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By Li Zuojun, DRC

2016-11-4

The new driving force for economic development can only be found in reform. At present, China’s economy is experiencing a key period of realizing the replacement of driving forces and it is imperative to find out the new driving force for economic development. Theoretically, the new driving force for economic development mainly stems from the following three aspects. First, it stems from the demand side composed of consumption, investment and export, the so-called “three-horse troika” pulling the economic ahead. Second, it stems from the input of production factors including labor, land, resources, environment and capital. Third, it stems from the enhancement of total factor productivity through the improvement of efficiency. Fourth, it stems from the GDP-oriented system. The three driving forces stemming respectively from the demand side, factor input and GDP-oriented system, have all encountered bottlenecks and new problems. As a result, the new driving force for economic development can only be found in the improvement of efficiency. The improvement of efficiency is merely the representation of the new driving force while the ways and means to improve the efficiency or the total factor productivity are the essence, which can be summed up as “the three engines” on the supply side, namely institutional reform, structural optimization and factor upgrading (reform, transformation, and innovation). Among them, the institutional reform is the major issue and the key leading to the new driving force for economic development. It should be emphasized again that the new driving force for economic development can only be found in reform. First, the government needs to promote institutional reform to give full play to the initiative and creativity of enterprises. Efforts should be made to clarify and reform the property rights of state-owned enterprises, agency relations, corporate governance, personnel management, financial affairs and distribution system. It is also necessary to protect the property rights of private enterprises, self-management and transactions, and to ensure equal rights for factor acquisition and same threshold for market access. Second, the government needs to give full play to the initiative of urban and rural residents to start their own businesses. The government also needs to improve the residents’ property rights, provide employment opportunities, reduce tax burden, flesh out relevant facilities relating to financing, migration, welfare, and education and follow the principle of equal pay for equal work. Third, the government needs to mobilize the enthusiasm of government employees and civil servants and cultivate a positive institutional environment.

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