Agencies
China should step up people-centred urbanisation and economic deregulation to bolster domestic demand, economists and academics urged, amid waning consumer sentiment, slowing economic momentum and heightened uncertainties ahead of Donald Trump’s second term as US president.
"People-centred urbanisation is the fundamental solution to China’s current domestic demand shortage,” Chi Fulin, president of the Hainan-based China Institute for Reform and Development, said at a forum held by the Centre on Contemporary China and the World at the University of Hong Kong on Tuesday.
China’s nearly 300 million migrant workers, who are not registered as residents in the cities where they work, do not have the same access to public services such as healthcare and education as registered urban residents.
Chi said migrant workers could power significant consumption if the public service gap was filled.
"A package of incremental policies is important … with the investment focused on people,” he said, distinguishing it from the infrastructure-focused stimulus in 2008.
"It should aim to boost consumption confidence by addressing public service gaps … thereby creating substantial mid- to long-term momentum for expanding domestic demand.”His comments were echoed by other academics at the forum, as the world’s second-largest economy grapples with boosting market confidence and domestic demand while facing external demand pressures amid renewed tariff threats from Trump, who is set to begin a second term as US president next year.
Chi said China will need to mobilise 80 trillion to 100 trillion yuan (US$11 trillion to US$13.8 trillion) in investment over the next five to 10 years to drive "people-centred urbanisation”, with urban residency for migrant workers one priority, along with ensuring equal access to public services across China and the upgrading of urban infrastructure.
Funding could be sourced through central government debt, the allocation of 10 to 15 per cent of state-owned assets, and unlocking the value of rural residential land, he said.
Fang Ning, vice-president of the China Association of Policy Science, said China has yet to reach the 65 per cent urbanisation rate typically seen in countries that have transitioned to industrialised and developed status since the second world war.
With only around 50 per cent of China’s population registered as urban residents, urbanisation has the potential to further drive growth, Fang said.
He also urged further economic deregulation, citing policy-related factors as one of the main reasons for the current economic downturn, along with the fiscal strains brought about by the Covid-19 pandemic and geopolitical pressures."Relaxing regulations is needed to raise [the market] expectations of broader society,” Fang said.
While deregulation helped spur China’s economic growth during the early years of reform, it was accompanied by problems and challenges, he said.Those challenges, such as increased corruption, had led to a tightening of regulations in the past decade."But regulation incurs social costs,” Fang said, adding that excessive regulation is a key reason for the challenges faced by China’s small and medium-sized enterprises.
They have been hit hard by the nation’s sluggish economy and restrictive regulatory shifts in the past few years, particularly in industries such as technology, real estate, and off-campus education.
Private investment, a gauge of confidence, fell by 0.2 per cent year on year in the first three quarters of this year, government data showed.
Further deregulation, Fang said, could rebuild confidence in the private sector and gradually lift the economy.
Beijing pledged last month to improve conditions for the private sector, releasing draft legislation designed to promote fair market competition and enhance the investment environment for private businesses.