The Impacts of Supply-Side Structural Reform on China's Economy: From the Perspective of General Equilibrium

Abstract

Abstract: How would the sustained deepening of supply-side structural reform affect China's future economic development? This is one of the critical and practical issues China has to face and deal with in the new era. The quantitative evaluation with the help of a dynamic computable general equilibrium model shows that while reducing the production tax rate of non-high-energy-consuming industries, increasing the labor participation rate and pursuing innovation-driven development, China's real GDP would be increased by 0.5%~2.6% on the basis of the baseline scenario in 2030. The residential income, the total import and export will be somewhat increased, and the overall price level will be lowered. The outputs of all sectors would be increased, among which, the output of the coal mining industry would have the largest increase. Compared with the other single reform schemes, the increase of labor participation rate would bring about more dividends. If the priorities of the supply-side structural reform programs are distinguished, the innovation-driven development would have more significant impacts on the coal mining industry, the high energy-consuming industry, the manufacturing industry, the transportation industry and warehousing industry, while reducing the production tax rate of the non-high-energy-consuming industries would be more beneficial for agriculture, the light industry and the public utilities units. The above conclusions show that it is necessary to comprehensively deepen the supply-side structural reform by reducing the taxes and fees, increasing the labor participation rate and pushing the innovations. In addition, the reform focus should be adjusted according to the situations of different industries, and attention should be paid to the transformation and upgrading of the coal mining industry.

Key words: supply-side structural reform, computable general equilibrium model, tax rate, labor participation rate, innovation driven

CHEN Sumei, LI Peng. The Impacts of Supply-Side Structural Reform on China's Economy: From the Perspective of General Equilibrium[J]. JOURNAL OF CONTEMPORARY FINANCE AND ECONOMICS, 2021, 0(1): 3-17.

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