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Special> Boao Forum for Asia 2015> Exclusive
UPDATED: March 9, 2015 NO. 11 MARCH 12, 2015
Economic Situation Still Bright
Despite challenges, the Chinese economy is in good condition to fulfill its development objectives
By Mei Xinyu

LEGISLATIVE ASSEMBLY: The Third Session of the 12th National People's Congress opens in Beijing on March 5 (CHEN JIANLI)

China will increase the GDP by approximately 7 percent and keep the increase in the CPI at around 3 percent, as it states in the government report by Premier Li Keqiang. Lowering the target from 8 percent, which China has maintained for quite a few years before 2012, to 7 percent is a reasonable adjustment under the global economic and political situation.

One of the major reasons for this adjustment is that the labor demand-and-supply situation is experiencing profound changes. There is a decrease in the amount of new labor; therefore the lower economic growth will not significantly affect the employment market.

Another reason is that the world is now entering a relative depression that might last for a long time. If China tries to stick to the high growth rate, it will be very difficult and the nation most probably will pay high price for this. China need to input more energy into income distribution and social equity.

"We must be adamant in pursuing economic development as our central task and do a thorough job of development as the top priority for ensuring the governance and revitalization of the country," the report says. This is a very important statement.

The report says that research and development spending accounted for more than 2 percent of the GDP in 2014. In 2010, it was only 1.76 percent. Our input in the science and technology development has been increasing in the past few years. This 2 percent is a milestone achievement.

Under the current market economic system, enterprises are the major power in the development of science and technology, and they are also the major investors in this field.

According to the report, the government budget deficit for 2015 is projected to be 1.62 trillion yuan ($261.3 billion), an increase of 270 billion yuan ($43.54 billion) over last year, which means that the deficit to GDP ratio will rise from last year's 2.1 percent to 2.3 percent. Of this amount, the central government deficit will account for 1.12 trillion yuan ($180.6 billion), an increase of 170 billion yuan ($27.42 billion) and local government deficit will account for 500 billion yuan ($80.6 billion), an increase of 100 billion yuan ($16.13 billion). This deficit is at a lower level among large economies, and it leaves enough leeway for possible sharp decrease.

As for streamlining administration and delegating more powers to lower-level governments and to society in general, I have a suggestion: New enterprises don't need to pay taxes for the first two years, and in the following three years, they only pay half taxes. This will not affect the revenue that much because new enterprises don't pay too large an amount in the first few years.

China is the only country in the world that meets all the industry categories of the UN Industrial Classification. This advantage is incomparable. That is why Steve Jobs said it is "unimaginable" to move the factory of Apple back to the United States.

The stable development of the macro economy is another major advantage of China. Although some have voiced pessimism about China's growth, the solid fact is that China's economic growth has not shown huge ups and downs like in other countries.

The inflation rate in China is not high either. So, the financial situation of China is generally better than other large economies, and this has provided more possibilities for the Chinese Government's macroeconomic regulation and control.

A longer industrial life cycle is another major advantage of China. Some prime industries, after being moved from the eastern part of the nation to the undeveloped west, still maintain vitality. The Chinese Government's regional development policy will help to make better use of this advantage.

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