has a direct economic impact on restraining various government bureaucracies, large and small, central and local, from exploiting businesses, especially privately owned ones, by collecting endless levies and bribes.

Forging ahead with the anti-corruption campaign, especially to establish a new system to more effectively regulate the way in which officials deal with businesses, is essential.

Other than the anti-corruption campaign, there are several big issues that Chinese society hasn’t gotten around to fully debating or reaching a consensus on how to make a difference.

Issue one: The securitization of local governments’ debt takes both time and risk (in not being able to restrain them from incurring new debt). Local governments will be advised to sell some of their assets to private investors in one way or another, and to work with them in future local development projects.

China has yet to produce a successful experience in such public-private partnerships, through which to reduce local governments’ debt and public commitment.

Issue two: It is obvious that wages have been increasing too rapidly in recent years, making many manufacturers’ total costs higher in China than even in the United States, as they have complained.

If the government doesn’t want to interfere with labor costs, then it will have to try to lower other costs for businesses. At least, small service-sector companies, which generate most new jobs for society, should be exempted from some existing labor rules.

Issue three: In contrast with the rise in its general labor costs, there are a great number of retired teachers and medical workers in cities whose expertise and experience may well be tapped in a country that is suffering, at least in most areas, from a severe lack of the services they can provide.

Making it easy, through policies and related monetary rewards, for those individuals to run their own services can help the nation save a lot of resources.

Issue four: There has been some relaxation of the two-decade-old policy on single-child families — but only some. A complete revocation of the policy, along with all the benefits it used to bring about, will create considerable new demand.

Issue five: Education reform, despite all the talk, has been very slow to come about. Many university graduates are ill-prepared for the increased job demands of a more competitive and innovation-driven society.

Issue six: In a country with a highly centralized administration, the environmental protection system remains weak, and ridiculously so. Raising environmental and quality standards in every industry and in its products, and strengthening environmental law and law enforcement will help the country create new creditability and also many new jobs.

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