China must adjust its macro-economic policy
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China's macro economy is affected by three factors: external environment, internal structure and social effects. As the three factors have changed, an adjustment in the macro-economic policy is imperative for the long term.
From 2011, China's development will go into a new phase. The 12th Five-year Plan (2011-2015) will set the tone for China's development in the next 30 years. As both domestic and global environments have become more complicated, readjustment should be the focus for the five-year plan.
External environment
President Obama said earlier this year that America would make efforts to double its exports and rejuvenate its domestic industry in the next 5 years.
In the first half of this year, the exports of Germany saw a year-to-year rise of 18 percent, which has injected vigor into the country's recovering economy.
Trade between China and emerging economies has increased significantly. ASEAN (Association of Southeast Asian Nations) has surpassed Japan to become China's third largest trading partner.
Therefore, the external environment of China has changed a lot. On the one hand, developed countries are trying to balance their trade deficits by increasing exports to China. On the other hand, China's exports and industrial progression will face challenges due to the adjustment in the trade policy of developed countries. The days of China relying heavily on its exports are gone.
Internal structure
Due to the global financial crisis, the world economy has been undertaking far-ranging adjustments since 2008, which has forced China to make corresponding adjustments to its internal economic structure.
The adjustment includes: the relationship between investment, consumption and exports; the industrial structure and arrangement of regional economies; the market of production factors and merchandise; and income-distribution balance. Above all, the most important thing is to change the pattern of growth to ensure society develops in a balanced way with the economy.
Social effects
The same policy will generate different social effects depending on the situation. At the initial stages of reform and China's opening, the policy encouraged some people to get rich quickly. This policy, which helped people navigate through hard times and toward prosperity, has also caused many problems, such as unbalanced regional development and a widening gap between the rich and the poor.
In order to achieve satisfying social effects, measures should be taken to change the unbalanced allocation of social resources, transform the development mode and guarantee fair wealth distribution.
Since the three factors that will influence the economy are all undertaking significant changes, adjustments to the macro-economic policy are around the corner.
(This post was first published in Chinese and translated by Xiang Bin)
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