Tapping development potential

Industrial restructuring, financial upgrades and regional balances should play strategic roles for China

China should strive to forge a dynamic economic and industrial development strategy to fuel its fast-driving economic locomotive at a time when the world economy is changing.

Despite the emergence of some positive signs in the world economic landscape, the global economic recovery is still expected to be a complicated and marathon process in which a variety of risks will grow. The international community has so far failed to make substantial progress in the efforts to resolve a wide range of major economic issues, from trying to avoid international monetary instability by adjusting the imbalanced trade structure, to struggling to rein in fluidity excess, easing government debt crises across the world and rectifying malpractices in the global financial model.

The increasingly fierce political games among the world's major powers in the post-crisis period are also expected to be a huge challenge for the global economy in returning to steady growth. Against this backdrop, China should make multiple efforts to start a new economic growth cycle.

The world's experience indicates that a country's new round of economic growth is based on its application of new technologies and the building of reasonable and scientific structures for industries, demand and energy and a coordinated regional economic model.

The ongoing upgrade of China's industrial structure and technological progress fuelled by its accelerated industrialization and urbanization will drive its economic growth. The country's vast area of land, its abundance of natural resources, and the complimentary nature of its industrial structure and economic development levels of different regions have put the world's third-largest economy at an advantage over other countries.

The distribution of resources nationwide, its booming infrastructure construction and sufficient supply of raw materials, together with a free transfer of labor forces in the years ahead, are expected to inject a new vitality into China's accelerated campaign to expand domestic demand and upgrade industrial structure in the pursuit of sustainable economic growth. In this process, unremitting efforts should be made to facilitate the change of the country's industrial structure, now dominated by the traditional manufacturing sector, to one that mainly consists of services and high-tech manufacturing sectors.

The "made in China" brand should be confined to traditional processing trades, light industries and the low-end manufacturing sector. Instead, it should take aim at equipment manufacturing, information technology, and aerospace and other strategically important sectors. Correspondingly, the development of these industries with close correlations, huge elastic demands and high capital intensity will boost the depth and efficiency of China's ongoing industrial expansion programs. It will also be of great significance to the country's pursuit of a new round of economic growth and its crusade to change the imbalanced global economic order.

Due to its abundance in natural resources and its forestry, maritime and ecological diversity, China should make efforts to develop and build up some resource-based sectors. Workable measures should be taken to further tap into the country's advantages in resources, cultivate homegrown brands, and improve industrial-added value in a bid to transform its abundant resources into industrial and economic advantages.

As its influence keeps rising on the international stage, China should create a set of scientific finance and economics theories suitable for its national conditions. Both a scientific assets assessment system and an industrial and financial capital pricing mechanism are needed to prevent the country's economic development from being excessively swayed by the West-dominated international pricing system.

China has a long way to go to become a financial power. Over the past year, the country has scored a remarkable achievement in pushing forward financial reforms and in greatly raising the capital adequacy rate of domestic financial institutions and their profit-making capability. However, the country's financial institution building remains in the primary stage and its capital utilization efficiency at a comparatively low level. Compared with foreign counterparts, China's domestic financial bodies have yet to improve their competitiveness.

The absence of a scientific pricing system on financial assets still puts an insurmountable obstacle to the further development of its financial sector. On top of the country's financial agendas is to push for the change to direct and indirect financing for its financial sector.

In addition to some challenges to China, the global financial crisis also offers a rare opportunity for the country to step up its global capital strategy. To gain an initiative in restructuring the unbalanced global capital market, China should try to convert the crisis into an opportunity and actively push its industrial, commercial and financial capital to go global. That will help remove long-standing factors that put China at a disadvantage in the global division of trade and finances, increase the country's return ratio for capital investment and develop China into an intensive economy.

Given that the dollar-dominated global monetary system has occasionally experienced fluctuations, China should make efforts to optimize arrangements of its enormous foreign reserves and try to diversify its overseas investment.

Greater efforts should also be made to further push for the country's overdue industrial merger, such as thoroughly integrating its financial and industrial capital. Expanded overseas acquisitions will improve China's industrial effects and reduce pressures brought by dwindling external demand. The country should also capitalize on the drop in international energy and resources prices to build a cheap resources reserve for its industrialization and set up a stable supply and pricing mechanism.

The author is an economics researcher with the State Information Center.

(China Daily 04/26/2010 page8)