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Balance in running a state

By Di Dongsheng and Zhou Sichang: 0 Comment(s)Print E-mail China.org.cn, November 8, 2013

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The third type of balance will be between the domestic and overseas markets. Our slogan in the past thirty years has been making good use of resources in the international and domestic markets. But the truth is that there is a disparity between China's developed southeast coastal areas and the underdeveloped central and western regions. Subsidies for export manufacturing, foreign capitals and foreign consumers have contributed to rapid industrialization, but at a detriment to the welfare and savings of citizens. The costs in central and western China have been even worse. The domestic imbalance matched the imbalance in the U.S. market, which has caused an imbalance world in the 21th Century.

Since Obama became U.S. president with his "change" slogan five years ago, U.S. economic policies have not changed very much. They still rely on stimulus measures to increase consumption, such as monetary easing and low interest rates. Manufacturing has been built up again slowly. However, China has adjusted its economic structure gradually with the steady appreciation of the renminbi and its internationalization, relaxing financial repression step by step, opening capital account as well as increasing environmental protection standards and the minimum wage. Although reform has been painful, the restructuring continue.

[By Jiao Haiyang/China.org.cn]

The fourth type of balance is between power, capital and labor, or between the state, market and society. Insufficient domestic consumption has affected the sustainable development of the Chinese economy. People have got too little a share in the distribution of wealth, so are less inclined to spend. Government tax revenue accounts for 25 percent of the annual gross domestic product (GDP). The government also collects another 20 percent of GDP wealth through channels such as land revenue and financial repression. The other 55 percent is left for capital and labor, and the laborers are in an unfavorable position. Therefore, to encourage domestic consumption as a new driving force of economic growth, we need to reform several mechanisms at the same time to rapidly increase people's real incomes. That means cutting the proportion of power and capital in the distribution of wealth and increasing the proportion that the workers receive. To achieve this balance, the government should reduce taxes, cut public consumption, control monetary growth, enhance social security, reform the land policy and reform the household registration system.

As well as these four balances, other balances need to be addressed in practice. For example, the balance between inflation caused by price reform and deflation caused by exchange rate and competition, and the balance between capital outflow from the reduction of subsidies and the inflow from opening up the domestic market.

China's new leadership is striving for high-speed growth in an expansive economy, striking a balance between various aspects of development. All Chinese people should understand contribute to the progress, and not cause or be a victim of the imbalance.

Dr. Di Dongsheng is vice director and Zhou Sichang is a research assistant at the Research Center for China's Foreign Strategy Studies, Renmin University of China.

This article is translated by Li Shen.

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

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