Xiao Gang says during 14th 5-Year Plan, China needs to carefully manage 5 relationships: that between inheritance & innovation, between the market & the government, between opening-up & independence, between development & safety, and between development strategies & tactics. 1/8
The Chinese government newly proposed that supply-side structural reforms should remain as the emphasis of efforts, while demand-side management also deserve due attention. 2/8
Xiao believes that to promote the new development pattern of #dualcirculation, the key is to balance the upgrade of the supply side and the expansion of consumer demands. 3/8
This year, production has recovered better than demands from covid’s blow, big businesses better than small and micro ones, and South China better than North China. 4/8
These imbalances show that insufficient #demands relative to #supplies have become an outstanding problem in China, calling for greater efforts in demand side management. 5/8
Xiao believes that China can achieve high-quality development on the strength of its domestic demands. China has a super-large #market, with immense potential demands for #investments and #spending. He calls for new mentalities when expanding domestic demands. 6/8
Before, expanding domestic demands was to make up for falling external demands; under new mentalities, demands and supplies are mutually-reinforcing. Debt-driven investment expansion needs to be changed. Existing #assets should be tapped into to boost investment efficiencies. 7/8
He also suggests to improve the quality of domestic demands while actively engaging in international competition, improve the efficiency of resource usage, and boost innovation on the supply side to cater to the changing demands. 8/8

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More from @ChinaFinance40

30 Dec
Chinese people love #savings. This mentality in itself is by no means wrong. Savings have been important in sustaining Chinese households during covid. But the problem lies in the form of savings, says Ren Chunsheng, Chairman of China Insurance Investment Co., Ltd. 1/6
Most of the savings in China are placed with #banks, but banks’ main function is to extend #credits; only a small portion goes into equity #investments. 2/6
It would be desirable to turn part of the 90 trillion yuan of household savings in China into long-term funds through investments in third-pillar #pensions. 3/6
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29 Dec
Since October,market views have diverged on the outlook of China’s economic recovery: the first type of view believes that economic recovery will continue,the second holds that the economy has already showed signs of overheating, &the third states that the economy is peaking. 1/7
This essay by CF40 research fellow Zhu He reviews four basic facts of China’s economic recovery since the outbreak of COVID-19 and discusses the possible reasons behind the three different views. cf40.com/en/news_detail… 2/7
Fact 1: Policy forces have played an important role in this round of credit expansion. But whether the momentum of this round of expansion will sustain after policies exit depends on how large role policies have played so far. This is the first divergence in the market. 3/7
Read 7 tweets
27 Dec
This year, China proposed the new development pattern based on “dual circulation” with domestic and international markets reinforcing each other. According to Zhao Changwen, such a pattern will need an innovation-friendly financial system: new.cf40.org.cn/uploads/202010… 1/6
First, an innovation-friendly financial system should be able to help the country seize the opportunities brought by the new round of technological revolution or industrial revolution. 2/6
Second, an innovation-friendly financial system under the “dual circulation” strategy should be able to help resolve three imbalances in economic structure, that is, imbalance between supply and demand in real economy, … 3/6
Read 6 tweets
15 Oct
Joining high-standard economic / trade pacts such as #CPTPP will be an important strategic move for #China to accommodate itself amid the current changes, says Huang Qifan: mp.weixin.qq.com/s/lBj7m4Usv_M-… 1/6
Joining CPTPP will level up China’s opening-up drive, which will force more in-depth and fundamental reforms. That will reinvigorate Chinese market participants, improve the efficiency of the internal circulation, and step up forming a mature market economy...2/6
Meanwhile, participation in the pact will help China to open up wider and engage more in the international circulation...3/6
Read 6 tweets
13 Oct
A paradox will emerge if we simply look at the contribution of the demand factors to China’s GDP growth, says Cai Fang: the contribution of external demand to the country’s GDP growth stood at only 11% in 2019; it even fell below zero in many previous years...
In statistical terms, external demand means net exports, or total exports less total imports. So a question arises: does negative external demand mean that it is not important?
It even gives rise to a ridiculous idea that China only needs to cut down its imports so that exports can contribute more to GDP growth, which is nothing but a mercantilist conclusion. But the fact is far from that...
Read 5 tweets
25 Sep
3 key takeaways from Prof Huang Yiping on China’s capital account opening – should China open it up? When, and how?

(1) capital account opening is an easy choice for China. 1/7
(2) there is probably not a so-called best timing for this move, and it could be a good timing to do this when the economy and financial market are not doing perfectly well, because in that case policymakers would be more vigilant against risk factors. 2/7
(3) it’s important to remain prudent and open up in a steady manner, and China needs to press ahead with the task in due order and take necessary macro-prudential measures to make sure that the opening-up is robust and sustainable. Tobin tax could be taken as a good example. 3/7
Read 7 tweets

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