by Wan Zhe

Chinas economy in 2018 can be characterized by three features： relatively strong resilience， steady reform of the capital market and increasingly lower institutional costs.

Amid an increasingly complicated situation at home and abroad and fiercer disputes in trade， China has generally fulfilled its main targets in economic development in 2018： The growth rate of its GDP reached 6.6 percent， the urban surveyed unemployment rate stayed at around five percent， foreign trade volume hit a new high， economic restructuring continued progressing， emerging industries maintained relatively fast development， and the urbanization rate increased steadily. All indicators point to the high resilience of Chinas economy.

The resilience of Chinas economy can also be seen in flexible policies. Since mid-2018， uncertainty in the economy has increased， so China has changed its macro policies accordingly. Monetary policy was adjusted to “prudent”and policymakers stressed that to ensure liquidity in the market， fiscal policy should be loosened. The government vowed to enact more policies such as cutting taxes and administrative fees， investment and infrastructure projects have been expanded， and the environment for doing business has been improved. China has further removed obstacles impeding trade and become more open to the world.

Facing a complicated and volatile external situation， China should harness more domestic fuel and dynamism in its economy. Chinas reform has entered a deep-water zone， and mountainous pressure lies ahead. However， the reform is still ongoing and more potential for Chinas economy has yet to be tapped.

The capital market has always been a focus of the governments work in economic development. However， only recently was it mentioned at the Central Economic Work Conference as an area that affects the whole picture， which evidences the significance of the capital market in Chinas economic development and restructuring.

In recent years， the reform of Chinas capital market is heading for “internationalization， legalization and marketization.” From the perspective of internationalization， two-way opening of Chinas capital market has steadily progressed. In terms of legalization， China has adhered to strict supervision in accordance with the law and constantly improved basic systems of stock issuance， listing and delisting. While improving relevant laws， regulations and regulating institutions and cracking down on violations of laws and regulations， China has effectively protected the legitimate rights and interests of small and medium investors. On marketization， China has maintained normal issuance of new shares， regulated refinancing of listed companies， curbed excessive financing， supported mergers and acquisitions with industrial integration as the focus， and streamlined examination and approval procedures， all of which give the capital market more power in its role in serving the real economy.

It should be noted that the reform of the capital market has achieved early results while withstanding tremendous pressure. Although the capital market is temporarily at a low valuation due to changes in internal and external environments， the prospects for value investment and long-term investment remain promising.

Considering the progress of the five major tasks （cutting excessive industrial capacity， destocking， de-leveraging， lowering corporate costs and improving weak links）， the first three have been completed， and China has made concrete efforts to improve weak links. Lowering corporate costs will be a focus of future economic policies， and China will also focus on the reduction of institutional costs. This reduction should include multiple aspects：

The first is cutting taxes and administrative fees. Since last year， China has repeatedly stressed reducing taxes and administrative fees， but ordinary people havent seemed to witness any effect. Due to local governments effort in debt clearance， real estate purchase restrictions and other policies， they are not in a good financial position. Few local governments are willing to “reduce administrative fees，” and they have barely reduced the actual burden on local enterprises. For the future， it is necessary to intensify efforts to rectify and change fiscal revenues and earnestly reduce taxes and fees for enterprises.

The second is improving administrative efficiency. In the past few years， “streamlined administration and decentralization” and“reduction of approval affairs”have achieved good results， but better administration will happen not only through decentralization but also with the provision of better services. We must work hard in administrative process design and management， reduce institutional costs of doing business and improve the abilities of administrators at all levels， so government affairs are more open， procedures are reasonable， and management and supervision are effective.

The third is promoting the rule of law. Marketization and legalization are key to reducing institutional costs. The Central Economic Work Conference released requirements of “marketization and legalization.”Marketization must be guaranteed by rule of law. Otherwise， enterprises and individuals will not be willing to become involved in long-term investment， the market will not be able to operate in a healthy manner， and economic power and vitality will not be truly released.

Chinas economy has not lost momentum because the countrys reforms have been orderly and unceasing. Only more proactive reforms can secure a better future.