At the 2019 annual meeting of the Chinese Economists 50 Forum in mid-February, scholars from the Chinese Academy of Social Sciences (CASS) called for increased measures to stabilize employment, the financial sector, trade, domestic investment and market confidence and to maintain sound economic growth in the long run.

CASS Vice President Cai Fang said that after 2007, almost all countries in the world saw a high unemployment rate, while China’s registered unemployment rate and the surveyed unemployment rate remained stable. This shows that the Chinese economy has undergone structural changes following certain trends. The disappearance of the demographic dividend has led to labor shortages, a decline in the rate of improvement of human capital, and a drop in the rate of return on investment, together with a slowdown in the efficiency of resource re-allocation, thus causing a fall in the potential growth rate of the economy, Cai said, adding that these trends continue.

However, given that China’s natural unemployment rate is about 5 percent, there is no need for excessive stimulus as long as there is no periodic unemployment. Cai suggested reducing the natural unemployment rate through various services such as training and furthermore improving the potential growth rate of the economy along with the supply and allocation of factors of production through reforms, thus facilitating stable growth while avoiding the side effects caused by stimulus.

Li Yang, chairman of the National Institution for Finance and Development, said that the debt problem of China’s local governments is becoming increasingly serious, urgently calling for a sound and effective management system. Japan’s experience is worth considering, Li said. Japanese local governments used to have complicated debt problems. However, the situation has been improving since the introduction of the law for managing local debt in 2009.

At present, there are four sources of funding for Japanese local government debt: the central government’s financing funds, funds from local public groups and financial institutions, public offerings of funds in the market, and banker’s acceptances. Li said that this is a good reference for China. In particular, two of them come from banks, which deserve special attention.

Three points can be learned from Japan, Li said. First, the central government should have unitary regulation, organization and supervision of local debt financing. Moreover, it should be stipulated that banks can finance local government debt, but they should follow strict regulation. In addition, a professional and policy-based mechanism for local government financing should be established.

Du Yang, deputy director of the Institute of Population and Labor Economics at CASS, said that in the long run, a relatively stable and moderate growth of wages needs to be maintained, and the momentum of economic growth should be increased through improving labor productivity, addressing population aging and maintaining the competitive advantage of the tradable sector.

At present, we should develop an in-depth understanding of the nature of structural unemployment, formulate more accurate policies and encourage labor mobility to promote employment, Du said. In addition, such measures as the reform of the unemployment insurance system can be adopted to maintain the balance of the labor market.

Huang Qunhui, director of the Institute of Industrial Economics at CASS, said that we should emphasize fair competition and that a sound policy for competition should play a fundamental role. In terms of overall strategic objectives, it is vital to cultivate the core competence of China’s manufacturing industry and make original contributions to global manufacturing. It is necessary to strengthen the basic research capabilities and ensure high-quality manufacturing.

Wang Tongsan, a Member of the Academic Division of Economics at CASS, said that how to achieve and maintain fiscal balance is an important issue currently. When implementing the policy of a larger-scale tax reduction and fee reduction, we must be cautious and moderately expand the deficit, focusing on achieving fiscal balance by reducing government spending.

To cope with the economic downward pressure, a proactive fiscal policy must be implemented, Wang said. However, when implementing a proactive fiscal policy, it should be noted that while any macro-control policy has a positive effect, it may also have a varying degree of negative impact.

(Edited by Jiang Hong )