Seek progress while maintaining stability

The upcoming fifth session of the 12th National People's Congress will review and discuss Government Work Report, which emphasizes that China should seek progress on the basis of maintaining stability, to maintain steady and healthy development of the economy and retain society's harmony.

So the key thing for China's development is stability.

China's economic growth slowed down in the past few years, and the government then decided that the economy was entering a "new normal" phase. China had been working on restructuring the economy, which has gradually seen some good results. Last year, China's GDP growth was stabilized at 6.7 percent in the first three quarters, and growth rose to 6.8 percent in Q4.

Entering 2017, China's economic situation is quite good, but it is still under pressure and faces certain risks.

The outside influences include global capital flows and exchange rate fluctuations caused by the United States' tight monetary policies, potential trade conflicts brought by Donald Trump's policies against globalization, uncertainties in the European Union countries' elections results and some existing regional conflicts.

Domestically, overcapacity, financial risks and the need to upgrade the economy threaten stable development.

After decades of development, the size of China's economy has surpassed $10 trillion. No single measure will be able to boost such a large economy significantly. So China needs to undertake comprehensive measures to ensure stability and development. While supply-side reform is in the spotlight, positive fiscal policy, stable monetary policy and coordinating the development in different sectors are also very important.

Supply-side reforms

In 2017, China should push supply-side reforms forward with greater resolve. China needs be more firm about reducing industrial overcapacity, to pay more attention to the market's power and to strictly carry out the application of stricter standards on environmental protection, energy consumption, quality and security.

It needs to reduce its housing inventory by making different policies for different cities, and solve the conflicts brought by the differentiation between big and small cities. It should also reduce leverage and prevent financial risks.

It could also use tax policy to help companies increase their efficiency, and change certain tax rates to help reduce the cost of doing business. China should also pay more attention to people's needs and solve their problems.

The supply-side reform in the agricultural sector and real economy sector and the healthy development of the real estate market are three key sectors.

Agriculture is the basis of the economy and affects the stability of society. Supply-side reform in the agricultural sector should focus on the supply of green and high-quality agricultural products, and foster new agribusiness entities, to ensure the stable development of agriculture and the sustainable growth of farmers' incomes.

For boosting the real economy, China should encourage companies to reduce cost and increase efficiency, to improve their products' efficiency and core competitiveness, and to innovate and build their own brands. But the government should also make various policies to help boost profits derived through investments in the real economy, making it more attractive for people than investing in the virtual economy.

Demand-side needs

Increasing domestic demand could push forward stable economic growth, and make it easier for the implementation of supply-side reforms.

After so many years of development, China's domestic demand is large, but there is still great potential in its expansion.

There is great demand for upgrades in the consumption and service sectors. Pushing forward an upgrade of consumption is key to China's economy.

Consumption has replaced investment and become a main driver for China's economic development. In 2016, consumption's contribution to economic development reached 64.5 percent. As consumption is decided by the income, it is also important to increase people's income.

In the investment sector, there are also many areas that need more new money, such as the environment, rural areas, people's livelihoods and underground infrastructure.

China should maximize its investment structure, making investments grow properly to make key contributions to the economy.

There are four principles for optimizing investment. First is to invest in areas that concern people's livelihoods, and make the investment focus more on education, healthcare, pensions and the and environment. China should greatly increase its investment in the education of its 60 million left-behind children to make sure they have sound bodies and minds.

Second is to invest more in the infrastructure of rural areas, so that village people can enjoy convenience - on one hand, increasing the construction of infrastructure, such as roads, along with farmland protection and water conservancy construction, while at the same time investing in culture, internet communication and environmental hygiene.

Third is to invest more in underground projects. The construction of underground pipelines is essential to cities' sustainable development, and China should raise the standards for building underground pipelines.

Fourth is putting environmental protection higher on the agenda and speeding up the comprehensive treatment of polluted water, land and air.

In the end, China needs to be more open and help exports to grow. In 2016, China's exports were reduced by 0.9 percent, which held back economic development.

The Belt and Road Initiative presents an opportunity for China to strengthen trade. In 2016, China's exports to Belt and Road countries and regions grew by 0.7 percent over the previous year, which is quite a good sign that the initiative will be an important driver for the economy.

The author is a senior research fellow of the International Monetary Institute of Renmin University of China.The views do not necessarily reflect those of China Daily.