As China strives to sustain growth while the effectiveness of traditional demand-side policy support wanes, the country is turning to the other side, the supply side, for new vitality.
The country will take steps to expand aggregate demand while pushing forward "supply-side structural reform" in 2016 and beyond to support growth through new demand and productivity, top leaders at the annual Central Economic Work Conference agreed on Monday.
WHY NOW
China used to rely on stimulating the demand side, including investment, consumption and exports, to support growth. However, the effectiveness of such a strategy has lessened.
The economy experienced acute volatility in the mainland equity market,disappointing economic indicators and a currency devaluation this year. The government appeared to have done everything it could, including five interest rate cuts and massive investment in infrastructure, but that was not enough to spur the slowing economy. ( "That's because it [the demand-side support policy] is no longer the remedy for the disease," said Li Zuojun, a researcher with the State Council Development Research Center (DRC), a government think tank.
Li said China's most pressing economic issues lie in the supply side, not the demand side. As an example, Chinese shoppers are looking to Japan to buy heated toilet seats, indicating a supply-demand imbalance rather than any lack of money or willingness to spend.
Balancing under-supply in some sectors, is over-supply in others, presenting major challenges said Wang Yiming, DRC deputy director.
China's growth slowed to 6.9 percent in the third quarters, the weakest pace since the global financial crisis, and is widely expected to post its lowest rate in a quarter of a century this year.
