A leading Chinese economist says further support for private enterprise will be the key to a sustainable recovery for China’s economy in the wake of the Covid pandemic.
Zhang Aoping (张奥平), columnist for Forbes China, said that despite a stimulus-driven recovery in Chinese GDP levels in the first quarter, policymakers should adopt measures to increase private investment and household consumption to provide a firmer boost to demand in 2023.
“Although the Chinese economy has already achieved recovery, like other economies that have emerged from the pandemic, it still faces structural problems in the short term,” Zhang wrote in an article published by Caijing.
“I propose that various departments and regions should focus on expanding domestic demand, with private sector investment and consumer spending as key points, in order to promote sustained endogenous economic recovery.”
Monetary policy support for private enterprise
Zhang said that monetary policy needs to achieve an apt balance between overall quantity and structure to effectively boost demand from private enterprises and households.
“First, the overall quantity needs to be sufficient. As current domestic demand expansion still faces risks and challenges, policy interest rates should be lowered to strengthen the balance sheets of private sector and households, to help restore effective demand and boost confidence,” Zhang writes.
“Secondly, policy should be targeted. Structural monetary policy tools should be used to implement ‘precision irrigation’ and increase support for key areas and weak links, such as small and micro enterprises, technological innovation, green development, and modern infrastructure.”
Improving broader policy conditions for private enterprise
Zhang contends that raising household incomes lies is the key to solving China’s long-standing challenge of low levels of consumption. Private enterprise can play a vital role in boosting household incomes, and thus shoring up China’s domestic consumption.
“Consumption is a function of income, income is a function of employment, and employment is a function of enterprise development, in particular private enterprises,” Zhang writes.
“Therefore, it is firstly necessary to continue to deepen the ‘streamlining administration and delegating power’ reforms, optimize the business environment, and institutionalize and legalize the requirement of equal treatment for state-owned and private enterprises.
“[We must] encourage and support the development of the private economy and private enterprises by means of policy, and protect the property rights and rights of private entrepreneurs in accordance with law.”