2016

Demand and supply must "walk on two legs."

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In this year's government work report, the two parts of "strengthening supply-side structural reforms and enhancing the momentum of sustained growth" and "tapping the potential of domestic demand and opening up greater space for development" have the same weight. Some representatives and committee members from the economics community believe that this deployment fully reflects the central government's strategic thinking of "focusing on strengthening supply-side structural reforms while moderately expanding aggregate demand.

Emphasizing both supply and demand, such as walking on two legs, is a balance between economic analysis and macro-management. For a large developing country like China, it is necessary to accelerate supply-side reforms to solve structural problems, increase total factor productivity, and achieve sustained economic growth and long-term prosperity; it is also necessary to strengthen demand-side management to solve the total problem, and "brake" the economic downturn. Stable growth "ignition", and then form a stable and lasting domestic demand support. An objective analysis of the current Chinese economy shows that insufficient effective supply and insufficient effective demand exist at the same time. Some economists pointed out that if only the supply is insufficient, then whether it is "effective" or "ineffective", it should be reflected in the rise of the price index. However, the reality is that PPI has experienced negative growth for four consecutive years, and CPI growth in 2015 hit a six-year low. Obviously, this cannot be simply explained by "insufficient effective supply". The problem of insufficient demand is equally serious. Therefore, while accelerating supply-side reform, the work of tapping the potential of domestic demand must not be relaxed for a moment.

The fundamental role of consumption in stimulating economic growth should be enhanced. Among the driving forces for steady growth, consumer demand is the largest and has the most direct relationship with people's livelihood. To release the consumption potential, it is necessary to further optimize the consumption environment. While stabilizing traditional consumption, we should continue to cultivate and expand new consumption hotspots, such as pension, health, tourism, education, entertainment and so on. Of course, this is also inseparable from supply innovation, breaking down policy barriers, increasing the supply of goods and services in the market, and activating to meet multi-level consumer demand, which can provide more choices for consumption upgrading.

The key role of effective investment in stabilizing growth and adjusting structure should be played. Some time ago, the responsible comrades of the National Development and Reform Commission proposed to "grasp investment with confidence". This signal suggests that, while over-reliance on investment is not desirable, it is equally undesirable to bias or underestimate the role of investment. We should study and summarize past experiences and lessons, and actively expand effective investment in view of the shortcomings in infrastructure, people's livelihood and new urbanization. for example, the construction of urban underground comprehensive pipe corridors, rail transit, smart grid, all kinds of pollution control, as well as speeding up the citizenization of agricultural transfer population, promoting the construction of public service facilities, and so on. It should be noted that, on the one hand, public investment should improve efficiency and rational layout, on the other hand, it should also mobilize the enthusiasm of social investment, and at the same time strengthen the convergence and coordination of fiscal, monetary, investment, industry, price and other policies, so as to form a superimposed amplification effect of increasing effective demand.

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