Understanding Chinese economic reform with CGTN

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In 2010, China overtook Japan to become the world's second largest economy after enjoying explosive growth since the 1970s when the reform and opening-up policy was introduced. The new position forged a new road that would be far from a cakewalk.

A huge government stimulus plan, put in place at the end of 2008, helped China tough out the initial shockwaves of the tsunami caused by the financial meltdown, winning worldwide applause for helping reduce the devastating damage on global economy. That, however, was at the expense of key structural reforms until the raging waters have subsided – even if further delay meant hindering the government's economic vision.

One side effect of state-owned enterprises reform is the potential cost on the jobs which are also threatened by automation. Protecting workforces should be high on the government's agenda.

State-owned enterprises (SOEs) proved to be useful agents in concentrating resources and maximizing output in the absence of a functional market amid fears of an economic hard landing. However, these big firms feeding on cheap credit and producing goods beyond the market’s appetite could not have been sustainable.

A plan for supply-side reforms was hence introduced to phase out the massive stimulus program. By turning off the faucet of cash flow and cutting down overcapacity, the Chinese government is resolved to enhance industrial efficiency. However, authorities overseeing reforms and the market doing more don't always mix well together. The government's supervision is undoubtedly essential to protect the workforce and prevent bad loans from poisoning the entire financial network. But it is important to bear in mind that no firm could ever mature until becoming part of the competition within a free market.

Reducing debt should avoid victims of circumstances – mainly companies in the private sector that, despite having outpaced SOEs in their contribution to the GDP, are still at disadvantage when it comes to securing bank credit in comparison with their state-owned counterparts. This is also where the major overhaul of China’s financial structure fits in the picture.

The mindset that the government would come to their rescue when the market tumbles has hardly weakened at least among Chinese retail investors, if not reinforced, after the free fall in 2015.

China’s stock market meltdown in 2015 and its slow recovery since have been of concern to young private firms in need of funds. How to put the financial sector at the service of the real economy is a "delicate dance" and the government needs to tread c arefully to ensure it does not lose balance. A case in point to get the message across is the policy flip-flop regarding the stock trading suspension mechanism, which was switched off just a week after its introduction in January 2016.

Another challenge lies in the liberalization of the yuan. Imposing restrictions on capital movement is not unwise, but its long-term effectiveness is debatable. China will have to deepen its financial market as a shield from the volatility of the capital market.

Housing price is a sore spot for the general public in China. Ordinary people need a roof and the local governments need a solid source of income. How to square one with another while in the meantime pre-empting a bubble needs more economic wisdom.

Individuals are at the heart of economic activity; therefore reforms must also be concerned with reshaping people's expectation which significantly influences their spending plans today. Now that China is shifting its growth engine from investment to consumption, more policies tackling housing prices and social welfare programs are crucial to convince Chinese people that opening their wallets today will not deprive them from a roof over their heads or a hospital bed tomorrow.

New business model can be as much innovative as subversive to traditional industry. The rise of sharing economy in China is a case of point. Balancing between the interest of the new and that of the old, therefore, requires as much economic rethinking as the political one.

The exponential growth of the digital economy has also played in favor of policymakers seeking to shift household practices from saving to consumption. However, new technologies, while spurring demand for goods and services, are also capable of disrupting the current business infrastructure and job supply. Traditional macro-management tools need to be upgraded to keep up with the times as new business models emerge, exploring niche markets or creating needs that did not previously exist (riding shared bicycles for example or using a mobile app to call a stranger for a pickup).

During the Summer Davos Forum held in June in the Chinese port city of Dalian, China's aspiration to secure a leading role in the “fourth industrial revolution” was repeatedly mentioned. But the country has a lot to do in optimizing its infrastructure to better harness the force of innovation.

The beginning of China's journey as the world's second largest economy has taken it into a land of open opportunities and endless possibilities where the next destination is just another new start.

Against this backdrop of a fast changing economic landscape in the Asian powerhouse, CGTN is rolling out today its new and improved business section to bring you breaking news, real-time data, comprehensive coverage, in-depth analysis and all the latest about the economic and financial sectors in China and the world.