In the afternoon of Oct. 24, discussions were held on the structural reform of the Chinese economy and the Japan-China economic relationship.

Three key features of China's 'new normal' economy

Yi Gang, vice governor of the People's Bank of China, explained the three characteristic features of China's "new normal" economy: first, the switchover from investment to consumption-oriented economy; second, the structural change from manufacturing to service industry; and third, the respect for environmental protection and low energy consumption.

Yi further explained that China will continue its 6 percent to 7 percent economic growth under the new normal economy by promoting the establishment of a social safety net, such as the consolidation of its pension system.

As for the bank's Oct. 23 announcement to lower the reserve deposit/policy interest rates while eliminating the deposit interest-rate ceiling, he said that those decisions were made to support the country's economy and to further rationalize China's interest rate decision mechanism in line with the actual market situation.

Zhang Yansheng, secretary-general of the academic committee of China's National Development and Reform Commission, noted the need to accelerate qualitative instead of quantitative innovation, promote internationalization by sea and land, consolidate and observe laws and rules, protect the environment and equally distribute social welfare services to citizens.

Ways to raise Japan's potential growth rate Hiroshi Nakaso, deputy governor of the Bank of Japan, said that in order to rise the potential growth rate of the Japanese economy, its labor force should be expanded and its capital further accumulated while its productivity is enhanced. "To this end, structural reform, corporate investments and active participation by women/elderly/foreign population in the labor force are necessary," he said.

As for the Chinese economy, he observed no drastic downward risk for the time being since individual consumption remains solid. "But the Chinese government must strengthen its communication power and retain market transparency by consolidating/releasing related data, thereby allowing global market participants to make correct predictions. Such actions are necessary to avoid the sudden drop in stock prices, as was the case this summer on the Shanghai stock market," he noted.

China's slack manufacturing sector and the need to check skyrocketing stock prices

Masahiro Kawai, a specially-appointed professor to the Graduate School of Public Policy, University of Tokyo, said, "The Chinese government's 4 trillion yuan economic stimulus plan raised investment too much against GDP. It pushed local governments and banks to lend excessively until their debts rose to an uncontrollable level while corporations overspent on facilities." He further commented that though such conditions are weighing down the Chinese economy, the manufacturing sector is slack and not helping consumption to grow enough.

Susumu Okano, senior executive managing director of the Daiwa Institute of Research Ltd., said that China's stock prices rose to an abnormal level, as margin trading by individual investors ballooned through financing from non-securities firms. As those corporations are outside the restrictions/ supervision of the authorities, Okano said they should also be checked while also monitoring stock prices, by expanding the rights of the China Securities Regulatory Commission (CSRC).

Japan-China cooperation required to heighten economic sustainability

Gong Xiaofeng, director general, Center for International Economic and Technological Cooperation, said that the current slow growth of the Chinese economy should be overlooked since the country is undergoing an economic model change.

Wu Yun, chief engineer and chief information officer of China Energy Engineering Corporation Ltd., said that his company's technological power in plant engineering is among the world's best, as a result of support from Japanese corporations such as the Tokyo Electric Power Company.

Shouei Utsuda, former chairman of Mitsui & Co., Ltd., noted that China's service industry is growing in such areas as TV shopping, electronic transactions and tourism. He also noted the need for Japan and China to heighten their economic sustainability by cooperating in new areas such as the environment and new energy, as well as social welfare services such as hospital/care facility operation/management.

He then asked whether China may join the Trans-Pacific Partnership (TPP), as negotiations on the Japan-China-South Korea Free-Trade Agreement (FTA) and Asia's Regional Comprehensive Economic Partnership (RCEP) have both ground to a halt.

The Chinese panelists replied by saying that their country is carefully examining the TPP since its low tariff rates and intellectual property protection rules are very demanding for a rising country like China.

Zhang stated that Japan should actively promote the unification of the Asian market instead of concentrating too much on its domestic market and said, "I hope the China-South Korea FTA will help to push Japan to sign an FTA with China."

Nobuaki Kurumatani, deputy president at the Sumitomo Mitsui Banking Corporation, noted that Japanese banks could also finance China's social welfare services such as elderly care. He further mentioned the possibility of the two countries cooperating in the robotics sector.

On Japan's public debt and China obtaining SDR

Wang Wen, executive dean of Chongyang Institute for Financial Studies, Renmin University of China, asked what Japan thinks about its public debt and whether Japan agrees to China obtaining the special drawing right (SDR) of the International Monetary Fund (IMF), as the renminbi becomes a key international currency.

In response, Tatsuo Yamazaki, former vice minister of finance for international affairs at Japan's Ministry of Finance, said that although financial measures are being taken tentatively, Japan is straining its efforts to turn its primary balance figures into the black by 2020.

Next action for economic cooperation

Wei Jianguo, vice chairman of the China Center for International Economic Exchanges, noted that future proposals should be presented to the respective governments, questions and hard feelings between the two countries' enterprises and citizens should be erased, and Japan and China should find areas where their businesses can collaborate and cooperate.