Aligning Demand Growth with Supply-Side Structural Reform
This article focuses on the interplay between increasing demand and implementing structural reforms on the supply side. It explores strategies and policies aimed at fostering sustainable growth by aligning efforts to boost demand with necessary adjustments in supply structures.
TroibNews 
**Editor's note:** Dong Yu serves as the executive deputy director of the China Institute for Development Planning at Tsinghua University. The views expressed in this article are those of the author and do not necessarily reflect the stance of CN. This piece has been translated from Chinese and edited for clarity and brevity. In this special series, "China's Economy: Five Coordination Priorities for 2025" by CN, experts delve into the five coordination priorities outlined during the Central Economic Work Conference, providing a comprehensive examination of China's economic strategies and potential moving forward.
**I. Understanding the Relationship Between Expanding Domestic Demand and Deepening Supply-Side Structural Reform**
Historically, both the expansion of domestic demand and the deepening of supply-side structural reform have emerged as strategies to address various economic challenges, each aligned with the specific developmental needs of China's economy at different phases. An accurate comprehension of their interrelatedness and a holistic perspective is essential.
Recognizing the evolution of strategic concepts is vital. The focus of the current domestic demand expansion strategy is on reviving and enlarging consumption, emphasizing consumption's foundational role along with investment's key contributions. The ultimate aim is to establish a robust domestic demand system expeditiously.
It is important to accurately assess changes in supply-demand dynamics. In China's current economic landscape, restoring consumption and addressing high-quality demand deficits are paramount on the demand side. On the supply side, challenges include lingering overcapacity in low-end sectors combined with a lack of supply in high-end sectors and supply chain security risks. These interwoven challenges necessitate coordinated actions on both sides, requiring a clear identification and resolution of principal contradictions and their key aspects.
Striking a balance in macroeconomic governance is also essential. The efforts to expand domestic demand and deepen supply-side structural reform are complementary rather than in opposition. In the context of the new development paradigm, expanding domestic demand is a strategic foundation, while advancing supply-side structural reform remains integral. A cohesive approach, where both strategies work collaboratively, can facilitate supply upgrades driven by demand and encourage potential demand stimulated by supply, ultimately achieving a higher level of dynamic equilibrium.
**II. Identifying Intersections Between Expanding Domestic Demand and Deepening Supply-Side Structural Reform**
In light of the current complex economic environment, regional and departmental actions must consider local circumstances while identifying intersections that can enhance the supply system's quality and efficiency and bolster effective demand. By transforming constraints and gaps into new growth engines, these efforts can provide significant momentum for improving the broader economy and promoting long-term healthy development.
Finding intersections during industrial transformation and upgrading is crucial. A primary component of supply-side structural reform is the adjustment and optimization of the industrial structure to cultivate new growth drivers. As emerging industries generate demand, promoting development in strategic sectors and future industries represents a vital form of supply-side structural reform, accelerating the upgrade of consumer demand.
Exploring intersections in the establishment of a "Digital China" is essential. Digital infrastructure, including networks, computing power, and application frameworks, lays the groundwork for tremendous market opportunities. Integrating Digital China initiatives into the "Five-sphere Integrated Plan" can create fresh demand across multiple sectors.
Addressing intersections in creating a unified national market is important. Advancing market-based production factor reforms is key, necessitating expedited pilot programs and broader implementations that promote the free flow and efficient allocation of these factors. Such actions are essential for deepening supply-side structural reform and will help establish a high-standard market system. Investments in vital infrastructure and industrial projects should align with regional strategies, while removing regional and institutional barriers will ensure private and foreign enterprises have access to equitable and high-quality services, enabling their growth across various regions.
Additionally, finding overlaps in ecological and environmental protection is crucial. A growing green consumer mindset signifies a shift, leading an increasing number of individuals to prioritize environmentally friendly choices. Therefore, providing higher-quality green products can stimulate new demand.
Lastly, enhancing people's well-being presents another intersection. Many demands related to healthcare, culture, sports, entertainment, and leisure remain unsatisfied, representing key potential areas for supply-side reform. Integrating new products, innovative business models, and diverse services could effectively expand consumption.
**III. Coordinating Strategies Through a Systematic Approach**
Successfully implementing the strategy of expanding domestic demand alongside deepening supply-side structural reform is a systemic endeavor that aligns with overall national interests. Both strategies must be directed toward the shared goal of high-quality development, necessitating coordinated planning and execution.
Establishing a solid technological and talent foundation is fundamental. Initiatives in science and technology should incorporate the "Four Orientations," focusing on national strategic needs and consistently generating innovative talent and research.
