L. V. NOVOSELOVA

Doctor of Economics Institute of the Far East of the Russian Academy of Sciences

XVIII CPC Congress Keywords:, Chinese economy, investment, investment efficiency

The 18th CPC National Congress (November 2012) announced the need to accelerate the transformation of China's economic development model with a focus on building a more harmonious society based on modern industrial potential and scientific and technological achievements. In this regard, the country is faced with the task of fundamentally improving the quality of life of the people, resolutely reducing the gap in the levels of development between urban and rural areas, creating a favorable ecological environment and ensuring creative openness to the outside world.

A similar task was already put forward at the previous 17th Congress of the CPC (2007). However, due to a number of reasons, primarily related to the negative impact of the global financial crisis on the situation in China, during the 11th five-year plan (2006-2010), the Chinese leadership failed to make significant progress in mitigating the serious structural imbalances that hinder implementation of the target model of economic and social development. Thus, the share of the 3rd sector (including science, education, healthcare, trade), which is the most important priority of economic policy, has not changed significantly, amounting to only 43.4% of the country's GDP in 2011 compared ^{to 41.9% in 2007.1}

In the context of the new economic strategy, special attention is currently being paid to increasing domestic demand and the scale of the domestic market, expanding consumption and increasing incomes of the population, and improving the social security system of citizens. The congress, in fact, for the first time, along with doubling GDP, set the goal of doubling the population's income by 2020. This is inevitably associated with a change in the current ratio of accumulation and consumption of China's GDP, as well as with a significant reorientation of investment resources in favor of economic sectors that improve the quality of life of people. To make the reasons for this question more clear, we should turn to the analysis of the current economic situation in the country.

SAVE OR CONSUME?

The first decade of this century saw a very dynamic development of the Chinese economy: the average annual GDP growth rate in 2001-2011 exceeded 10%. Even in 2009, during the most acute period of the global crisis, this figure was 9.2%. As a result, China has become the second largest economy in the world after the United States. There is no doubt that the country's economic development has made significant progress, mainly due to the mobilization of huge investment resources.

At the same time, as evidenced by Chinese statistics (see Table. 1). in the last decade, the dominance of investment as an engine of economic growth has become increasingly apparent. The share of investment in GDP increased to 72.1% in 2012 from 33.2% in 2000. This, on the one hand, characterizes an extremely high level of accumulation and the scale of the investment process, and on the other, demonstrates very limited opportunities for a serious expansion of consumption by the population.

Thus, at the end of the first decade of this century, the share of consumption in China's GDP was one of the lowest not only in comparison with developed countries, but also among developing countries. In 2010, it was only 33.8%, compared to 53.7% in Thailand, 61.9% in India,and 52.5% in the Republic of Korea. ²

Without detracting from the achievements of the Chinese model of economic growth, which were reflected, in particular, in a noticeable increase in the standard of living of the people, nevertheless, it should be recognized that the population's income significantly lagged in growth from the country's GDP.

Of great importance is the fact that capital-intensive industries, which traditionally account for OS-

Table 1

Share of investment in GDP (%)

Source: Zhongguo tongji nianjian 2012. Beijing, 2012, Tables 2-1, 5-2; Report of the State Statistical Office (GSO) China, 22.02.2013.

All other things being equal, the new volume of disbursed investments creates fewer new jobs than labor-intensive ones (for example, the service sector). In addition, the huge scale of capital construction, stimulated by the administrative interests of local authorities, often generates excess capacity in a number of industries (steel, cement, aluminum, etc.), which in turn hinders, in particular, the solution of the problem of reducing specific energy consumption in the country. During the 11th five-year plan, despite a number of measures taken, it was not possible to meet the planned target for saving energy consumption per unit of GDP.³ Thus, mitigating the serious imbalance that exists in the PRC between the scale of investment resources and the size of consumption is one of the urgent tasks of China's current economic strategy.

TOWARDS A NEW STANDARD OF LIVING

It is assumed that in the conditions of continuing instability of the global economy, China's economic growth in the foreseeable future should be based mainly on domestic consumer demand. As noted at the First Session of the NPC of the 12th convocation (March 2013), in this regard, it is necessary to carry out work in a number of areas. First of all, it is necessary to significantly expand the effective demand of the population by creating new jobs, raising wages, increasing purchase prices for agricultural products, creating a mechanism for resolving labor conflicts, etc. Thus, in 2013, the number of people employed in cities and towns will be increased by more than 9 million people, while the registered urban unemployment rate will remain unchanged (4.6%). The population's income will increase at the same rate as the overall economic growth, which is expected to reach 7.5%4.

