shinjin liu, vice minister of drc

7/28/2019 Shinjin Liu, Vice Minister of DRC

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China 2030Background and Key Elements

Development Research Center of the State

Council, China

November 2012

Liu Shijin


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Background to China 2030:Building a Modern,

Harmonious and Creative High Income Society

Chinese and world bank leaders agreed to conduct

a jointly research in 2010.

First time to organize a joint team by a Chineseresearch institute and World Bank, which included

more than 50 experts.

Kicked off since Nov 2010, finally released in Feb

2012


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The research mainly focused on the development

vision which is to build a modern, harmonious and

creative high income society in China by 2030.

Besides overall guidance, five supporting groups

were set up , which correspond to five branches of

the vision research: structural reform, innovation,

green development, social development ,China

and the rest of world.


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A lot of field studies, seminars and background

papers

The preliminary report was discussed at a high-levelinternational conference held in Sep 2011, though

which we got comments and suggestions from many

first-class experts as well as the Chinese ministries

and local governments

The final version, including an overview and six

supporting reports, builds on the these comments

and suggestions.


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The joint research gave full play to the

complementary advantages of China and World

Banks experts. These experts from World Bankare skilled in international analysis and expertise,

while Chinas counterparts know well about

domestic issues as well as macro conditions.


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Key Elements of Historical Experience How to recognize the experience of Chinas

development in the past? The so-called ChinaDevelopment Model has caused widespread

concerns. Five important characteristics:

Pragmatic and effective market-oriented reforms

Finding the balance between growth, social andmacroeconomic stability

Promoting the competition across regions

Promoting the integration of domestic market

Steadily integration with the global economy


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Challenges and Opportunities

In the next two decades, both international anddomestic development environment would change a lotand will be much different from that during the past

three decades.

International environment:

The process of globalization would not step back

regardless of trade protectionism

The balance of power in developed countries andemerging economies will change significantly

New technological breakthroughs

Structural reforms of the international monetary

system and global governance


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Challenges and Opportunities Considerable advantages and opportunities: high savings,

increasingly skilled labor and the potential for furtherurbanization.

The risks and challenges to address at the same time:aging society, rise income inequality, environmental deficitand external imbalances.

With reference to the development path of other

successful catching-up economies, the annual potentialgrowth rate of Chinas GDP output will be expected todecline to around 9% in 2010-2015, to about 7% 2015-2020, and then to 5%-6% during 2020-2030


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Development Vision

The predicted results are not low when compared tothe average growth rate of the whole world.Considering the challenges and opportunities mentionabove, the report proposed a vision of building amodern, harmonious and creative high-incomesociety in China by 2030

By 2020, Chinas GDP at current prices will be close

to or exceed that of the United States

By 2020, Chinas GNI per capita will be close to orreach the threshold of high-income groups


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Projected growth pattern assuming steady

reforms and no major shock


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GDP growth prospects: China Vs.US

6

21

54

182

1523 38

95

0

50

100

150

200

2010 2015 2020 2025 2030 2035 2040 2045 2050

G

DP

China

US

GDP(Trillion $, atcurrent price)


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GDP growth prospects: China Vs. major

developed countries

10%

23%

39%

60%

11%

26%

44%

70%

0%

20%

40%

60%

80%

2010 2015 2020 2025 2030 2035 2040 2045 2050

GDP/GDP

GDP/GDP

GDP per capita: China/the average of UK, France,Germany and Japan

GDP per capita:China/US


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The core of new strategy is to transform the

government roles To achieve the vision, China needs to accelerate the

adjustment of the existing development strategy.

The core measure is to transform government roles and to

redefine the relationship between the government and themarket, enterprises and society. When a catching-upeconomy gradually close to technical frontiers,government should reduce or even exit from the directlyintervention in the allocation of resources and play agreater role in providing public goods and services, partlybecause of increasing uncertainties.

More important is to provide invisible public goods andservices including institutions, regulations and policies.


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Major characteristics of new strategy

More emphasis on improving the quality of growth

while continuing to raise the income level

To achieve a more balanced and sustainable growth

To strengthen the innovation and creativity

To fully exploit the potential of human resources

To pay more attention to combined effects of market,

the rule of law, values and moral

Therefore, the report proposed six pillars ofthe new strategy


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Pilliar1:Structural reform for a market-based

economy with sound foundations

State-owned capital should be used solely or mainly forthe provision of public goods and services, which rangefrom national defense at one end to infrastructure, reliable

energy supply, postal service, social protection, and basicR&D at the other end

The government should securitize its implicit equity inSOEs and strengthen the management and oversight onthe state-owned capital and the use of its return.