Moreover, strengthening fiscal and financial supports is crucial. Fiscal policies should concentrate on investment in critical areas to leverage the guiding role of government funding, effectively catalyzing broader societal investment and consumption. Financial policies should also bolster key and underserved sectors, including accessible finance for small enterprises, technological innovations, green projects, and infrastructure, to better serve the needs of China's real economy.
Ramin Sohrabi for TROIB News
**I. Understanding the Relationship Between Expanding Domestic Demand and Deepening Supply-Side Structural Reform**
Historically, both the expansion of domestic demand and the deepening of supply-side structural reform have emerged as strategies to address various economic challenges, each aligned with the specific developmental needs of China's economy at different phases. An accurate comprehension of their interrelatedness and a holistic perspective is essential.
Recognizing the evolution of strategic concepts is vital. The focus of the current domestic demand expansion strategy is on reviving and enlarging consumption, emphasizing consumption's foundational role along with investment's key contributions. The ultimate aim is to establish a robust domestic demand system expeditiously.
It is important to accurately assess changes in supply-demand dynamics. In China's current economic landscape, restoring consumption and addressing high-quality demand deficits are paramount on the demand side. On the supply side, challenges include lingering overcapacity in low-end sectors combined with a lack of supply in high-end sectors and supply chain security risks. These interwoven challenges necessitate coordinated actions on both sides, requiring a clear identification and resolution of principal contradictions and their key aspects.
Striking a balance in macroeconomic governance is also essential. The efforts to expand domestic demand and deepen supply-side structural reform are complementary rather than in opposition. In the context of the new development paradigm, expanding domestic demand is a strategic foundation, while advancing supply-side structural reform remains integral. A cohesive approach, where both strategies work collaboratively, can facilitate supply upgrades driven by demand and encourage potential demand stimulated by supply, ultimately achieving a higher level of dynamic equilibrium.
**II. Identifying Intersections Between Expanding Domestic Demand and Deepening Supply-Side Structural Reform**
In light of the current complex economic environment, regional and departmental actions must consider local circumstances while identifying intersections that can enhance the supply system's quality and efficiency and bolster effective demand. By transforming constraints and gaps into new growth engines, these efforts can provide significant momentum for improving the broader economy and promoting long-term healthy development.
Finding intersections during industrial transformation and upgrading is crucial. A primary component of supply-side structural reform is the adjustment and optimization of the industrial structure to cultivate new growth drivers. As emerging industries generate demand, promoting development in strategic sectors and future industries represents a vital form of supply-side structural reform, accelerating the upgrade of consumer demand.
Exploring intersections in the establishment of a "Digital China" is essential. Digital infrastructure, including networks, computing power, and application frameworks, lays the groundwork for tremendous market opportunities. Integrating Digital China initiatives into the "Five-sphere Integrated Plan" can create fresh demand across multiple sectors.
Addressing intersections in creating a unified national market is important. Advancing market-based production factor reforms is key, necessitating expedited pilot programs and broader implementations that promote the free flow and efficient allocation of these factors. Such actions are essential for deepening supply-side structural reform and will help establish a high-standard market system. Investments in vital infrastructure and industrial projects should align with regional strategies, while removing regional and institutional barriers will ensure private and foreign enterprises have access to equitable and high-quality services, enabling their growth across various regions.
Additionally, finding overlaps in ecological and environmental protection is crucial. A growing green consumer mindset signifies a shift, leading an increasing number of individuals to prioritize environmentally friendly choices. Therefore, providing higher-quality green products can stimulate new demand.
Lastly, enhancing people's well-being presents another intersection. Many demands related to healthcare, culture, sports, entertainment, and leisure remain unsatisfied, representing key potential areas for supply-side reform. Integrating new products, innovative business models, and diverse services could effectively expand consumption.
**III. Coordinating Strategies Through a Systematic Approach**
Successfully implementing the strategy of expanding domestic demand alongside deepening supply-side structural reform is a systemic endeavor that aligns with overall national interests. Both strategies must be directed toward the shared goal of high-quality development, necessitating coordinated planning and execution.
Establishing a solid technological and talent foundation is fundamental. Initiatives in science and technology should incorporate the "Four Orientations," focusing on national strategic needs and consistently generating innovative talent and research.
Moreover, strengthening fiscal and financial supports is crucial. Fiscal policies should concentrate on investment in critical areas to leverage the guiding role of government funding, effectively catalyzing broader societal investment and consumption. Financial policies should also bolster key and underserved sectors, including accessible finance for small enterprises, technological innovations, green projects, and infrastructure, to better serve the needs of China's real economy.
Ramin Sohrabi for TROIB News
