[21st Century Business Herald] Liu Yuanchun: 6.0-6.5% GDP Growth Rate is realistic and more elastic

In response to the Government Work Report about targets for 2019 delivered by Premier Li Keqiang on March 5, 2019, Liu Yuanchun, the vice president of Renmin University of China, pointed out that the down-regulation of economic growth is inevitable, and with more uncertainties, the new range from 6.0% to 6.5% allows for more elasticity.

Increased uncertainty

Q1: What are the considerations for adjusting GDP growth rate downward?

A1: As the internal and external environment become more complicated, more challenges and risks are expected along with the increasing uncertainties. Therefore, a lower GDP growth rate is nothing but a realistic decision. Moreover, 2019 growth rate is set within a range, from 6.0% to 6.5%, which allows for more flexibility and elasticity considering all the uncertain factors..

Q2: What do you think of this year’s employment situation?

A2: Economic uncertainty and structural paradox are the major factors for low-quality employment. In response to this, the government has listed many concrete actions to improve the skills of laborforce, such as allocating 100 billion yuan to enhance employees’ skills and promote job transfer and redeployment through training.

More Effective Fiscal policy

Q3: What do you think of the positive fiscal policy in 2019?

A3: The fiscal policy inherits last year’s keynote and is further quantified, e.g. the large scale tax-cut and fee reduction are clarified with approximately 2 trillion yuan; VAT rate and enterprises social insurance premium will be reduced; and local government special-purpose debt will increase 800 billion yuan.

Q4: Does the stable monetary policy imply a reduction in Required Reserve Rate (RRR) and interest rate?

A4: It is imperative to reduce RRR in order to motivate banks to lend more as right now our RRR is still in the high range. As for the interest rate, under the downturn pressure, we have to reduce the actual rate of interest, or even as the price level changes, to reduce the nominal interest rate as well.

Q5: The continuous RRR cut has raised concerns about “economic flood” with money.

A5: RRR cut or interest rate reduction is not related to economic flooding as the flood is actually determined by the match or mismatch of liquidity and economic operation. So far, our monetary policy has been rather tight.

Promote stable growth by stabilizing domestic demand

Q6: What role does a stable infrastructure play in 2019?

A6: Investing in infrastructure is the key for the stable investment, as it is an important direction to put money in. But infrastructure investment should not return back to the high-speed mode since its overall scale is big enough.

Q7: How do you view the measures to stabilizing consumption such as individual income tax cut, more support for elder and children care services, and automobile consumption?

A7: necessary measures and policies have been carried out or in plan to promote consumption, all the sectors mentioned here are the weak parts in our domestic consumption.  Stable domestic consumption and stable investment are the core pillars of a stable growth since external demand is uncertain and more difficult to control.

Liu Yuanchun, Vice-president of Renmin University of China, and Head of Think Tank Management at RUC.

The original article was first published at:

http://nads.ruc.edu.cn/displaynews.php?id=6585