Although the world’s economy experienced huge ups and downs in recent years, foreign investors still favored China. The world continued to take prudent and optimistic attitude towards China in spite of the hardships. There are two reasons behind why China still could play an important rule in current circumstance.
China is a big exporter, but a larger importer at the same time. The trade volume last year hit as high as 2.3 trillion US dollars, which ensured China the world’s third largest exporter. China will contribute more to the world’s economy if the country’s economy maintains a growth rate of 8 percent to 10 percent, mainly through two-way trade.
Apart from that, China is rich in capital and human resources. The country’s foreign exchange reserve has exceeded 1.9 trillion US dollars, and the figure is going to approach 2 trillion with another 300 billion US dollars added in the first half of this year. In terms of human resources, State-owned Assets Supervision and Administration Commission of the State Council encouraged SOEs, small-and-medium-sized enterprises included, to go global, and invest overseas. These are what China should do and what China can do, which will contribute to the world’s economy.
China has cooled down its economic development and the risk possibly from the overheated economy has gone. In that circumstance, the problem now is whether a balance can be reached between economic development and inflation. If economic growth needs to be kept with a reasonable range, between 8 percent and 10 percent as previously mentioned, three aspects must be addressed:
The first step is to encourage investment; next is to boost domestic consumption, including how to raise the level of personal income tax as well as corporate tax; last is to expand net export, which means to grand certain favorable policies to some trading companies, such as those engaging in garment and textile. In the long run, China must upgrade its export in terms of quality, and further encourage the export of innovative products.
More attention should be given to domestic consumption. Personal income increase can be achieved by raising the level of personal income tax. Next measure, which is currently underway, is to lower the inflation rate, which can be paraphrased as raising people’s purchasing power. The inflation rate in China stood at 7.9 percent in the first half of this year, 6.3 percent in July and 4.9 percent in August. The percentage shows the rate is declining over the months. Stronger purchasing power will be generated if inflation rate is reduced and personal income increased.
As of the stock market, China should bring the fundamental role of market into play, which can also be regarded as the role of resources allocation. Government has already taken some measures, such as lower the level of stamp tax and reserve ratio, to improve the quality of the listed companies, mainly in terms of corporate governance and the healthy financial performance. In the long run, corporate governance will guarantee the quality of the listed companies. The current task should focus on making corporate governance more transparent, protecting the interests of minority stockholders as well as ensuring information disclosure so as to avoid the inside trading, market manipulation and so on.
By People's Daily Online
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