China's New Normal: The worst of times, the best of times
- By Robert A. Rogowsky
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E-mail China.org.cn, July 10, 2015
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Photo taken on June 23, 2015 shows methanol-fueled taxis displayed during a launching ceremony in Guiyang City, capital of southwest China's Guizhou Province. [Xinhua/Liu Xu] |
Reflecting on the opportunities for economic progress in China, I recalled the famous opening to the Charles Dickens novel "A Tale of Two Cities" about the French Revolution. He opened it, "These are the best of times, these are the worst of times." In many ways, the same can be said of China. I can say the same thing about the United States because our troubles closely parallel those of China. The best of times in China can be seen in the growing real economy. The worst of times arise in the financial economy.
China's amazing rise has been and continues to be the result of progressively unleashing the real economy. I read that more than 9.7 million urban jobs were created in January-September of 2014. An aggressive program of reforms is building a new foundation for continued growth. The new normal is a shift from high speed to medium-high speed. Three more free trade zones (FTZs) are being established in Guangdong, Fujian and Tianjin. The State Council reported that 632 administrative approval items had been dismissed or relegated to governments at lower levels.
Sinopec announced it would offer a mixed ownership model for its wholly-owned subsidiary, Sinopec Marketing Co. Twenty-five domestic and foreign investors will hold 30 percent of the ownership. The majority of the board of directors will not be from Sinopec.
Another exciting example comes in medical reform. More than 1,000 hospitals have been privatized or started new as private firms to improve management. China is opening the door to private investors in oil and natural gas exploration and banking. Private capital is encouraged for railway construction. The price mechanisms for agricultural products and public service products are also undergoing reform.
There is more to be done. There are many new demands for supporting services. Early years of reform and opening up spurred local governments to set up special customs supervision areas such as bonded areas, export processing zones and cross-border industrial parks. But the 2008 global crisis has gradually replaced exports as a key driver of China's economic growth.
The acceleration of industrial upgrading requires more than the old style of special economic zones. The increased need for services and the growth of high value-added industry requires a more advanced form of experiment in reform. The new FTZs are to support both export and domestic sales. The FTZ in Fujian is expected to develop and maintain its strength by exploring cross-Strait trade ties. The FTZ in Tianjin is expected to develop offshore finance and finance-lease on the basis of the Beijing-Tianjin-Hebei coordinated development.
Compared with the traditional bonded area, which is known for its preferential policies regarding tax deductions and exemptions, land use opportunities and import-export tariffs, the FTZ is more strategically destined and focuses on opening up factor trade, which generates higher demand for talent, services and capital flow. As FTZs mature they will increasingly demonstrate freer exchange for the renminbi. Residents and non-residents of the Shanghai FTZ are allowed to open domestic/foreign currency free trade accounts and carry out risk management for separate account business.
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