China’s Next Agenda

While China remains a complicated puzzle, the authorities are clearly pursuing pro-market reforms designed to produce real annual growth of 6.5% or more during the next five years. If that target is missed, it will not be for a lack of effort on the part of the Chinese government.

CAMBRIDGE – I recently returned from Beijing, where I had spent a week talking with Chinese officials and attending the China Development Forum (CDF), the major annual gathering of Chinese and senior foreign officials and top business executives. The Chinese government had just released its 13th Five-Year Plan, and officials were eager to explain what it means for China’s future.

Although the latest plan contains a seemingly endless list of specific projects and goals, the major new theme this year is “supply-side restructuring,” a term that includes a wide range of policies aimed at boosting economic growth and living standards. The term “supply side” is intended to distinguish these new policies from the traditional demand-side measures of easy money and a slightly larger fiscal deficit that are already aimed at strengthening economic activity.

High on the list of supply-side policies is eliminating some of the excess capacity of state-owned firms in the steel and coal industries. This means shedding some four million workers, a number equal to about 0.5% of China’s workforce. The plan authorizes a special fund to provide assistance to those who remain unemployed. Experts believe that much more downsizing is needed; but the authorities are starting small to see how it works and to monitor the public’s response.

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