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Table 1 Scenario design for China’s economic development in the next decade

From: Prospects for China’s economic development in the next decade

Type of scenario Scenarios
BAU 1. The development trend of population size becomes exogenous, and the population projection from the United Nations is adopted
2. The urbanization level and urban and rural populations become exogenous with the urbanization rate increasing by 0.8 on average from 2010 to 2020
3. The growth of the aggregate labor force and changes in rural land supply become exogenous
4. Domestic tax rates remain unchanged, and transfer payments become exogenous
5. International payments tend to be balanced from 2010 to 2020
6. The growth rate of government consumption becomes exogenous
7. Total factor productivity (TFP) becomes exogenous, assuming that, from 2010 to 2020, the growth rate of TFP will decrease from the average level of the past 25 years
8. Biased technological progress and changes in the intermediate input rate become exogenous
9. Global economy remains depressed in the next decade but ultimately recovers gradually
Accelerated reform 1. Promote reform in energy and environment tax, perfect the price formation mechanism of resource products, and improve the efficiency of energy and resource utilization
➢The resource tax rate increases by 10% from the BAU level during the 12th Five-Year Plan
➢A carbon tax is imposed with tax rate increasing from 10 RMB to 50 RMB per tonne of CO2. Income from carbon tax is mainly used as incentives to encourage enterprises to promote energy efficiency and innovate in the high-tech industry
➢The average efficiency utilization rate between 2010 and 2020 is 1% higher than the BAU level
2. Adjust the structure of public expenditures, moderately reduce construction expenditures, and perfect the social welfare system
➢The growth rate of government spending is slightly higher than the BAU level
3. Increase government investment in education, medical services, scientific research, and social welfare
➢Increase government transfer payments to poor regions and people by 10% from the BAU level from 2010 to 2020
4. Eliminate the barriers to the flow of labor between urban and rural areas or among different regions and industries, accelerate the urbanization process and citizenization of migrant workers, and promote quality urbanization
➢The urbanization rate increases by 0.25% annually based on the BAU level from 2010 to 2020 and the transfer of the urban and rural labor force is accelerated
5. Promote the reform of state-owned enterprises and monopoly industries and adjust the distribution system of state-owned enterprises and monopoly enterprises
➢Increase the payout ratio of SOE returns by 30% from 2010 to 2020 in a progressive manner for public expenditure
6. Improve reform of service sector regulations, expand the scope of the value-added tax, and reduce the tax burden on the service sector
➢Reduce the tax on the service sector by 10% in a progressive manner
➢Eliminate the price difference between the service sector and industry in terms of electricity, water, gas, and heat
7. Promote reform to factors of production like land and capital, improve the efficiency of the utilization and allocation of such factors, boost technological innovation, and accelerate technological progress
➢Eliminate discrimination against various companies in the acquisition of factors of production like land and capital
➢TFP growth rate is higher than the BAU level by 0.2%, while TFP in the service sector is higher than the BAU level by 0.6%