In parallel with the expansion of effective demand, it is important to create comfortable conditions for using the significant savings of the population available in China for consumer needs. Traditionally, Chinese citizens tend to save a significant portion of their current income for a long time for unforeseen expenses, medical care, children's education, and providing for their own needs in retirement. The surest way to encourage the population to make more active use of savings for current consumption needs is to strengthen people's confidence in the security of their lives through the comprehensive development of the social security system (for old age, disability, child care, etc.).

It is no coincidence that this task is being actively emphasized by the Chinese leadership at the present time. In 2013, it is planned to increase the average per capita rate of budget allowances for participants in the rural cooperative system of medical care and health insurance for non-working urban population from 240 to 280 yuan* per year, and the average per capita rate of financial expenditures for basic public health services - from 25 to 30 yuan.⁵ At the same time, the goal is to increase the number of participants in the urban old-age insurance system, unemployment insurance, industrial injury insurance, and rural social old-age insurance by 3.1%, 1%, 2.7%, and ^3.7%, respectively, in 2013.6

An essential aspect of the problem of forming a high-quality structure of effective demand in China is the comprehensive promotion of the purchase of products from priority industries, including energy-saving household appliances and environmentally friendly products. In order to simplify and facilitate the purchase of goods for buyers, it is planned to actively develop modern forms of trade and its infrastructure through, in particular, the expansion of retail networks, the development of transport and telecommunications, the introduction of online stores, etc. The task is to strengthen control over the quality and safety of goods sold on the market.

Thus, despite the existing problems of socio-economic development, related, in particular, to the reduction of economic growth in the last two years, the Chinese Government is taking consistent steps to improve the standard of living of the population. In particular, at the end of 2011, the minimum taxable level of monthly income was raised from 2 to 3.5 thousand yuan.

In addition, the Ministry of Finance of the People's Republic of China in 2012 allocated budget funds in the amount of 36.3 billion rubles. RMB to provide citizens with targeted subsidies for the purchase of energy-saving household appliances and lighting devices, cars with low specific fuel consumption.-

* $ 1 is equal to 6.13 yuan (approx. ed.).

high-efficiency electrical appliances, etc. According to calculations, this should increase the size of annual consumption by 450 billion rubles. RMB. From June 2012 to May 2013, each Chinese buyer is expected to receive such subsidies in the amount of 180 to 400 yuan.⁷

The promotion of consumers in the car market continues. The government decided to provide 3,000 yuan to each buyer of a car with an engine capacity of up to 1.6 hp, or with a specific fuel consumption of 20% less than the standard level. In general, due to the use of these and other tools to stimulate domestic demand in the current year, it is expected to increase the total volume of retail sales of consumer goods by 14.5%.

Special attention is paid to rural residents: the coverage of the rural population by the pension system is expanding; purchase prices for agricultural products are increasing; state subsidies are increasing, as well as the cost of training migrants from the village. Annual per capita subsidies for farmers ' health care increased from RMB 200 to RMB 240. ⁸ In 2009-2010. rural residents were granted subsidies in the amount of 4.97 billion rubles. RMB for the purchase of cars, which increased their sales to the rural population to 38.2 billion yuan. ⁹. In 2012, subsidies to farmers reached 192 billion yuan. yuan versus 64 billion yuan. RMB in 2007 This year, the promotion of sustainable growth of peasant incomes will continue, and the minimum purchase prices for basic agricultural crops, including wheat and rice, will significantly increase.¹⁰

These actions demonstrate the Government's serious intentions to follow the path of building a more harmonious society.

EFFICIENCY IS THE ESSENCE OF INVESTMENT

This task is classified as extremely complex. Currently, China is at the stage of active urbanization and industrialization. Being the world's largest producer of industrial products, it is still, in fact, not a modern industrial power based on high-tech and efficient production. Under these conditions, investment will continue to play an extremely important role in stimulating the country's economic development in the short term. In 2013, capital investment in the country's fixed assets is expected to grow by 18%^. Maintaining stable economic growth while significantly improving the standard of living of the population is a key problem of the current economic strategy of the PRC.

The solution of this problem, taking into account the need for a relative increase in the consumption fund with a relative reduction in accumulation and the share of investment in GDP, requires a significant increase in the efficiency of using capital investments, compared to the current level.

In practice, this task is further complicated by the fact that, according to Chinese statistics, in order to maintain high growth dynamics from year to year, the PRC needs an increasing scale of investment resources (see Table 2). At the same time, the efficiency of using capital investments is steadily decreasing: if at the beginning of the XXI century, the country will be able to to ensure one yuan of GDP growth, 3.5 yuan of investment was required, while in 2012 it was already necessary to spend 7.9 yuan, and overcoming the impact of the global economic crisis in 2009 even required 8.4 yuan per unit of GDP growth.

