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China Sets Forth an Economic Plan

new plans of China

Li Keqiang, the Premier of People’s Republic of China, has declared recently, that China has enough resources for stabile economic growth. As quantity is no longer that important for China, the main efforts will be made in regards to quality of that growth. That is quantitative indices will come into account only along with effectiveness of methods use to achieve them.

Background

According to Li Keqiang, credit-to-GDP ratio is quite low (17%) in China, thus that is not an issue right now. At the same time, the Premier confirmed that there is no intention to devaluate Yuan. Such export stimulation has proved not helpful for Chinese companies to become more competitive globally.

Plans

Peking is going to concentrate on excess capacities lay off in steelmaking, colliery and other sectors, in order to develop smaller private businesses.

As Chinese leader puts it, consumer economy didn’t work out, that’s why Chinese authorities decided to keep export orientation, but put more efforts in small business development. It is hard to predict the outcomes of such politics because excess capacities refusal may hurt consuming as millions of Chinese will lose their jobs. At the same time, the government has some secret measures prepared to create new jobs to set off losses.

Services Sector

Analytics opt to think that these secret measures may only be accomplished in the services sector. However, its development is closely linked to economic reforms and liberalization. It means that taxes have to be reduced, administrative barriers have to be eliminated and market entry threshold has to be simplified.

Peking has already declared about its intentions to cut tax burden and reduce bureaucracy, but having no experience with that, reforms may turn difficult.

Expectations

Peking expects to cut taxes by 500 billion Yuans in 2016 (nearly 76 billion US Dollars) and continue tax system reform. Li Keqiang is sure that China has shown a good start in 2016 if viewed holistically. According to the Premier, consumption is growing and there are many opportunities for further growth in the Western and Central parts of China.

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