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Prof. Yao Yang: Three Challenges for Chinese Economy

Mar 14-2023   



On March 5, Premier Li Keqiang delivered the government work report in the first session of the 14th National People’s Congress. Following the historic event, Prof. Yao Yang, Dean of the NSD, was invited by the media to comment on the report.

 

He said that China has performed relatively well over the last five years, especially on the supply side and in 2021 (over 8% growth rate). There were some twists and turns in 2022 but adjustment to pandemic control has led the economy to bounce back into a good form. Major indices have shaped up well in the first two months of the year, portending solid economic performance in the whole of 2023, said Prof. Yao.

 

Commenting on the 5% growth target set out in the government work report, Prof. Yao said that it is a conservative one but within a reasonable range. He believed that it will come as no surprise if the actual growth rate reaches 5.5% or even 6%, so the market ought not be pessimistic.

 

The ‘two unwavering’ policy concerning public and private ownerships was highlighted in the report, just like in previous ones. Prof. Yao saw in it no change to China’s fundamental economic system and to the government’s support for private enterprises. However, execution of the policy might have gone astray in some cases; for example, some local governments tend to award government purchasing deals to SOEs, which then sub-contract to private firms by charging a commission fee. Also noticeable is that banks prefer SOEs to private firms when issuing loans. Consequently, some private enterprises have sought to introduce state capital and put on a ‘red hat’. Given the immense role played by private firms, Prof. Yao called for timely actions to ensure national treatment for them.

 

China aims to achieve basic realization of modernization by 2035. Prof. Yao said that three challenges will have to be surmounted, with the first one being the need to maintain an annual growth rate of no less than 4.7%. Secondly, the savings rate, currently at 45%, should stay above 35% up to 2035. The third challenge is to ensure continuity and stability in policy, which is a prerequisite for stabilizing market expectations.

Prof. Yao Yang: Three Challenges for Chinese Economy

Mar 14-2023   



On March 5, Premier Li Keqiang delivered the government work report in the first session of the 14th National People’s Congress. Following the historic event, Prof. Yao Yang, Dean of the NSD, was invited by the media to comment on the report.

 

He said that China has performed relatively well over the last five years, especially on the supply side and in 2021 (over 8% growth rate). There were some twists and turns in 2022 but adjustment to pandemic control has led the economy to bounce back into a good form. Major indices have shaped up well in the first two months of the year, portending solid economic performance in the whole of 2023, said Prof. Yao.

 

Commenting on the 5% growth target set out in the government work report, Prof. Yao said that it is a conservative one but within a reasonable range. He believed that it will come as no surprise if the actual growth rate reaches 5.5% or even 6%, so the market ought not be pessimistic.

 

The ‘two unwavering’ policy concerning public and private ownerships was highlighted in the report, just like in previous ones. Prof. Yao saw in it no change to China’s fundamental economic system and to the government’s support for private enterprises. However, execution of the policy might have gone astray in some cases; for example, some local governments tend to award government purchasing deals to SOEs, which then sub-contract to private firms by charging a commission fee. Also noticeable is that banks prefer SOEs to private firms when issuing loans. Consequently, some private enterprises have sought to introduce state capital and put on a ‘red hat’. Given the immense role played by private firms, Prof. Yao called for timely actions to ensure national treatment for them.

 

China aims to achieve basic realization of modernization by 2035. Prof. Yao said that three challenges will have to be surmounted, with the first one being the need to maintain an annual growth rate of no less than 4.7%. Secondly, the savings rate, currently at 45%, should stay above 35% up to 2035. The third challenge is to ensure continuity and stability in policy, which is a prerequisite for stabilizing market expectations.