The need to overcome the current trend of falling investment efficiency has been repeatedly emphasized by both Chinese economists and representatives of the Government of the Russian Federation.-

Table 2

Efficiency of investment in China

Calculated by: Zhongguo tongji nianjian 2012..; Post by GSU...

structures. Concrete work is being carried out in a number of areas.

First of all, the requirements for objects under construction, which are financed using public funds, have been increased. A number of government resolutions have been issued defining the procedure for monitoring and monitoring such facilities. The state has specifically defined the priorities of the investment process - infrastructure construction, agriculture, high-tech industries, as well as the service sector. Of the total number of projects approved by the Reform and Development Committee of the People's Republic of China in 2012, 78.8% relate to public utilities (water, gas, energy supply, communications, etc.) and 11.3% - to the field of information technology ¹². Overall, in 2012, the fastest growing investments were in the banking sector (46.2% growth compared to 2011), culture and sports (36.2%), wholesale and retail trade (33.0%), agriculture (32.2%), information services (30.6%), science (27.8%) 13.

In recent years, in order to create a full-fledged competitive environment in the investment sphere, special attention has been paid to the development of private entrepreneurship. In May 2010, the State Council of the People's Republic of China issued a policy document "Proposals for encouraging and guiding the healthy development of private investment", which removes restrictions on private investors to invest capital and establish companies in a number of sectors of the Chinese economy that were previously a kind of fiefdom of public sector enterprises.

Among the industries that are fully open to the private sector are water management, electric power, extractive industries (including oil and gas production), transport and logistics, education, social insurance, and telecommunications. The category of open industries also includes housing and utilities, defense industry (in terms of R & D), construction of budget housing, financial services, etc.

At the end of the first decade of this century, private companies accounted for only 10% of investment in such industries as transport, postal services, water management, finance. Legal confirmation of their right to conduct business in industries that are practically monopolized by the state in the coming years should have a positive effect on strengthening competition in the investment sphere, and therefore on improving the efficiency of investment. According to the National Society for the Study of Private Entrepreneurship, the unclaimed investment potential of the private sector of the Chinese economy is between 20 and 30 trillion yuan.¹⁴

Among the tools and methods of encouraging non-state investment activities, the following are identified::

- allowing private companies to restructure public sector enterprises on the basis of mergers and acquisitions;

- state support for independent innovation activities;

- simplification of administrative procedures for establishing a private business;

- facilitating private companies ' access to financial and credit resources;

- encouraging the export of private Chinese capital abroad and the creation of multinational companies, etc. ¹⁵

In 2011 - 2012, a significant reduction in the tax burden for small and medium-sized enterprises should be noted as practical measures to support the private and individual sectors of the Chinese economy. For example, the corporate income tax rate was halved for companies with annual tax payments of no more than 30 thousand yuan. For private companies, more than 100 administrative fees were canceled for a total of 36 billion rubles. in 2011, and even more than 20 yuan in 2012.

Since the beginning of 2012, import customs duties have been reduced on 730 types of goods, including advanced equipment, basic components, raw materials and energy carriers.¹⁶ At the same time, the amount of state funds allocated to support small and medium-sized enterprises in technological and innovative improvement, improving product quality, energy saving and reducing harmful emissions into the atmosphere, expanding sales markets, etc. increased significantly. In 2010, the corresponding budget allocations amounted to 12.3 billion rubles. RMB2. 7 billion. RMB exceeding the level of the previous year ¹⁷. In the following years, this practice was continued.

Maintaining a rational ratio between the level of the bank's interest rate and the return on invested capital is also important from the point of view of improving the efficiency of capital investments. According to Chinese researchers, the state-regulated interest rate in China has long been significantly lower than the return on capital indicator.

Thus, in 2000-2010, the return on capital index ranged from 10% to 17%, while the interest rate on the loan ranged from 5% to 7%, which makes bank credit relatively cheap and, consequently, affordable for business entities.¹⁸ This primarily applies to state-owned enterprises that have a preferential position as borrowers of credit resources. However, excessive and not always justified borrowing of resources often leads not only to the creation of excessive capacity in a number of industries, but also to direct squandering of the funds received and creating certain difficulties in the banking system itself.

