From the "three driving carriage" to the "supply side structural reform", the recent high-level discourse system in which a clear signal: China's macroeconomic regulation and control thinking is undergoing major changes from the previous emphasis on demand side regulation to the supply side adjustment.

"Supply side structural reforms" this new word in the public sounds like a very fresh, but the supply side is not a new thing. Since the establishment of the current government, promote decentralization, "management" and "Internet +" and a series of actions, are essentially from the supply side force of the macro-control measures.

The central economic work conference held today to focus on the supply side of the structural reform. From the top spoilers, tax cuts, SOE reform, financial reform, decentralization, "double", emerging industries are supply side reform keywords.

The supply side reform and China economic standard "

In the last month, the high level for the supply side reform frequently blowing.

November 10th, Xi Jinping, general secretary at the central financial and economic leading group meeting stressed the need to moderate expansion at the same time, focus on strengthening the supply side structural reform. This is the first time the central government put forward "supply side reform".

Subsequently, the term referring to a high China economy "standard".

In November 11th, Prime Minister Li Keqiang said in a State Council executive meeting presided over, "foster the formation of a new supply of new power (310328, fund) to expand domestic demand"; 15, Xi Jinping at the G20 summit stressed the need to pay attention to the supply side and demand side coordination force "; 17, said Li Keqiang convened in the 45 plan preparation to work meeting, at both ends of the supply side and demand side force, promote the high end industry towards; 18, Xi Jinping at the APEC conference, said," we must be determined to make greater efforts in promoting economic structural reform, the supply system to adapt to changes in demand structure."

December, Li Keqiang hosted two expert seminars. Two seminars, Li Keqiang both mention the same point: from the supply and demand side force to promote structural reform.

For a time, the "supply side reform" has become the hot topic of experts and scholars in the economic circle. In fact, the supply side is not fresh, just like the two sides of the coin, there is a demand for supply, but a long time ago when it comes to macroeconomic regulation and control more focused on the demand side, that is, investment, consumption, exports, three driving carriage". And now, the high level has clearly defined the focus of regulation to supply side.

This change has its profound background. "The reason is not complicated, because the practice proves that the simple needs management is difficult to help the Chinese economy to recover." Liu Shengjun, executive vice president of the Lujiazui International Financial Research Institute, china.

After the financial crisis in 2008, China tried to stimulate demand through sustained monetary policy and fiscal policy. 2009 -2010 implemented the "4 trillion investment plan", 10 trillion loans issued, the national development and Reform Commission in recent two years, the new investment in infrastructure projects are more than trillion. Still, the downward trend in the economy is still not changed.

Yang Weimin, deputy director of the office of the central financial leading group pointed out, (the twelfth five year period) we have been implementing the strategy and policy to expand domestic demand, but the current economy is still down, the price of industrial products continued to decline, corporate profits decline, apparently these problems have been difficult to explain the lack of demand."

In fact, the downward economic growth is only appearance, even more serious is the 4 trillion tonic injection, side effects of overcapacity and debt risk to the sustained and healthy economic development.

What is the excess capacity? In steel, for example, the United States Steel Association and other 9 steel organization recently released a statement, which quoted the OECD statistics, the current global steel production capacity of about 7 tons, while China's iron and steel enterprises of about 4.25 tons of excess capacity.

Overcapacity behind is a large area of business losses. China Steel Association data show that the first three quarters of this year, large and medium-sized steel enterprises losses 28 billion 122 million yuan, loss of 49 enterprises, accounting for nearly half of the number of member enterprises.

Iron and steel industry is only the tip of the iceberg. "Now the overcapacity is the result of the mismatch of resources, that we will be too much of the resources to invest in some of the low rate of return on investment and social needs of the industry." Li Wei, professor at the Cheung Kong business school, told reporters.

Connected with the excess capacity is a rising debt scale. August of this year, the Chinese Academy of Social Sciences released the China national balance sheet 2015 shows that by the end of 2014, China's economy as a whole the total debt amounted to 236% yuan, the proportion of GDP rose from 170% in 2008 to 6, up 65.7 percentage points over years.

Excluding financial institutions, the size of the debt of Chinese entities to 138 trillion yuan, accounting for GDP of the proportion rose from 157% in 2008 to 217% in 2014. The leverage level Bimei, Britain and Germany, Japan and other developed countries are higher.

In 2008 the central bank has cut interest rates 4 times, the end of 2014 to start this round of rate cut has been 6 times. But we are looking through the research institutions in the research report, the survey of small and medium enterprises, to see, hear the most is still a difficult financing, financing expensive".

The asset bubble, the government and the enterprises that are hard to bear.
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