In the year that 13th Five Years
Plan began, the economic situation and macro policies of China have attracted
attentions from both home and abroad. According to what the authority has
clearly stated on the People's Daily, China's economy has been in the L-model
rather than the U-model or the V-model. What's more, the L-model refers to a
phase that would last more than two years. What the economic signs have
released from the statement?
Source: Internet
Sign
One: China's Economy will Sustain Steady Growth in a Reasonable Section
In terms of how to describe the economic
situation, there are many capital letters, for example, the L-model, U-model, V-model,
and W-model.
According to Cai Zhizhou, researcher of the
Research Centre for the National Economic Accounting of Peking University, the U-model
refers to the strong rebound after a period of bottoming out due to the sharp
fall in economic growth, the V-model refers to a rapid and strong rebound after
a sharp fall, the W-model refers to the situation that occurs repeating
V-models, while the L-model refers to the stable and smooth running after a
sharp fall in the economic growth.
"The
L-model shows a general steady situation of China's future economy, that is to
say, the economy would neither significantly rebound nor apparently slowdown,'
analyzed Wang Jun, deputy Minister of China Center for International Economic
Exchanges. At present, China's economy is mainly facing the structural problems
rather than periodic problems. The domestic and abroad environment of China's
economy is changing; therefore, in a long run, it is necessary and normal to
conduct speed adjustment. For one thing, China's economy is facing various
difficulty and deep-seated problems; for another, it enjoys great potential
with strong tenacity.
In the Q1 of 2016, China's economy has
operated steadily with the year-on-year growth of 6.7%. the expected goal of
China's economic growth in 2016 was 6.5% to 7%, while the economic growth
target of the 13th Five Year Plan was more than 6.5% per year.
"The judgment of the L-model accorded with
the situation of enterprises' operation,' said Zhang Lianqi, 0managing partner
of Ruihua Accounting Firm who has recently conducted researches on numerous enterprises.
At present, with the recoveries on domestic infrastructure investment and
international staple commodities prices, the production and operation of some
enterprises has improved, while the pressures from the increased cost and
reduced price has not changed yet.
The L-model does not mean that the future
economic growth will all the way in a line. In general, China's future economy
will step into a reasonable phase of steady growth, although some short-term
economic fluctuation is inevitable.
Sign
Two: Stable Macro Policies
In order to keep smooth operation on
economy, the macro policies should avoid big swings or fluctuations.
"We should not let down guard or be panic because
of the temporary changes on economic statistics,' said Zhang Liquan, researcher
of the Development Research Center of the State Council.
According to the executive report of
central bank monetary policy that released a few days ago, the next step is to continually
implement prudent monetary policy and improve pertinence and efficiency, at the
same time, it is also necessary to conduct aggregate demand management that adjusted
with structural reform of supply front.
"We need moderate demand management to stop
economic slowdown, but the new stimulus is unnecessary, or it will cause
structure adjustment time and again. We have to release clear sign about the
stable and sustainable macro policies to avoid misinterpretation,' said Zeng
Gang, chairman of Bank Research Department of Chinese Academy of
Social Science.
The risks in China's economy accumulated
for a long time begin to break out, therefore the implement of the
macroeconomic policy should be extremely prudent. According to Cai Zhizhou, at
present, many enterprises and some local government have born with heavy
burden, and thus the stability should be the first principle of the macro
policies. What's more, it is also necessary to avoid systematic risks and
dissolve deep-seated problems by the means of reform.
Sign
Three: Focus on Advancing the Reform of Supply Front
The anticipation of the L-model actually
warned us that the future of China's economy is to unswervingly promote
structural reform of supply front.
Recently, with the recovery of steel price,
came with the resurgence of some outdated steel capacity. The steel industry is
facing the ordeal of de-capacity.
"Although the steel price has increased at
present, the prices of the raw material and fuel have risen even faster than
that of the steel, therefore the situation of the steel industry has still been
in the difficulty. The anticipation of the L-model actually warned the steel
industry to unswervingly reduce production capacity and production cost thus to
adapt to new normal and improve efficiency,' said Gan Guiping, general manager
of Liuzhou Steel Group of Guangxi Province.
As the biggest integrated iron and steel
enterprise in southeast China, Liuzhou Steel persisted in adjusting structure
and reducing production cost. The group, which is the one of few enterprises
that has profited, has earned more than RMB80 million in the Q1 of 2016.
According to Zhang Liqun, the L-model has
actually created pressure on the reform of supply front. For one thing, structure
adjustment is painful, therefore if the enterprise is still in high growth,
there would no impetus for structure adjustment; for another, if the enterprise
has been knocked down by the difficulties, the goal of structure adjustment
would also hard to achieve.
In terms of the L-model tendency, on one
side it keeps the necessary economic growth that gives the enterprise with
financial support on structure adjustment, on the other side it exerts some
pressure on the enterprise and forces it to improve its operating ability.
Each of the task, including de-capacity,
de-inventory, de-leverage, cost reduction, and bolstering weak spots, is
extremely difficult. To fulfill those tasks, we should make full use of the decisive
role of market resource allocation and implement the sensible competitive
system to achieve the survival of the fittest. At the same time, the
governments at all levels should give full play to take the guideline and
support those promising enterprises that have been in difficulty.
*This
article is an edited and translated version by CCM. The original article comes
from Jiemian.com.
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