Page 26 - 2017 White Paper
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7 White Paper on the Business Environment in China
“Reaganomics” (to advocates) and conversely, “voodoo So, what does President Xi’s supply-side reform
economics” (to detractors), formed the backbone of really mean? Thankfully, late in December 2015, Xinhua
President Ronald Reagan’s administration economic released a helpful missive entitled “Backgrounder: What is
program. China’s Supply-Side Reform?” In providing a definition to
supply-side management, it adheres to classic economic
Peter Ferrara, who served in the White House Office textbook theory, stating that, “[s]upply-side economics
of Policy Development under President Reagan, wrote holds that the best way to stimulate economic growth is
in Forbes magazine that “Reaganomics” operated on an to lower barriers to production, particularly through tax
explicit, four-point economic program aimed at reviving cuts”. With reform under the Xi administration, Xinhua
the then-collapsing American economy, which President declares “attention has turned to stimulating business
Reagan inherited upon assuming office in 1981: through tax cuts, entrepreneurship and innovation while
phasing out excess capacity resulting from the previous
- tax rate cuts to incentivize economic growth, stimulus. Such measures are intended to increase the
encouraging companies to invest and produce supply of goods and services, consequently lowering
prices and boosting consumption” and generate
- government spending reductions “sustainable, quality growth”. Xinhua then enumerates
- a n t i - i n f l a t i o n m o n e t a r y p o l i c y c o o l i n g the following as “concrete examples” of China’s supply-
money supply growth versus demand, to stabilize and side reforms, stating that “viewed as a whole, these
strengthen the value of the dollar measures can also be considered ‘structural’ reform”:
- deregulation, involving, among other things,
the elimination of government price controls on oil - “cutting housing inventories
and gas - tackling debt overhang
- eliminating superfluous industrial activity
Mr. Ferrara then argues in Forbes that these economic - cutting business costs
policies not only succeeded in reviving the American - streamlining bureaucracy
economy, but “amounted to the most successful - urbanization
economic experiment in world history”. From 1982 - abandoning the one-child policy” (Magnier
until 1990, the U.S. economy grew by almost a third, 2015)
created tens of millions of jobs, reduced inflation while
unemployment reached record lows; the poverty rate The current administration’s pronouncements on
declined while the stock market boomed and the supply-side reform policies seems to dovetail neatly
American standard of living, measured by real per-capita with the 13th Five Year Plan (2016-2020)—the first to be
disposable income, increased significantly (Ferrara 2011). generated under President Xi Jinping—which, reported
the Wall Street Journal, was approved by the Communist
According to The Economist, President Xi’s first Party leadership at the conclusion of the Fifth Plenum in
mentions of supply-side strategy or “gongjice” started October 2015 (Magnier 2015).
occurring in speeches in November 2015, followed by
his December 2015 announcement, but he has yet to be In a communiqué issued after the Fifth Plenum,
as explicit as President Reagan was with his economic Xinhua reports that the Plan targets “maintaining a
program. The magazine speculates that President Xi medium-high speed of growth”, aiming to double its
may be attempting to “reinvigorate reforms”. Back in 2010 GDP and per capita income by 2020. In order
2013, the Communist Party’s Central Committee had to do this, China must maintain an annual growth
called for market forces to take a “decisive” role, placing of at least “6.5% from 2016 to 2020”, Xinhua quoted
the private sector on an equal footing with the state. President Xi in a statement. The communiqué stated
While the Xi administration has been using the “new that China will “promote clean industrial production,
normal” catchphrase to describe the economy’s slower low-carbon development and energy conservation to
yet sustainable maturation, The Economist supposes ensure sustainable growth” in the next five years. China
that adding “supply-side reform” sounds more like a call- will “accelerate its opening-up of the capital market,
to-action, quoting Xinhua who had recently (and most and further opening-up of the service sector, including
succinctly) combined the two catchphrases together: banking, insurance, securities and nursing homes, to
“supply-side structural reform is the new growth driver foreign investment”, the communiqué said. In addition,
