New five-year plan to promote reforms, consumption
- By Dan Steinbock
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E-mail Shanghai Daily, October 28, 2015
Only a few years ago, China still enjoyed double-digit growth. According to third-quarter data, the Chinese economy grew 6.9 percent year-on-year.
As a result, some observers have concluded that the Chinese economy is in trouble, Chinese consumers are hunkering down and the next five-year plan must be dead on arrival.
In reality, Chinese economy is rebalancing as expected. Chinese consumption is more vibrant than before. And the new plan is likely to ensure that this will remain the case for the next half a decade.
China's government leaders are expected to disclose an outline of their 13th five-year plan this week. The apparent aim is to rebalance the Chinese economy toward consumption.
The toughest test of the new plan will be reforms of state-owned enterprises (SOEs). The key to success is to time the SOE reforms right. If you move too fast, you risk additional unemployment, bad loans and social disharmony. If you move too slowly, you will contribute to a false sense of stability, creeping assets bubbles and decreased growth.
Until recently, Chinese growth relied on investment and net exports. That was fine as long as the government was in a position to invest and the rest of the world could absorb Chinese exports. That era, however, ended with the global financial crisis.
