Cai Fang (蔡昉), Chief Expert of Chinese Academy of Social Sciences’ National High-end Think Tank, delivered a speech on September 3, highlighting that China’s economy has transitioned into a new normal, rendering traditional stimulus approaches obsolete.
Cai identified three key characteristics of China’s new economic landscape from both macro and micro perspectives:
- A rapidly declining population and a significant decrease in its labor force.
- Weak consumer demand, exacerbated by demographic aging.
- Mounting pressures in labor market, including labor shortages and the need to align the workforce’s skills with evolving industry demands.
Cai proposed three strategic policy directions:
- Promote a Competitive Environment: Encourage the removal of less competitive companies to stimulate innovation and enhance productivity.
- Rethink Traditional Macroeconomic Stimulus: Recognize that traditional stimulus measures no longer align with today’s economic landscape. For example, previous approaches emphasized infrastructure spending, which does not address the job-seeking preferences of today’s youth, who seek opportunities in the service sector rather than construction.
- Advance structural Reforms: Prioritize reforms such as the overhaul of the Hukou (household registration) system to incentivize urban-bound rural residents to increase their spending in urban areas.
Source: 21st Century Business Herald, September 3, 2023