The National People's Congress (NPC) is taking two most important steps for China's economic future, the new property law and the reduction in the corporate tax rate. At the same time, it has set the tone for continued economic performance by emphasizing efficiency, not just output.

The property law can move China in the direction of ultimately solving two major concerns, real estate over-investment and agricultural efficiency.

China can solve the real estate problem by actually increasing the supply of property released by the State, as the city of Beijing seems to be doing. Agricultural efficiency can be improved by facilitating land consolidation for large-scale agribusiness and transitioning farmers to new sectors.

The reduction in the average corporate tax rate has gone unnoticed by media distracted by consolidation of the tax rate into a single rate for foreign and domestic companies.

As the key component of supply-side economics, the tax rate reduction assures future economic growth with increased future tax revenue. Add to this the abolition of the agricultural tax that started last year and you have a continuing supply-side economic revolution in China.

While last year's NPC focused on the direction of economic growth by recognizing the opportunity for domestic investment and improving health and education for the rural workforce, this year's has focused on sustaining the economic growth engine.

This boils down to encouraging improved productivity. This can be done by increasing units of output per unit of input or decreasing units of input per unit of output. A management culture still alive in State-owned organizations emphasizes maximizing output alone, not input or the difference between the two, which is profit or savings.

And the output maximized often tends to be visible output, in other words hardware, not software. For example, in real estate, many new buildings are erected in content-producing sectors like universities and the performing arts but they are a low-yielding input compared with teachers, performers and information technology.

Over-investment and productivity are two sides of the same coin. Over-investment means low productivity.

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