Real economy faces real challenges(2)

Supporting policies

The real economy is fundamental to stabilizing economic growth. The most urgent for China now is to consolidate development of the real economy to overcome the crisis. Although the consumer price index grew by 1.8 percent in July, indicating that inflation is alleviated, top decision-makers have not formulated further measures to stimulate the economy.

The central bank's hesitation in making decisions may deliver two signals to the market: Decline of the real economy at present is still acceptable; and the central bank is not yet optimistic about the price tendency in China, especially when striking price hikes of farm produce in the international market have added to inflation worries of the decision-makers.

However, stabilizing growth is one of the focuses of the Central Government, and to stabilize growth, the government needs to revitalize the real economy. Liu Shangxi, Deputy Chief of the Research Institute for Fiscal Science of the Ministry of Finance, said measures of the government supporting the real economy mainly focus on upgrading and transforming the industrial structure, as well as financing.

Liu said there are serious problems in China's economic structures. Under the downturn pressure, economic restructuring is accelerated and dilapidated production capacity and enterprises are being phased out, making it difficult for enterprises to develop. Particularly, some enterprises are faced with financing difficulty and declining economic returns during the process of technology transformation. "The government should figure out ways to combine government policies with bank credit in order to provide a good environment for enterprises. The key is to promote economic restructuring, not just preserving those dilapidated production capacities and enterprises that should have been eliminated," Liu said.

Liu believes the government should first carry out structural tax reduction to enterprises, reducing their burden, improving the business environment and promoting their transformation and upgrading. The government should also solve the financing difficulty for enterprises, especially for small and micro enterprises.

Yu Gang, Vice Chairman of the CFLP, said what enterprises look forward to most from the government is tax reduction and more financial supporting policies, so that they will have good prospects of profits and be better motivated to production.