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6 White Paper on the Business Environment in China
1.2 Supply-Side Economic Reform and
The 13th Five-Year Plan (2016-2020)
In order to manage China’s ongoing economic transi- According to The Economist, President Xi’s first mentions
tion and in preparation to launch the 13th Five Year Plan, of supply-side strategy or “gongjice” started occurring in
details of which are scheduled to be released in March 2016, speeches in November 2015, followed by his December 2015
President Xi Jinping in late December 2015 revealed his ad- announcement, but he has yet to be as explicit as President
ministration’s strategic framework in leading the transition. Reagan was with his economic program. The magazine
According to a report in China Daily, when speaking at the speculates that President Xi may be attempting to “reinvigorate
end of the Central Economic Work Conference, President Xi reforms”. Back in 2013, the Communist Party’s Central
announced that China will be focusing on “supply-side re- Committee had called for market forces to take a “decisive”
form, or a package of supply-side policies to release new de- role, placing the private sector on an equal footing with the
mand and boost new productivity.” 1 state. While the Xi administration has been using the “new
normal” catchphrase to describe the economy’s slower yet
If the terminology has a ring of familiarity, then the reader sustainable maturation, The Economist supposes that adding
was probably around during the 1980s, when supply-side pol- “supply-side reform” sounds more like a call-to-action, quoting
icies, popularly known then as “Reaganomics” (to advocates) Xinhua who had recently (and most succinctly) combined the
and conversely, “voodoo economics” (to detractors), formed two catchphrases together: “supply-side structural reform is the
the backbone of President Ronald Reagan’s administration eco- new growth driver under the new normal.” 3
nomic program.
So, what does President Xi’s supply-side reform really mean?
Peter Ferrara, who served in the White House Office of Thankfully, late in December 2015, Xinhua released a helpful
Policy Development under President Reagan, wrote in Forbes missive entitled “Backgrounder: What Is China’s Supply-Side
magazine that “Reaganomics” operated on an explicit, four- Reform?” In providing a definition to supply-side management,
point economic program aimed at reviving the then-collapsing it adheres to classic economic textbook theory, stating that,
American economy, which President Reagan inherited upon “Supply-side economics holds that the best way to stimulate
assuming office in 1981: economic growth is to lower barriers to production, particularly
through tax cuts”. With reform under the Xi administration,
• tax rate cuts to incentivize economic growth, encourag- Xinhua declares “attention has turned to stimulating business
ing companies to invest and produce through tax cuts, entrepreneurship and innovation while
phasing out excess capacity resulting from the previous
• government spending reductions stimulus. Such measures are intended to increase the supply of
• anti-inflation monetary policy cooling money supply goods and services, consequently lowering prices and boosting
consumption” and generate “sustainable, quality growth.”
growth versus demand, to stabilize and strengthen the Xinhua then enumerates the following as “concrete examples”
value of the dollar of China’s supply-side reforms, stating that “viewed as a whole,
• deregulation, involving, among other things, the elimi- these measures can also be considered ‘structural’ reform”:
nation of government price controls on oil and gas
• cutting housing inventories
Mr. Ferrara then argues in Forbes that these economic • tackling debt overhang
policies not only succeeded in reviving the American economy, • eliminating superfluous industrial activity
but “amounted to the most successful economic experiment in • cutting business costs
world history.” From 1982 until 1990, the US economy grew by • streamlining bureaucracy
almost a third, created tens of millions of jobs, reduced inflation • urbanization
while unemployment reached record lows; the poverty rate • abandoning the one-child policy4
declined while the stock market boomed and the American
standard of living, measured by real per-capita disposable
income, increased significantly. 2
16
1.2 Supply-Side Economic Reform and
The 13th Five-Year Plan (2016-2020)
In order to manage China’s ongoing economic transi- According to The Economist, President Xi’s first mentions
tion and in preparation to launch the 13th Five Year Plan, of supply-side strategy or “gongjice” started occurring in
details of which are scheduled to be released in March 2016, speeches in November 2015, followed by his December 2015
President Xi Jinping in late December 2015 revealed his ad- announcement, but he has yet to be as explicit as President
ministration’s strategic framework in leading the transition. Reagan was with his economic program. The magazine
According to a report in China Daily, when speaking at the speculates that President Xi may be attempting to “reinvigorate
end of the Central Economic Work Conference, President Xi reforms”. Back in 2013, the Communist Party’s Central
announced that China will be focusing on “supply-side re- Committee had called for market forces to take a “decisive”
form, or a package of supply-side policies to release new de- role, placing the private sector on an equal footing with the
mand and boost new productivity.” 1 state. While the Xi administration has been using the “new
normal” catchphrase to describe the economy’s slower yet
If the terminology has a ring of familiarity, then the reader sustainable maturation, The Economist supposes that adding
was probably around during the 1980s, when supply-side pol- “supply-side reform” sounds more like a call-to-action, quoting
icies, popularly known then as “Reaganomics” (to advocates) Xinhua who had recently (and most succinctly) combined the
and conversely, “voodoo economics” (to detractors), formed two catchphrases together: “supply-side structural reform is the
the backbone of President Ronald Reagan’s administration eco- new growth driver under the new normal.” 3
nomic program.
So, what does President Xi’s supply-side reform really mean?
Peter Ferrara, who served in the White House Office of Thankfully, late in December 2015, Xinhua released a helpful
Policy Development under President Reagan, wrote in Forbes missive entitled “Backgrounder: What Is China’s Supply-Side
magazine that “Reaganomics” operated on an explicit, four- Reform?” In providing a definition to supply-side management,
point economic program aimed at reviving the then-collapsing it adheres to classic economic textbook theory, stating that,
American economy, which President Reagan inherited upon “Supply-side economics holds that the best way to stimulate
assuming office in 1981: economic growth is to lower barriers to production, particularly
through tax cuts”. With reform under the Xi administration,
• tax rate cuts to incentivize economic growth, encourag- Xinhua declares “attention has turned to stimulating business
ing companies to invest and produce through tax cuts, entrepreneurship and innovation while
phasing out excess capacity resulting from the previous
• government spending reductions stimulus. Such measures are intended to increase the supply of
• anti-inflation monetary policy cooling money supply goods and services, consequently lowering prices and boosting
consumption” and generate “sustainable, quality growth.”
growth versus demand, to stabilize and strengthen the Xinhua then enumerates the following as “concrete examples”
value of the dollar of China’s supply-side reforms, stating that “viewed as a whole,
• deregulation, involving, among other things, the elimi- these measures can also be considered ‘structural’ reform”:
nation of government price controls on oil and gas
• cutting housing inventories
Mr. Ferrara then argues in Forbes that these economic • tackling debt overhang
policies not only succeeded in reviving the American economy, • eliminating superfluous industrial activity
but “amounted to the most successful economic experiment in • cutting business costs
world history.” From 1982 until 1990, the US economy grew by • streamlining bureaucracy
almost a third, created tens of millions of jobs, reduced inflation • urbanization
while unemployment reached record lows; the poverty rate • abandoning the one-child policy4
declined while the stock market boomed and the American
standard of living, measured by real per-capita disposable
income, increased significantly. 2
16