The situation described most clearly manifested itself during the period of overcoming the consequences of miro-

during the financial crisis in China. Since 2008, in the context of stagnating foreign investment and export orders in the PRC, the task of maintaining high economic growth rates by activating domestic consumption has been solved. For this purpose, credit and financial expansion measures aimed at stimulating solvent investment and consumer demand were actively used.

As a result, in 2009, the amount of new loans issued by Chinese banks doubled compared to the previous year, reaching 9.6 trillion yuan, and in 2010 and 2011, the economy received additional 7.5 and 7.9 trillion yuan of credit funds, respectively. Being a direct catalyst for economic activity, the active credit policy allowed the PRC to compensate for the negative impact of external factors on the national economy in a short time and thereby "emerge" faster from the first, most destructive wave of the global financial and economic crisis.

However, this process also had negative consequences. As you know, in 2008 - 2009, the main responsibility for implementing the state package of anti-crisis measures was assigned to local authorities. Under these conditions, provincial and city governments have created a total of 3.8 thousand different investment and commercial structures across the country, actively resorting to bank loans for the implementation of development projects entrusted to them.

According to estimates by the Banking Management and Control Committee, at the beginning of 2010, out of 8 trillion yuan of total local government debt, 7.4 trillion yuan was held by these quasi-commercial organizations. At the same time, about a fifth of the amount of this debt was regarded by the banking regulator as unpromising, from the point of view of repayment ^of debt. In 2012, local government debt is estimated to be between 10 and 14 trillion yuan, and a significant portion of projects launched in 2008 and 2009 are unlikely to ever pay off.²⁰

In this context, in February 2010, the Committee for Management and Control of Banking Activities issued guidelines aimed at strengthening state control over the size and target orientation of commercial bank loans. In particular: the provision of financial loans (i.e. loans without a specific purpose of using borrowed funds) was prohibited; the use of bank loans issued to replenish working capital, finance capital investments and purchase securities was prohibited; the practice of extending the maturity of previously issued loans was abolished, etc. The banking regulator pays special attention to loans issued for investment projects and programs of provincial and other local authorities. The relevance of all these measures in the near future is beyond doubt, especially as the credit expansion in the Chinese economy continues - in 2012, newly issued loans totaled 9.1 trillion yuan.²¹

* * *

In general, the current economic strategy of the PRC is focused on solving a wide range of tasks, which are often multidirectional in nature. The need to maintain socio-economic stability associated with maintaining a stable dynamics of economic growth and creating an appropriate number of new jobs implies an active increase in investment in the national economy. At the same time, the need to improve the standard of living and social security of the population requires a significant expansion of the consumption fund and a relative slowdown in the investment process, combined with a significant increase in the efficiency of investment.

As a result, the success of China's current economic policy depends on finding the optimal balance between current and long-term goals, between public and private interests, and between external and internal development factors.

The accumulated experience of the policy of economic balancing, combined with a clearly expressed political will focused on a serious restructuring of the important foundations of the socio-economic order in the country, allows us to assess the prospects for the implementation of the new economic strategy of the People's Republic of China with a certain optimism.

¹ Zhongguo tongji nianjian 2012. Beijing, 2012, Table 2.

² China and World Economy. Vol. 20, 2012, N l, p. 66.

³ Information Office of the State Council, 2011.

⁴ Report on the work of the Government at the first session of the NPC of the 12th convocation (March 2013)- http://russian.people.com.en/31521/8172435. html; Report on the implementation of the 2012 Economic and Social Development Plan and the draft 2013 Economic and Social development Plan at the First session of the 12th National People's Congress - http://russian.people.com.cn/ 31518/8174734.html

⁵ Report on the work of the Government at the first session of the NPC ...

⁶ Report on the implementation of the 2012 Economic and Social Development Plan...

⁷ Beijing Review, 2012, N 25, p. 11.

⁸ Ibid., N 11, p. 17.

⁹ Ibid., N 25, p. 11.

¹⁰ Report on the implementation of the 2012 Economic and Social Development Plan...

¹¹ Ibid.

¹² Beijing Review.., p. 13.

¹³ Communication from the State Statistical Office (GSO) China, 22.02. 2013.

¹⁴ Beijing Review.., N 10, p. 14.

¹⁵ Xinhua, 14.05.2011.

¹⁶ Beijing Review, 2012, N 11, p. 17.

¹⁷ Ibid., 2011, N 7, p. 33.

¹⁸ China and World Economy.., p. 74.

¹⁹ The World Bank Quarterly Update Beijinq, June 2010, p. 9; China Economic Review, 14.01.2010.

²⁰ Bigness.ru, Pravda.ru, 2012.01.08.

²¹ Message from the State Tax Service of the People's Republic of China...

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