under the new normal” (The Economist 2016). it will continue to “promote the ‘Belt and Road’ initiative
26
“Reaganomics” (to advocates) and conversely, “voodoo So, what does President Xi’s supply-side reform
economics” (to detractors), formed the backbone of really mean? Thankfully, late in December 2015, Xinhua
President Ronald Reagan’s administration economic released a helpful missive entitled “Backgrounder: What is
program. China’s Supply-Side Reform?” In providing a definition to
supply-side management, it adheres to classic economic
Peter Ferrara, who served in the White House Office textbook theory, stating that, “[s]upply-side economics
of Policy Development under President Reagan, wrote holds that the best way to stimulate economic growth is
in Forbes magazine that “Reaganomics” operated on an to lower barriers to production, particularly through tax
explicit, four-point economic program aimed at reviving cuts”. With reform under the Xi administration, Xinhua
the then-collapsing American economy, which President declares “attention has turned to stimulating business
Reagan inherited upon assuming office in 1981: through tax cuts, entrepreneurship and innovation while
phasing out excess capacity resulting from the previous
- tax rate cuts to incentivize economic growth, stimulus. Such measures are intended to increase the
encouraging companies to invest and produce supply of goods and services, consequently lowering
prices and boosting consumption” and generate
- government spending reductions “sustainable, quality growth”. Xinhua then enumerates
- a n t i - i n f l a t i o n m o n e t a r y p o l i c y c o o l i n g the following as “concrete examples” of China’s supply-
money supply growth versus demand, to stabilize and side reforms, stating that “viewed as a whole, these
strengthen the value of the dollar measures can also be considered ‘structural’ reform”:
- deregulation, involving, among other things,
the elimination of government price controls on oil - “cutting housing inventories
and gas - tackling debt overhang
- eliminating superfluous industrial activity
Mr. Ferrara then argues in Forbes that these economic - cutting business costs
policies not only succeeded in reviving the American - streamlining bureaucracy
economy, but “amounted to the most successful - urbanization
economic experiment in world history”. From 1982 - abandoning the one-child policy” (Magnier
until 1990, the U.S. economy grew by almost a third, 2015)
created tens of millions of jobs, reduced inflation while
unemployment reached record lows; the poverty rate The current administration’s pronouncements on
declined while the stock market boomed and the supply-side reform policies seems to dovetail neatly
American standard of living, measured by real per-capita with the 13th Five Year Plan (2016-2020)—the first to be
disposable income, increased significantly (Ferrara 2011). generated under President Xi Jinping—which, reported
the Wall Street Journal, was approved by the Communist
According to The Economist, President Xi’s first Party leadership at the conclusion of the Fifth Plenum in
mentions of supply-side strategy or “gongjice” started October 2015 (Magnier 2015).
occurring in speeches in November 2015, followed by
his December 2015 announcement, but he has yet to be In a communiqué issued after the Fifth Plenum,
as explicit as President Reagan was with his economic Xinhua reports that the Plan targets “maintaining a
program. The magazine speculates that President Xi medium-high speed of growth”, aiming to double its
may be attempting to “reinvigorate reforms”. Back in 2010 GDP and per capita income by 2020. In order
2013, the Communist Party’s Central Committee had to do this, China must maintain an annual growth
called for market forces to take a “decisive” role, placing of at least “6.5% from 2016 to 2020”, Xinhua quoted
the private sector on an equal footing with the state. President Xi in a statement. The communiqué stated
While the Xi administration has been using the “new that China will “promote clean industrial production,
normal” catchphrase to describe the economy’s slower low-carbon development and energy conservation to
yet sustainable maturation, The Economist supposes ensure sustainable growth” in the next five years. China
that adding “supply-side reform” sounds more like a call- will “accelerate its opening-up of the capital market,
to-action, quoting Xinhua who had recently (and most and further opening-up of the service sector, including
succinctly) combined the two catchphrases together: banking, insurance, securities and nursing homes, to
“supply-side structural reform is the new growth driver foreign investment”, the communiqué said. In addition,
under the new normal” (The Economist 2016). it will continue to “promote the ‘Belt and Road’ initiative
26
