Yifu Lin: The Future Of China's Growth

Since the pition to market economy in 1979, China has achieved remarkable economic growth, but at the same time, it faces severe challenges: aggravated inequality, large-scale and deteriorating environmental destruction, and difficult external imbalance and social ageing.

Fortunately, China's 12th Five-Year plan (2011 - 2015) recognized the need to deepen market-oriented reforms, change China's development model, focus on quality of growth, structural reform, and increase social inclusion to overcome the gap between urban and rural areas and curb income inequality.

In line with this major and long-term goal, the latest report, "China 2030: building a modern, harmonious and creative high-income society" (China2030:BuildingaModern, Harmonious, andCreativeHigh-IncomeSociety), suggests that China should develop into a mature and Yun Zuoliang's good market economy in 2030.

The report is the result of long-term cooperation between China and the world bank.

In order to commemorate China's accession to the world bank 30th anniversary, President Zoelick proposed to China's leaders to cooperate in identifying and analyzing China's medium-term development challenges.

China 2030 has proposed structural reforms that will redefine the role of government, reform state-owned enterprises and banks, develop private sectors, promote competition, and deepen the liberalization of land, labor and financial markets.

The number of tangible public goods and services directly provided by the Chinese government is relatively small, and more intangible public goods and services need to be provided, such as rules, standards and policies.

These policy and institutional improvements can enhance productivity, promote competition, facilitate specialization, increase the efficiency of resource allocation, protect the environment and reduce risks and uncertainties.

In the enterprise sector, the key is to increase competition in all fields, reduce barriers to entry and exit of Private Companies, and enhance the competitiveness of state-owned enterprises.

In the financial sector, the banking system must be commercialized, gradually allowing market forces to decide interest rates. At the same time, capital markets must synchronize with the development of legal and regulatory infrastructure that ensures financial stability.

In the labor market, China must speed up household registration reform to ensure that workers can freely migrate according to market information by 2030.

At present, anyone who goes to a non domicile has the risk of losing education, social services and the right to buy a house.

Chinese policymakers must also introduce policies to increase labour force participation, rethink wage policies and extend social insurance to the national level.

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China's medium-term success also depends on creating an open system that enables competition to create new products and production processes in China, not only through its own R & D efforts, but also in the global R & D network.

The priority is to improve the quality of research and development, not just quantity.

Policymakers should focus on improving the technical and cognitive abilities of university graduates and building several world-class research universities that are closely linked to the industry.

A visionary strategy must encourage China to achieve "green growth" instead of continuing the current rapid growth and facing the huge environmental costs in the future.

Encouraging investment in industries with low pollution, energy and resource efficiency will help achieve green development, stimulate investment in upstream and downstream manufacturing and service industries, and build global sunrise industries with international competitive advantages.

China 2030 also proposes to expand opportunities, improve social security and reduce the relatively high social and economic inequality in China by correcting the gap between urban and rural areas such as employment, financing and high-quality public services.

This needs to continue to pay more attention to rural areas and migrant workers who have not been adequately taken care of, while reforming social policies to ensure a reliable social safety net.

In addition, it is also crucial to use more revenue and ensure that local governments have enough funds to meet rising expenditure to strengthen China's financial position.

Such reforms will help ensure that all levels of government (central, provincial, prefecture level, county, town level, village level) are able to obtain the necessary budgetary resources for the necessary expenditures.

Finally, China should become an active stakeholder in the global economy.

China should continue to enhance global trade, investment and financial ties that have been doing its best in the past 30 years.

China can also benefit from further specialization, more investment opportunities, higher capital returns, and mutually beneficial exchange of ideas and knowledge.

China must remain steadfast in restarting the stagnant Doha round of multilateral trade negotiations and supporting the global agreement on investment flows.

China's financial sector has to open its capital account if it wants to integrate into the world. This needs to be achieved by a gradual and prudent pace, but it is a key step to internationalize the RMB and become a global reserve currency.