Chinese economy to overcome difficulties, make new strides(2)

SEEKING PROGRESS WHILE MAINTAINING STABILITY

The Chinese economy is also thwarted by some deep-rooted obstacles, including excess capacity in certain industries.

Liu Shucheng, an economist and CPPCC member, said that, in 2014, China should remove excess capacity in certain industries, prevent risks of local government debt, calm rocketing home prices in some cities, and reduce enterprises' production and operation costs.

In the meantime, he added, China should also maintain a moderate economic growth and prevent structural unemployment.

Statistics show, by the end of 2012, capacity utilization of only 70 percent was registered in such sectors as iron and steel, cement, electrolytic aluminum, plate glass and ships.P Li, the CASS vice president, said the problem of excess capacity was related to a GDP incentive mechanism decided by an irrational development strategy, which should be reformed fundamentally.

The risk of local government debt, estimated at more than 20 trillion dollars by the end of 2013, is also an obstacle hindering the Chinese economy.

Jia, the Finance Ministry official, said, in order to prevent systemic risks due to lack of capital, it was imperative to set up a mechanism of early warning and emergency response for debt risks.

"The Chinese economy is in a crucial, painful moment of transformation and structural readjustment," said Feng, the State Council analyst.

"In the new year, we will face a tough test and should stick to the policy of seeking progress while maintaining stability," he said.

REFORM, INNOVATION NEEDED FOR BREAKTHROUGH

Facing fierce competitions worldwide in new industries brought by the recovery of developed economies, the Chinese economy in transformation needs reform and innovation to make a new breakthrough.

"We should speed up reform and make a breakthrough in innovation to occupy the high ground in the revolution of new technologies so that the Chinese economy can take a quantum leap," said Sun Pishu, chairman of Inspur Group and a deputy to the National People's Congress.

The IMF and Asian Development Bank predict the Chinese economy will increase 7.5 percent and the World Bank puts the figure at 7.7 percent, indicating China's growth will continue to lead that of all important economies.

"As China is promoting urbanization, industrialization, informatization and agricultural modernization, there is no problem with the fundamental driving forces to boost its economic development," Feng said, highlighting the key issue for the Chinese economy is whether reform and innovation can form core competitiveness.

Participants at the CPC meeting Monday decided to strive for new breakthroughs in major areas of reform, construct an open economy, push forward "high-level" opening up and foster new world-class competitive edges, with the emphasis on restructuring the economic system.

Analysts say the decision made at the meeting determined the policy frame of the central government's economic work this year and the upcoming two sessions will turn plans into actions.

"Reform will become the theme of this year's economic work," Jia said, adding that reform measures would be carried out to promote development, adjust economic structures, transform the mode of economic growth and improve people's living standards.

The "engine" of this round of reform should be restructuring the economic system, according to Yang Weimin, vice head of the Office of the Central Leading Group on Finance and Economic Affairs, a key economic policymaking institution.

The fundamental issue in China was development, which faced a number of difficulties and risks, Yang said, indicating only accelerating economic reform could inject more dynamism into development.

China's top oil refiner Sinopec took a first step in reforming the country's inefficient and wasteful state-owned enterprises.

Sinopec announced on Feb. 19 that it would bring in social and private capital to jointly market and sell its oil products, the first opening up of the largely monopolized area.

The move was seen to echo the decision made at the third plenum of the 18th Communist Party of China Central Committee last November to give the market a decisive role in the economy, recognizing the private sector's indispensable role in fostering economic growth and job creation.

Other dramatic measures such as improving the budget management system, introducing a property law and establishing a unified rural-urban construction land market are expected to add more vitality to the Chinese economy.