To reduce barriers against entering into the strategicindustries for the private enterprises and enhancecompetition and efficiency


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Pilliar1:Structural reform for a market-based

economy with sound foundations Financial sector: promoting the liberalization of interest

rate step by step, regulating capital markets andreshaping the financial regulatory framework.

Labor market: accelerating the reform of householdregistration system, improving labor force participationrate, and revising polices on employment, wage-setting,social security and tax.

Land market: improving the agricultural landexpropriation to protect farmers' interests, increasing theefficiency of land use, and reducing the reliance of localgovernment on land-related income.


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Pillar2: speeding up innovation

There is no significant impacts on boosting productivitypurely through increasing the R&D expenditure sharein GDP. Government should pay more attention to

institutional reforms instead of the development ofspecific technologies.

Encouraging large-scale private enterprises to play theleading role in the industrial innovation, while actively

promoting the development of innovative SMEs. Attracting more multinationals to set up local R&D

institutions, which will help to the upgrading ofdomestic industries


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Pilliar2: speeding up innovation

Increasing the proportion of universities and researchinstitutions which are engaged in basic research, andimproving the research capacity of universities

through further opening-up

Strengthening vocational training and improving thequality of human capital

Developing the innovative cities


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Pillar3Seizing the Opportunity of Green

Development

Green sources of economic growth:

To recognize that green development can bring about

new opportunities to accelerate technical

breakthroughs and sustain growth, in stead of

additional burden.

Traditional sectors grow greening

New green industries

Emerging service industry for green products andservices


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Pillar3Seizing the Opportunity of Green

Development

Advantages: available technology, markets,

advantage of backwardness, resources,

industrialization The key is to play the role of government

appropriately and form the long-term incentives to

promote green development in accordance with

market mechanism.


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Pillar 4Equal Opportunity and Basic

Security for All

Income inequality in China is attributed to both the

human capital diversity and the inequality of

opportunity related to employment, social security

and other basic public services and social mobility.

To implement social policy for development because

each person is regarded not only as a consumer, but

also as a producer and innovator


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Pillar 4Equal Opportunity and Basic

Security for All

Strengthening the development of human capita and

the provision of basic social welfare (but avoiding

welfare dependency); improving the opportunity

equality related to education, social security,employment and business; giving full play to each

person's potential.

Most important is to improve institutions related to

pension, health care, education, employment, etc.


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Pillar5Establishment of the sustainable financialsystem compatible with the transformation of

government functions

The share of China's fiscal revenue in GDP has been notlow and the potential to increase further is limited

Key reforms:

Adjusting the structure of fiscal expenditure to make it

compatible with the transformation of government

functions

Addressing the mismatch between fiscal resources and

expenditure responsibilities of local government

Improving the efficiency of revenue mobilization

Strengthening fiscal discipline


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Pillar 6Achieving mutually beneficial relations

with the rest of world

Key PrinciplesOpen markets, fairness and equity,mutually beneficial cooperation, global inclusiveness,and sustainable development

Major fields to open up further

Upgrading industrial chains and opposing trade

protectionism.

Services liberalization to promote domestic competition

Speeding up the outwards direct investment and promotingthe development of transnational corporations in China

Steadily liberalization of capital account and

internationalization of the RMB

Recognizing the importance, conditions, transparency and

safeguards of foreign aid


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Pillar 6Achieving mutually beneficial relations

with the rest of worldWith the improvement of national status and per capitaincome, China, as an important stakeholders amongglobal governance arrangements, will be in line with the

mutual interests of China and other economies

Participation in global governance will be an process ofmutual adaptation between China and the rest of world.

Large scale of economy but low per capita income

Participating the rule-makings and reforms related tointernational trade and capital flows

Promoting the global climate negotiations and the reformof the international financial system


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Overcoming resistance and strengthening

coordination to implementing reforms Sequencing reforms: highest priority should be

placed on the reforms in the fiscal, financial andenterprise sectors, which boost reforms in other

fields. Overcoming opposition to reform: vested interests,

those whose are likely to be hurt from reform,opinion makers.

It is necessary to find a proper balance amongvarious stakeholders in order to get full support toreform


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Overcoming resistance and strengthening

coordination to implementing reforms To effectively promote the reforms and ensure the

ultimately successful implementation of the newstrategy, it is essential to not only have a strong

leadership of the central government, but also toencourage local and grass-roots reform experiments.

Focus on management of macroeconomic and otherrisks during the process of transition and maintain a

proper balance between the solution to short-termproblems and long-term strategy


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Thank you!

shinjin liu, vice minister of drc

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