Comments and Discussion

Professor Liu Shucheng, Member of the Chinese Academy of Social Sciences: Ideal Path and Growth Potential of the “New Normal”

I sincerely congratulate the 18th press conference held smoothly. This conference has become an international and domestic brand. We can foresee that today's announcement will have a significant impact during the “Two Sessions.” The predictions and analyses of the report were completely consistent with my view in recent years. Therefore, I extremely support the overall conclusion of this report.

Outlooking the economic trends during the period of 2015–2020, we can imagine four different scenarios: all the way down, all the way flat, returning to high growth, or just like the view of this report and mine, the economy fluctuates in the reasonable interval which follows the economic law. The economy of China has shifted gear from the previous high-speed to a medium-to-high-speed growth today, that is, “new normal.” Some people take the “new normal” as economic growth all the way down, which is not right and may cause some problems. For example, it will be difficult for the urban residents to achieve the goal of doubling the income by 2020 and thus cause social problems; enterprise investment will be affected and then encumbers the goal of doubling GDP, also procrastinating the technology innovation of enterprises; revenue will be reduced, making it difficult to support public utilities like reform.

We need some countermeasures for it is inadvisable to be all the way down. We have to change the way of thinking, which means we should take the positive strategy, transforming the strategy from holding the “lower limit” to grasping the “medium limit,” for the purpose of providing more space. We should also reform the operating mode of macroeconomic regulation, transforming the emergency response to global response. The “three national strategies” is a bright spot of the Central Economic Work Conference held at the end of 2014, which played an important role to promote the economic development in medium and long term. By taking the “three national strategies” as an engine, the economy growth will bottom out in the year of 2015, and the speeding up of the economy from 2016 to 2020 will stop from a downward trend and become stabilized and pick up moderately.

Professor Gao Peiyong, President of Strategic Finance Academy, Chinese Academy of Social Sciences:

We Should Think Over Reduction of Adverse Effects as well as Prevention and Control of Risk While Pulling the Economy

We must deal with two contradictions when pulling the economy. One is about pulling the economy and reducing the side effect. The basic path of operating a fiscal policy is nothing more than reducing income or increasing expenditure. To avoid the economic structural distortions caused by the strong stimulus policy, we have to focus on the reducing income rather than the increasing expenditure. Reduction is about tax and fee, but what tax or fee should be reduced? The main categories of taxes need to be reduced to make the policy work, which means we should put tax cuts on the process of replacing the business tax with a value-added tax. The public figures suggest that the number of reduced tax from replacing the business tax with a value-added tax was 191.8 billion last year. If the policy is implemented in all industries this year, the number will be 400–500 billion. If we can reduce the valueadded tax rate further more after 2016, the number will increase to 900–1000 billion. It is much larger, more direct, and more effective compared to reducing tax on small and micro-businesses. There are two parts of dropping charges: one is from nontax income of the general public budget, which is relatively normative. The other part is from the governmental fund income, which is also reported into budget but is not officially included in the scope of the National People's Congress for approval; thus, it cannot be coordinated, and in other words, it is a case dough of the government and should be cut down. The emphases of dropping charges should be put on the cleaning and reduction of the government fund income.

The other is about pulling the economy and preventing risk. Pulling the economy will certainly increase the issuance of government bonds. The deficit risks in China are immense today because there are a lot of risks out of our field of vision; for instance, the bonds are issued and repaid spontaneously by the local government. We should try to bring this part into deficit monitoring. In addition, under the current system, the local government scarcely plans to pay the debts when issuing bonds. Or it does not have enough money to repay when the bonds mature. It is mainly because the fiscal relation between central and local governments is not normative, and the revenue and expenditure system of local fiscal is unsound. We have to give back to the local government the sound willingness and capital, which they deserve owning to repay the debts, so that they could have the debtor's personality on the aspect of issuing and repaying uniformly or spontaneously.

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