www射-国产免费一级-欧美福利-亚洲成人福利-成人一区在线观看-亚州成人

US EUROPE AFRICA ASIA 中文
Business / View

Why supply side reform matters to China

By Li Yiping (China Daily) Updated: 2015-12-22 07:46

Why supply side reform matters to China

The supply-side reform will be led by a series of policies to improve public service, environmental protection, quality of production and further opening-up to the global economic system.[Photo/China Daily]

Reviewing the process of the change from demand management to supply management in market economies will help us understand China's supply side management.

Western economies are typical free market economies, which suppose supply will automatically create demand, without leading to a crisis of overproduction.

But the Great Depression (1929-33) forced the US government to abandon its traditional non-interventionist policy and implement, albeit partly, John Maynard Keynes' theory, which says governments should intervene in the market through public investment and even deficit-stimulus to help economies recover. But the final outcome of policies based on Keynesianism was stagflation, that is, inflation without real economic development.

In the 1980s, former US president Ronald Reagan and then UK prime minister Margaret Thatcher implemented the policies of supply-side economics and monetarism. Monetarism advocates maintaining money supply according to the GDP growth rate and leaving other problems to the market. According to supply-side economics, the government should reduce taxes to encourage enterprises to foster innovation and boost public consumption.

And the implementation of supply-side management and the rise of the information industry have helped the US economy maintain sustainable and stable development for a long time.

Since the 2008 subprime crisis in the US, China has taken a series of demand-management measures to stabilize growth, including a 4 trillion yuan ($616.8 billion) stimulus package in 2008. These measures were taken on the assumption that the government could solve microcosmic problems through macro policies.

But the government intervention distorted factor prices and created further overproduction pressure. In other words, the structural adjustment didn't work. The marginal utility of the stimulus package declined sharply-the 4-trillion-yuan investment was not enough to maintain 7 percent growth today.

China now faces three major tasks. The first is structural adjustment. Economic development has two effects: structural effect and level effect. Structural effect refers to the improvement of industrial and product structure that may create more demand at a micro-economic level, which means enterprises could create new demand through supply.

Level effect refers to horizontal expansion of the original industrial structure. The structural effect is limitless, but the level effect is limited. Structural adjustment will lead to both upgrading and exit of excess capacity. But the lack of innovation capacity restrains upgrading while over stimulus prevents the exit of excess capacity.

The second is innovation. In the initial period of reform, China had plenty of industrial space, which allowed it to imitate successful economic models to grow rapidly. But its industrial space is now saturated and the marginal utility of imitation has sharply declined. To maintain a healthy growth rate, therefore, China has to create more demand through higher level innovation. But since innovation comes with uncertainties, it is better to allow enterprises to accomplish it.

How to create a suitable situation for enterprises so that they can foster innovation is a reform issue, because institutional reform can promote a technological revolution. Demand management's stimulus policy could delay such a revolution, while supply management is conducive to it.

The third is to strengthen economic vitality at the micro level. China's economy grew rapidly for three decades because of many favorable factors, such as the small GDP base, huge industrial space, cheap labor and resources, as well as the high-tide period of the global economy. But under the new normal, stable economic growth requires improving economic vitality, for which more attention should be paid to reforming supply management.

Economic development lies more at the micro level. Supply can create more demand at a higher level, which enables enterprises to play their due roles at the micro-economic level. So to implement supply-side management, reform should aim to increase enterprises' vitality, let market play the decisive role in resource distribution, and reduce government intervention in the market.

Government intervention in any form could reduce enterprises' vitality and distort factor allocation. Hence, the government should implement concise and stable policies and ensure fair competition for all kinds of enterprises, so that they can focus on creating new demand.

The author is a professor of economics at Renmin University of China.

Hot Topics

Editor's Picks
...
主站蜘蛛池模板: 奇米第四狠狠777高清秒播 | 67194午夜 | 久草在线免费播放 | 厕拍精品 | 51国产偷自视频区视频手机播器 | 青青草色久综合网 | 日本私人色多多 | 精品一久久香蕉国产二月 | 婷婷久久久五月综合色 | 日本在线理论片 | 国产日本欧美在线观看 | 日韩欧美视频在线一区二区 | 成人免费一区二区三区视频软件 | 97视频在线免费观看 | 中国美女黄色一级片 | 亚洲在线精品视频 | 国产日产欧美精品一区二区三区 | 女人野外小树林一级毛片 | 国产精品久久久久亚洲 | 日韩黄色免费观看 | 看色网站 | 日韩毛片| 欧美成人手机视频 | 手机在线视频一区 | 二区三区在线观看 | 最新福利片v国产片 | 一级片欧美 | 国产精品一区二区三区四区五区 | 欧美一级毛片欧美一级成人毛片 | 国产成人精品亚洲日本语音 | 国产精品久久久久一区二区三区 | 色偷偷888欧美精品久久久 | 又刺激又黄的一级毛片 | 欧美成人aaaa免费高清 | 日韩精品在线一区 | 九九精品免视频国产成人 | 亚洲欧美男人天堂 | 国产aⅴ精品一区二区三区久久 | 亚洲视频欧美视频 | 国产成人高清精品免费软件 | 一级a毛片免费观看久久精品 |