Development road map for next year

The Central Economic Work Conference held early this month mapped out the path of China's economy in 2022. Apart from highlighting stability as the top priority, the conference also laid out the road map for addressing short-term economic issues and challenges, and decided to keep a firm eye on the country's key long-term goals.

In particular, the conference emphasized the importance of maintaining "a stable and healthy economic environment" for the 20th National Congress of the Communist Party of China next year.

Since China is facing pressure on three fronts－shrinking demand, supply shocks and weakening expectations－all of which concern people's livelihoods, the conference discussed how to ease them.

First, in terms of macroeconomic policies, the policymakers decided to moderately advance infrastructure investment in order to help create more jobs and increase people's incomes, and further boost consumption.

Second, with regard to microeconomic policies, the government will help strengthen the market entities and increase their confidence in China's economy. But since the market is becoming increasingly wary of the complex global environment, the government needs to take measures to inject new vitality into the market.

And third, the authorities are likely to take steps to smoothen the national economic cycle. For example, the conference reiterated that "housing is for living in, not for speculation", emphasizing that the aim of the property sector should be to meet the reasonable demand of homebuyers. After all, rationalizing housing purchase and building enough residential units are important to strike a balance between housing supply and demand.

The conference also asked local authorities to introduce reforms in accordance with their local conditions, indicating reforms need to be implemented following proper planning.

The policymakers also stressed that it is necessary to understand the characteristics of capital, and decided to give full play to the positive role of capital while taking measures to prevent its negative effects, for instance, by strengthening supervision.

What kind of role can capital be allowed to play in the market? How can the government's measures prevent the disorderly expansion of capital? These are some of the issues the government should pay special attention to.

Capital, business ownership and competition are closely related. But many believe "capital" plays a negative role in the economy. Therefore, it is important to raise people's awareness of the essence and role of capital in the economy.

Accordingly, the policymakers have to promote the standardized and healthy development of capital, improve the basis socialist economic system, consolidate and develop the public ownership economy, and support the development of the non-public ownership economy, so as to restore people's trust in private-owned enterprises.

The Central Economic Work Conference also addressed some other burning issues. For example, in the process to realize "common prosperity", collective efforts to create economic wealth precede the setting up of a fair economic benefit sharing system. Also, economic stability and innovation capacity, reform and opening-up are closely related.

The conference also asked local governments, financial and industrial regulators to draw up a plan to manage and mitigate financial risks, while urging enterprises to make self-rescue provisions. Take the property giant Evergrande Group as an example. Enterprises should take measures to prevent a domino effect following its collapse, which appears imminent.

The Central Economic Work Conference, while acknowledging the dominant role of fossil fuels in China's power generation, said the country should promote the development of clean energy and efficient use of coal to gradually phase out outdated coal production. The conference stressed that there is a need to increase the absorptive capacity of new energy, and optimize the use of coal and green energy.

Aside from addressing hot topics, the conference also suggested how to deal with the problems that may emerge during the 14th Five-Year Plan (2021-25) period. Since China has decided to beat the middle-income trap and basically realize socialist modernization by 2035, it should set its GDP growth target for the next five years around 5.5 percent a year.

But to maintain a healthy growth rate amid the global economic crisis, the government must look at the big picture rather than only focusing on details. Hence, it should adjust policies to ensure healthy economic development.

The views don't necessarily reflect those of China Daily.

The author is chief economist of the China Academy of New Supply-Side Economics.