Commentary: China’s supply-side structural reform can benefit the world economy

By Zhou Renjie from  People’s Daily

 

As the G20 Summit approaches, the world’s attention is turning to China, which contributes 25 percent of global economic growth and possesses the world’s second largest economy.

 

What new role China will play in global economic and financial governance? What experiences and inspiration can China offer to other countries with different systems? The upcoming summit is sure to provide satisfactory answers to these questions.

 

A healthier Chinese economy will in turn contribute to the world economy. As today’s world is in urgent need of finding new impetus to revive its fragile economic recovery and weak growth, China’s “supply-side structural reform” can serve as a great example.

 

This reform, which focuses on both immediate difficulties and long-term sustainable development, can address both the symptoms and root causes of economic roadblocks. Hailed by foreign scholars as a “cure-all recipe,” this Chinese reform could help create a new consensus for global economic governance.

 

Currently, deregulation and other measures to loosen monetary policy have begun to lose steam, while fiscal policies have become constrained by the burden of heavy debt. In order to revive the global economy, the world needs to take a new path.

 

It has to generate driving forces through structural reform and innovation-driven development, stimulate economic growth through systematic adjustment and realize sustainable prosperity by bolstering employment, income, investment and trade.

 

The reform proposal offered by China is also more effective in helping developing countries transition. When it comes to these developing nations, this year’s summit agenda has made two breakthroughs.

 

In addition to including more developing nations than ever before, the summit for the first time will highlight the importance of development in a global macro-policy framework, which will be crucial in the creation of action plans for the implementation of the 2030 Agenda for Sustainable Development.

By improving and stimulating developing countries’ development capabilities, China’s supply-side structural reform can help them eradicate poverty, optimize economic systems and help their economies take off, in addition to addressing other challenges.

For example, since many other economies are also dealing with overcapacity issues similar to China, they can refer to China’s experience in dealing with this headache.

Some people have misread China’s measures to cut excessive industrial capacity as a plan aimed at exporting outdated capacity, but in fact it is a mutually beneficial move. The Hebei Iron and Steel Group Company Limited, for instance, not only managed to ease its own burdens, but also helped meet the demands of overseas markets. This type of win-win cooperation is also encouraged by WTO rules.

 

In a sense, China’s economic slowdown has triggered concern throughout the rest of the world, but the country’s experience and success in macro-control and reform is also an opportunity for them to discover solutions to their own problems and a chance to ease their anxiety.