Reform, not investment, for economic growth

Local authorities should stick to the central government's strategy to promote economic growth by reform rather than investment, said an article in Beijing Youth Daily (excerpts below).

Minister of Finance Lou Jiwei said at a G20 meeting that although China's economy shows a little slowdown, its employment situation is desirable.

The government will not launch a large-scale stimulus policy but will make efforts to improve economic growth and employment through reform.

However, many authorities still rely on investments to boost economic growth.

Many provincial officials worked hard for the China Railway Company's 400 billion yuan ($65.1 billion) railway investment.

For years China's economic growth has relied on investments, which contribute 50 percent more to the economy than exports.

But most investments are fiscal and governmental, which cause problems, such as inflation and overcapacity.

Too much investment in government creates a burden on taxpayers and a risk of debt for local authorities.

The key is to reform the economic growth model.

Lou said that reform will reduce government restriction, promote taxation reform and balance fiscal income and spending.

To smoothly propel these reforms, the authorities should let the market play its part and change the traditional GDP-oriented performance evaluation system.

Through reform, the local governments will be forced to change their mindset.