More prudent short-term policies for growth

The policies for short-term growth tend to be stable and prudent. Policymakers are more confident when facing short-term economic fluctuations. Although the latest data show that the Chinese economy is facing huge challenges, the current administration is capable of handling that downward pressure.

In its concrete choices for macro policies, the government has refrained from using the heavily disputed stimulus packages and has continued with loose policies that are not accompanied by a massive stimulus plan.

China's deficit in the next fiscal year's budget will reach 1.62 trillion yuan (US$264.7 billion), rising by 270 billion yuan (US$44.1 billion). Accordingly, China's deficit rate will rise to 2.3 percent from last year's 2.1 percent, but it is still far lower than the warning level of 3 percent.

China is continuing with its "prudent" monetary policy by planning to set target M2 growth at 12 percent, meaning that the central government may "seize the right moment" to unveil a more proactive policy, though there is no sign of such a moment yet. As for macro control, targeted control will continue to play its part in avoiding negative market impact from earlier, more proactive macroeconomic policies.

Seeking innovation in long term development

China intends to rely on scientific innovations and institutional reform to fuel its long-term development. Decision makers in China have realized that sheer expansion of production is unlikely to fuel development in the long run. Instead, scientific innovation and structural reform are the solution.

First, entrepreneurship is repeatedly stressed in this Government Work Report. Entrepreneurship, such as Internet-based innovation, is creating room for growth, hence encouraging people's zeal to start their own businesses will have significant meaning. In encouraging innovation in the context of entrepreneurship, the government is linking scientific innovation with financial input, education and the protection of intellectual property, which were all mentioned in Premier Li's report.

Second, the idea of reform as institutional innovation has been receiving constant attention from the current top administration. Premier Li's Government Work Report shows a refreshed understanding of institutional innovation.

On one hand, China's rapid development over the past 35 years is proof that institutional innovation is capable of stimulating vitality in production, raising both people's standard of living and the country's economic performance. On the other hand, top decision makers should further stress that "the market should play a decisive role in the allocation of resources" in order for the market economy in China to continue to develop.

The government should also try to reduce administrative interventions in the economy in order to transform China from a country "big in size" to one "big in strength." In practice, "accessibility to non-banned items" and "negative listing" represent new thinking in governance since these concepts are changing the relationship between the government and the market.

These new ideas in governance mean that the government will have to expend more effort on supervision rather than on approval. The importance of anti-corruption action, a key part of stepping up supervision, is also highlighted in the Government Work Report.

To sum up, in reviewing Premier Li's annual Government Work Report, we should pay more attention to the changes in ideas about governance that are evident in it. However, we should also take a closer look at how various decisive factors will affect China's long-term development, and how reform and innovation may cause short-term problems and stresses to the country's economy and institutions before they fuel China's long-term development.

This writer is a research fellow at the Chinese Academy of Social Sciences.

The article was translated by Chen Boyuan. Its original unabridged version was published in Chinese.

Opinion articles reflect the views of their authors only, not necessarily those of China.org.cn.