Time to Get Serious on Economic Restructuring in Next Five Years

Li Dongsheng, chairman of China's appliance and top TV maker TCL had expected the operation of his company's joint production line of the 8.5 generation thin film transistor liquid crystal display with the Shenzhen government to start next autumn.

Construction of plant, with a total investment of 24.5 billion yuan (3.68 billion U.S. dollars) from the Guangdong-based company and the Shenzhen government, was completed this year.

Li said the production line of the self-developed new generation of LEDs marked a significant step forward in China's color TV industry to the upstream portion of the industrial value chain.

The local technology would also allow China's TV manufacturers to reduce their reliance on foreign rivals, he said.

Like TCL, many Chinese enterprises have been aware of the urgent need to step up production by using more advanced technology to grab a larger market share in the post-crisis period. The Chinese government has also realized that accelerating economic restructuring is the only way to achieve long-term sustainability.

Under China's 11th Five-year Plan (2006-2010) -- approaching its end -- the economy posted an average annual growth of gross domestic product (GDP) of 11.4 percent in the first four years. The first half of this year saw an 11.1 percent growth in GDP year on year, outshining the pace of even developed nations.

The Chinese government is now planning economic policies for the coming five years, also known as the 12th Five-year Plan, which experts believed would focus on economic restructuring to achieve sustainable development.

Despite the rapid development of the past 30 years, China's industry has remained at the lower end of the international industrial value chain, said Li Jingwen, academician at the Chinese Academy of Engineering.

If China failed to grab the opportunity to accelerate economic restructuring, it would lag further behind developed nations, he warned.

The Chinese government has been urging economic restructuring since October 2007 when it replaced the "transformation of growth mode" with the "transformation of development mode" in its report to the 17th National Congress of the Communist Party of China.

The different wording indicated a significant change in the government's perspective -- economic development now meant more than plain GDP growth.

However, experts said there had been no substantial and comprehensive progress on this front, despite frequent emphasis on either way of transformation because the development mode had, for a long period, been adequate for the earlier economic growth.

But after the global financial crisis hurt consumption in rich countries and sparked dramatic changes in global trade, there has been a slow economic rebalancing worldwide. The economic turmoil triggered a slump in China's exports, forcing the country to shift away from its export-driven development mode.

The country also faced domestic challenges, including an imbalance between consumption, exports and investment, increasing constraints on resources and the environment, a widening gap between the rich urban and poor rural residents and soaring prices.

All these problems pointed to the fact that China's current economic development mode did not meet the needs of sustainable development, and, that the next five years will prove to be a crucial period if a transition had to be made, experts said.

Further, global and domestic changes have made Chinese policymakers all too aware of the urgency for change. In February this year, Chinese President Hu Jintao said the transformation of the economic development mode could not be delayed any further considering the international and domestic economic situation.

The key for the transformation was to achieve it "at an accelerated speed" and with practical effects, Hu said.

"The present and coming years will be key to building a moderately prosperous society and a period for tackling the thorny problem of deepening reforms and the opening-up process, while accelerating the transformation of the nation's economic development pattern," according to a statement released after the conclusion of a meeting held by the Political Bureau of the Communist Party of China (CPC) Central Committee in late September.

It also decided that the Fifth Plenary Meeting of the 17th CPC Central Committee would be held in Beijing between Oct. 15 and 18 to discuss proposals for the 12th Five-year Plan. The strategic structural adjustment of the economy will be a priority to accelerate the reforms of the economic development mode.

Lawrence Greenwood, Vice President of the Asian Development Bank, believes restructuring will be a key issue in the next five-year plan. He said restructuring would not only be a necessary step for the country to move up the ladder to become a middle- and high-income nation, but also help solve the global economic imbalance problem.

Greenwood pointed out that many challenges during China's development sprang from its over-reliance on heavy industry after the Asian financial crisis, as investments poured into energy-intensive and environmental-unfriendly industries.

No doubt, shifting the pattern of economic development will be a difficult and long-term task. The difficulty lay with the obsession of local governments with high GDP growth figures, Wang Zhan, an official with the Shanghai Municipal Committee of the CPC said.

Experts have suggested that China needs to downplay the importance of the economic growth index in assessing development. Li Jingwen has proposed that China no longer consider GDP growth as a core target in the 12th Five-year Plan or use it as the yardstick to evaluate local governments.