Staying committed to a long-term, problem-oriented approach

Editor's note: Zhu Yanjian is an associate dean of the Academy of Financial Research, Zhejiang University. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity. In this special commentary series "China's Economy: Five Coordination Priorities for 2025" by CGTN, experts analyze the five coordination priorities highlighted at the Central Economic Work Conference. The series offers an in-depth analysis of China's economic strategies and future potential.

The Central Economic Work Conference pointed out that the country should coordinate the relationship between an efficient market and an effective government, fostering a flexible and well-regulated economic order. This dialectical balance is an important feature of China's state governance and also a manifestation of its traditional cultural characteristics. The emphasis on a "well-regulated" order does not suggest an excessive degree of government intervention. Instead, it aims to enhance the overall efficiency of resource allocation in the implementation of specific reform measures, an approach worth anticipation.

On a conceptual level, the key tasks outlined must be viewed as a cohesive whole. In addition to balancing an efficient market and an effective government, the conference highlighted the necessity of coordinating the relationships between total supply and demand, cultivating new drivers and upgrading old ones, optimizing incremental growth and revitalizing existing assets, and improving quality while increasing the total output. Coordinating the relationship between an efficient market and an effective government is a prerequisite for achieving the goals. Such keywords as effective government, demand management, upgrading growth drivers, revitalizing existing assets, and increasing the total output, will more actively align with future policy efforts.

So, what areas might see a more effective government, synergizing with market flexibility better to maintain a stable economic order, meet growth demands more effectively, and inject vitality into development? The following areas warrant attention.

First, balancing short-term and long-term development.

In China's current context, counter-cyclical policies and structural adjustments should be integrated and advanced simultaneously while also making preparations for long-term development. Short-term protective measures against economic downturns are inefficient in strengthening long-term positive expectations and may jeopardize the credibility of policies. In response, the Chinese government is actively addressing topics of concern, such as the protection of private entrepreneurs' rights and interests and the unusual growth of local non-tax revenues, aiming to adjust societal expectations and boost social vitality. These measures are anticipated to gradually take effect, amplifying the transmission effect of macroeconomic policies.

Second, balancing production and distribution.

A stable economic order can be reflected in many ways, but the first and foremost is the dynamic alignment of supply and demand. An effective government not only seeks to increase scale in response to the changing times but also adopts a more progressive decision-making mindset. Some initiatives are vital to our long-term prospects, such as placing greater emphasis on fostering and supporting ultimate domestic consumption, ensuring stable cash flow for social production sectors by expanding the consumer base and improving long-term consumer confidence, and supporting industrial upgrades and innovation-driven development. Over time, there will be significant shifts in income distribution and resource investment structures. The organic coordination between production and distribution will foster a virtuous and sustainable domestic economic cycle with moderate inflation expectations. To boost consumption, long-term reforms such as reducing social security contributions, easing personal income tax, promoting wage growth, and supporting households should be prioritized. Additionally, policies should focus on protecting and empowering the middle-income and higher-income groups to stimulate employment and ensure sustainable income growth for a broader population.  

Third, balancing relationship between central and local governments.

The behavioral relationship between central and local governments is a key to understanding the operation and development of the Chinese economy and society. Coordinating the relationship between an efficient market and an effective government and building a unified national market requires new reform plans and a new equilibrium in central-local relations. This will involve areas such as functional responsibilities and the fiscal and taxation systems. Furthermore, there is ample room for improvement in promoting the quality and effectiveness of industrial policies. For key sectors with supply bottlenecks, increased investment in innovation remains indispensable. However, moving forward, it is imperative to enhance central coordination and leverage private capital initiatives. For well-established industries, the focus should shift to offering greater support to traditional leaders in driving industry consolidation and strengthening governance along industrial chains, especially the rational regulation of emerging leaders. In this way, it is possible to prevent excessive involution and overexploitation from harming the core strength of upstream suppliers.

Fourth, balancing internal and external factors.

China's development now faces an increasingly complex internal and external environment, necessitating greater emphasis on forward-looking, complementary arrangements. Expanding into overseas markets helps businesses meet more diverse demands and enhance their international competitiveness. However, this needs more than just the market players simply fending for themselves. Instead, the governments must actively play their role in this process. There is significant potential for action in various areas. For example, efforts should focus on mobilizing private forces, reshaping training mechanisms to cultivate a diverse talent pool, and guiding companies to uplift their standards of business conduct. In addition, policies could be refined to manage cross-border capital flows in alignment with business needs, enhance the collection and management of overseas income taxes, streamline visa procedures for international employees, and resolve cross-border trade disputes. Moreover, it is equally important to conduct pre-assessments of qualifications for major projects, introduce regulations on the ownership of foreign investment entities, encourage the repatriation of overseas earnings as dividends, and establish a more systematic framework for safeguarding overseas investments.