Reform to refresh miracle

Updated: 2014-12-03 07:40

(China Daily)

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The central government is using additional money, in direct investment projects and in credit, to boost the economy's short-term growth, after some latest data showed weakening signs.

People are watching the world's second-largest economy closely as its leaders will soon convene for their annual economic work conference to chart its growth in 2015.

Analysts share a few basic observations: That China's economy can no longer grow as it did in the past three decades, that it will see a lower-than-average growth rate in 2014 and likely an even lower rate in 2015, and that many of the reform plans have yet to be fulfilled one year after they were made at the Third Plenum, a key meeting of the Party's Central Committee in 2013.

Some of them point out that China's task now looks much more complicated than the miraculous change it has undergone over the past three and half decades.

Indeed, China is a different country now. The main body of its labor is formed by more highly educated young people ready to take on urban services jobs, rather than crude farm and factory operations.

Its industry can no longer be profitable by manufacturing large quantities of cheap merchandise for overseas buyers.

Its domestic market, in the meantime, is showing a yawning gap between the supply and demand for decent services for health, education, leisure and small businesses.

Equally important, the old way is environmentally unsustainable, the ugly smog in many cities being a warning sign. A change has been pledged in the climate deal China signed with the United States in November.

It is not hard to predict that with the above factors, if China continues to rely only on the market forces at work, it is likely to drift into an all-round crisis.

But if it uses government intervention to overcome the inertia only to keep the existing businesses artificially afloat, it still won't give the economy the most important help. It may create zombie companies after a drain of valuable human resources, capital and opportunities.

While taking short-term measures to prevent wild cyclical fluctuations, the government cannot afford to waste more time in reform, it will have to encourage the new industries and services to absorb the country's new labor. This is the only way to build its long-term growth momentum.

That will require the political and legal infrastructure needed for more businesses, at minimum, to crack down on official corruption, which has driven many small enterprises to profitless closure in the past decade. The recently concluded Fourth Plenum of the Party's Central Committee, themed on boosting the rule of law, can be seen as a necessary insurance in this regard.

All long-term things take time. But the choice is clear: If China cannot change its present development model, it will not avoid a continuing slowdown, and even a stagnation. If it sticks to reform and accomplishes it, however arduous the task, it will get nothing short of a new miracle.

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