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China is making changes in its economic strategy, aiming for a long-term development. This year, the economic growth target has been set to 7 percent in comparison to last year’s 7.5 percent. In addition to this, it plans on opening its industry to foreign investors.
In 2014, China was aiming for a 7.5 percent in economic development but only managed a 7.4, the lowest value since 1990. The peak in terms of economic growth was reached in 2007 with a value of 14.2 percent. After that, the economy saw a slow but steady decline. The phenomenon was, however, intentional as the country was dealing with inflation and debt resulted from over-constructing and unrealistic investments.
This year, the strategy changed, Premier Li Keqiang declaring that the new aim is to create a “moderately prosperous society”.
Up until now, China was relying on an economic strategy based on construction and heavy industry. This method had many disadvantages, putting the country’s environment at great risks, as the level of air and water pollution in China reached above standard limits. The Communist Party decided to adopt a different strategy, based on services and population consumption.
The Premier said that they want to “maintain a proper balance between ensuring steady growth and making structural adjustments”.
The members of the Communist party agree with President Xi Jinping’s strategy which he personally dubbed “the new normal”. They are, however, worried that this slowdown might cause a spike in employment rates. This is why, two interest rate cuts have been performed since November of last year in addition to a decrease in business taxes.
If up until now, most of the Chinese market has been dominated by government-owned companies, banks and oil producers, Premier Li declared that from now on the country will open up to foreign investors, giving them more opportunities to enter the market. A first step will be the decrease in government-controlled services and manufacturing industries, a field where foreign companies were unable to infiltrate.
James Zimmerman, chairman of the American Chamber of Commerce in China expressed his enthusiasm in regards to the upcoming changes, saying that “member companies share the premier’s hopes for a stable, fair, transparent and predictable business environment” and await for the regulations to come into effect.
Image Source: WSJ
