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Top economists offer advice on private sector growth

By Wang Yanfei | | Updated: 2017-02-15 19:30

Leading economists on Wednesday suggested the government keep up with prudent monetary policy and lower enterprises' cost to revive private sector' growth. Relying on debt-stimulus measures would lead to the economy falling into a low-efficiency trap, they said.

Speaking at the Chinese Economists 50 Forum in Beijing on Wednesday, Wang Xiaolu, a senior economist with the China Reform Foundation, said the government should keep monetary policy prudent "in actuality", and should not slip back into the old ways of relying on credit to boost growth.

Wang made the comment one day after the central bank's data showed that social aggregated financing, a broad measure of credit, surged to a record high level of 3.74 trillion yuan in January, up by 2.1 trillion yuan compared to the previous month.

Echoing his remarks, Bai Chongen, a Tsinghua University professor and member of the Central Bank Monetary Policy Committee, said that the government should make good use of fiscal policy, specifically lowering the cost of enterprises, at the time when economic growth grinds slower.

The economy is on the verge of falling into an inefficient trap, according to Bai, referring to the circumstances where the government prefers to use infrastructural investment to conquer downward pressure, but failed to see high returns and squeezed out private sector investment, further dragging down economic growth.

"A better way to make good use of fiscal policy might be lowering the cost of enterprises," he said.

Enterprises in China do face higher a tax burden compared to other countries, and that became worse in recent years, according to Bai, who cited a report released by the World Bank earlier this year.

In terms of tax burden, the business environment in China ranks only 131 among 190 economies, slipping down from 122 compared to five years ago, according to the report.

"But that is not a hard nut to crack," he said. "Major tax burden comes from social security."

Bai suggested using some government assets to cover social security, as part of the efforts to help enterprises lighten the tax burden.

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