On March 5, 2017, Chinese Premier Li Keqiang delivered the Report on the Work of the Government at the Fifth Session of the 12th National People’s Congress. In this report, China set the projected 2017 goal of “GDP growth of around 6.5 percent, or higher if possible in practice.” This goal is a reasonable judgment based on China’s comprehensive understanding of both the domestic and international situations, and China will achieve this goal.
At present, China’s economy is still growing in an L-shaped path, and downward pressure on the economy continues to mount. However, due to the gradual stabilization of the world economy and positive effects brought by China’s domestic measures to promote steady growth, China’s GDP growth rate reached 6.7 percent in 2016. Taking both the domestic and international macroeconomic environments and conditions into consideration, the Chinese economy in 2017 will be able to make progress while maintaining stability, and achieve the goal of “GDP growth of around 6.5 percent, or higher if possible in practice,” as Premier Li Keqiang stated in the Report on the Work of the Government. In reality, China may realize a growth rate higher than 6.5 percent.
The 2016 performances of major international economies have shown good signs: the economy of the European Union has seen obvious recovery. The United States has maintained an economic growth rate of about 2 percent. And most new emerging markets have hit rock bottom and begun to enter the slow revival phase. It is expected that these above-mentioned economies will continue their slow recoveries in 2017. According to China’s monthly foreign trade statistics in 2016, the country’s drop in import and export volumes tended to narrow month by month, and its exports witnessed marked improvement. Thus, the external market demand for China’s economy in 2017 will be stabilized. At the same time, with the progress of China’s new round of opening up, with the construction of projects under the “Belt and Road Initiative” as the core, China will gradually explore greater international space, which is conducive to the country’s exports of high-level products and technologies.
During the implementation of measures for maintaining steady growth in 2017, both the number and the volume of domestic infrastructure investment projects will see growth. As PPP (Public-Private Partnerships) have gradually become the mainstream pattern for investment and financing, construction projects will be accelerated in 2017. The brand new mode of investment is expected to contribute 15 percent or even more of infrastructure investment growth. And infrastructure investment accounts for nearly 30 percent of fixed assets of the whole society. In 2017, a decrease in investment in the real estate sector is inevitable, which may seem harmful but will actually turn out to be beneficial to the economy. Slowing investment in real estate is the major structural condition for guiding real estate financial loans into the real economy and the stock market. Increasing investment in the real economy will fuel the transformation of the manufacturing industry, and increasing money in the stock market will be conducive to the program “Mass Entrepreneurship and Innovation.” And more money in these two sectors will promote the reform of the financial system and accelerate improvements of the financial market.
In the realm of consumption, as domestic consumption in recent years has maintained a relatively high growth speed of around 11 percent and the tertiary industry’s contribution to the national economy output and employment growth has increased dramatically, domestic consumption will give steady support for economic growth. Besides, the growth rate of overseas travel and shopping has reached as high as 20 percent, which proved that the major domestic problem is the lack of efficient supply, instead of insufficient demand.
Premier Li has stressed in the Report on the Work of the Government that the implementation of the five priorities (cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening areas of weakness) will be deepened through tougher measures on reform, which can force or guide enterprises into the process of transformation and upgrading and can create huge demand for new technologies, new equipment, and new products. As a result, investment in the real economy, especially the manufacturing industry, will be stimulated and a positive economic circle will come into being.
The author is a professor and doctoral advisor at the Economics Department of the Party School of the Central Committee of the Communist Party of China (CPC).