An economic balancing act: Optimizing resource allocation

Editor's note: Zhu Fangfei is the director and a researcher at the research department of the Institute for Public Policy of 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.

In December 2024, China's Central Economic Work Conference emphasized the need to balance the optimization of incremental growth with the revitalization of existing assets, aiming to comprehensively improve resource allocation efficiency. Optimizing incremental growth and revitalizing existing assets are key components of strengthening the macroeconomic governance system and important assurance to propel high-quality economic development. The focus of optimizing incremental growth lies in "optimization." It is essential to optimize resource allocation efficiency through a refined incremental resource structure. In contrast, revitalizing existing assets focuses on "revitalization," putting idle assets to work, integrating them into the national economic cycle, and ensuring the full utilization of scarce resources.

To effectively balance the optimization of incremental growth with the revitalization of existing assets, it is imperative to employ a range of policies, such as fiscal, monetary, industrial, and employment policies. Meanwhile, efforts should be made to manage assets and adjust liabilities, unleashing the vitality of various production factors, particularly innovation factors. Thus, the use of idle resources can be optimized and the development of new-quality productive forces accelerated. The ultimate goal is to maximize resource utilization and economic benefits, thereby driving high-quality economic growth.

In terms of revitalizing existing assets, it is crucial to fully utilize supportive policies to make effective use of idle and inefficient land, acquire and dispose of existing commodity housing, prudently resolve hidden local government debt problems, and promote industrial and corporate restructuring to improve the resource allocation efficiency of existing assets. Specifically, ongoing efforts should focus on optimizing the industrial structure of industrial parks across regions, encouraging the revitalization of idle and inefficient land in these parks. The implementation of the special refinancing bond program to service the outstanding hidden debts must be expedited to maintain an appropriate expansion of local government debt supply and curb the growth of new hidden debts. It is also imperative to maximize the use of local government special bonds and central bank re-lending funds for the acquisition and disposal of existing commodity housing. 

Efforts to revitalize existing industrial resources must be strengthened, capitalizing on current infrastructure to develop advanced manufacturing and nurture more projects that emphasize technological innovation, environmental sustainability, and job capacity. Meanwhile, market-oriented reforms must be pushed forward to establish and improve mechanisms for the exit and restructuring of market entities. This includes smoothing channels for corporate asset and debt restructuring, mergers and acquisitions, bankruptcy and liquidation, transfer of equity or property rights, and sale of assets or debts, ultimately improving the quality and efficiency of market restructuring and clearing. 

Regarding optimizing incremental growth, it is essential to support key national projects and fully harness the leading role of new quality productive forces. Technological innovation should drive industrial innovation, develop new industries, business models, and driving forces, lead in new directions, explore new frontiers, and expand new development spaces. Specifically, there should be increased support for technological innovation, particularly in areas like the digital economy, green energy, and high-end manufacturing, to drive technological breakthroughs and industrial structural optimization. 

Financial support for innovative enterprises should also be strengthened, alongside efforts to improve mechanisms for innovation-driven development and expand the applications of advanced technologies such as artificial intelligence. This will facilitate the digital transformation and intelligent upgrading of businesses. Moreover, further efforts should be made to unlock consumer potential and foster growth in consumption, especially in fields like digital and green consumption. Policy support should be increased to tap into the enormous potential of consumer markets while also providing incremental investment opportunities along the upstream and downstream of related industry chains.

Optimizing incremental growth and revitalizing existing assets are not contradictory but mutually reinforcing. Revitalizing existing assets can generate incremental growth while optimizing incremental growth aids in revitalizing existing assets. If existing assets are not revitalized, they directly hinder national economic growth, and incremental growth will inevitably be affected. On the other hand, if incremental growth is not optimized, it will result in new idle assets, further burdening the existing assets. Therefore, only through coordinated efforts in both incremental growth and the revitalization of existing assets can we optimize both the quality and efficiency.