1998 Debate Continues in China

A few days ago I posted China Looks to 1998 on Reform; Overcapacity Has Been Faced 3 or 4 Times Already. The Economic Observer had a couple of articles on the late 1990s reform that saw major reductions in overcapacity, with massive layoffs at SOEs. This sparked a lot of discussion in China and the paper has an editorial on the subject out today. The final message: let the market clear. Eliminate local resistance to market forces.

Economic Observer newspaper published on January 11, "China Economic ponder 1998" article created quite a discussion. This resonance is largely due to an understanding that the current economic situation and in 1998 like, but those most concerned about China's economic prospects also believe that large changes in the current year compared to today's international and domestic macroeconomic environment, can not be in the same breath. In this context, China's economic restructuring in the new normal, and still depends on the continued deepening of reform and progress. Further clarify the relationship between the government and the market, let the market determine the survival of the fittest companies, is still the key issues of the reform options.

Ponder 1998, when production really should go "when off constantly, will be troubled," the determination, of course, this adjustment is painful, a large economy such restructuring is completed, go through the growing pains may not be short But if it continues to delay, the cost may be greater, the cost will be higher, but smaller room changed again. As the People's Daily reporter authoritative answer when asked earlier, in 1998 we also face sluggish external demand, insufficient domestic demand, overcapacity dilemma was to withstand pressure, the implementation of large-scale textile spindles limited production, only the later strong economy growth, only the overall national strength continued to improve today.

Determined to have been, how to productivity? Policymakers answer is clear. Supply-side structural reforms, the focus is still on reforms. Even in 1998, limiting the production of spindles to pull off than the more worthy of attention is still reform - which is always the main theme of China's economic development. State-owned enterprises, "encounter", "unintentional positive outcomes shade", a large number of small and medium state-owned enterprise restructuring, put out a number of private force, also put out a broad market space - what they created a new supply to meet the new demand. This makes possible the rapid rise of private enterprises, private enterprises grow bring a lot of new jobs, but also to create the conditions for the state-owned maneuvers, private virtually played the role of state-owned enterprise reform reducer. Statistics show that in urban employment in 1997, state-owned enterprises accounted for 53%, to 2002, private enterprises accounted for more than 70%. Moreover, at that time to promote other reforms, the impact is not limited to the moment. Such as housing reform finally let real estate has become one of China's economic power next decade, 1998 to start the tax reform can also be considered a large-scale tax cuts.

Promoting reform move the experience of China's economic reforms. This is also a wonderful look back to 1998 not to be missed. 1999 China's economic growth rate of 7.1%, hitting a low point. But it is this year, China completed the WTO negotiations with the United States, China's accession to the WTO a little clear obstacles, to do so in 2001 to become a WTO member. Thereafter, the opening Forced opening up, reform and opening up wheel drive, coupled with enormous resources, environment and demographic dividend, making China rapidly becoming the world's second largest economy, which the achievements of China's economic miracle in the first quarter.

We can say that today resolve excess capacity, disposal "zombie companies", policy makers uphold the concept of the past have been very different. 2013 Third Plenary Session of the CPC held eighteen have been identified, the market plays a decisive role in the allocation of resources. Thus, the structure is reasonable, to be judged by the market ultimately, survival of the fittest should market the final say, in line with this principle, "cut the Gordian knot" zombie disposal business, resolve excess capacity, China's economy was likely to be reborn, complete restructuring and economic engine conversion.

Of course, we think, how will the market fall on the operation principle, there should be a more effective response. Past control overcapacity, often encounter local barriers, some local officials at every turn with "excess others, I do not surplus" as an excuse for this excess real estate business more than a "care", whereby the stiff and dead zombie companies. Because of the presence of local protection, companies want to cross-regional, cross-industry mergers and acquisitions many obstacles, not to mention the full role of the entrepreneur. Determined to eliminate resistance in this area, it should be the key today to achieve market clearing.
EO: 温故1998:除了改革,还是改革

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