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By any standard, China’s economic performance overthe last three decades has been impressive. GDP growth aver-aged 10 percent ayear, and over 500 million people were lifted out of poverty. China is now the world’s largestexporter and manufacturer, and its second largest economy. Even if growthmoderates, Chinais likely to become a high-income economy and the world’s largest economybefore 2030, notwithstanding the fact that its per capita income would still bea fraction of the average in advanced economies.
But two questions arise. Can China’sgrowth rate still be among the highest in the world even if it slows from itscurrent pace? And can it maintain this rapid growth with little disruption tothe world, the environment, and the fabric of its own society?
After more than 30 years of rapid growth, Chinahas reached another turning point in its development path when a secondstrategic, and no less fundamental, shift is called for. The 12th Five YearPlan provides an excellent start. This report combines its key elements todesign a longer-term strategy that extends to 2030. More importantly, itfocuses on the “how,” notjust the “what.” Six important messages emerge from the analysis:
First, implement structural reforms to strengthenthe foundations for a market-based economy by redefning the role of government,reforming and restructuring state enterprises and banks, developing the privatesector, promoting competition, and deepening reforms in the land, labor, andfnancial markets.
Second, accelerate the pace of innovation andcreate an open innovation system in whichcompetitive pressures encourage Chinese firms to engage in product and processinnovation not only through their own research and development but also by participatingin global research and development networks.
Third, seize the opportunity to “go green” througha mix of market incentives, regulations, public investments, industrial policy,and institutional development.
Fourth, expand opportunities and promote socialsecurity for all by facilitating equal access to jobs, fnance, quality socialservices, and portable social security.
Fifth, strengthen the fscal system by mobilizingadditional revenues and ensuring local governments have adequate financing to meetheavy and rising expenditure responsibilities.
Sixth, seek mutually benefcial relationswith the world by becoming a pro-active stakeholder in the global economy,actively using multilateral institutions and frameworks, and shaping the globalgovernance agenda.
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