OREANDA-NEWS. May 30, 2013. To speed up economic transformation and the transformation of the mode of economic development is a profound change in China's economy that has an impact on the overall situation of reform and opening up and socialist modernization construction.

The central leadership has put forward that it is necessary to integrate the acceleration of the transformation of the mode of economic development throughout the entire process and various fields of economic and social development, and to place pushing forward new urbanization at a prominent strategic position, emphasizing that we must follow the road of new urbanization with Chinese characteristics and improve the quality of urbanization development. New urbanization is an important means of achieving economic transformation and upgrading China's economy. Only by actively and properly pushing forward new urbanization can we lay a solid foundation for completing the building of a well-off society in an all-round way and achieving the great rejuvenation of the Chinese nation.

China's economic restructuring requires the joint efforts of China and the international community

Over the past 30 years of reform and opening up, China's economic development has made unprecedented achievements and the country has become the world's second largest economy, a manufacturing, trading, and foreign exchange reserve powerhouse as well as becoming a foreign investment powerhouse. However, the traditional development mode characterized by over-reliance on investment and exports as a driving force is increasingly facing constraints from serious land load, energy resource consumption, ecological environment, and international markets, and there are more and more problems of a lack of balance, coordination, and sustainability, so to speed up development mode transformation and economic transformation is urgently needed.

With the advance in the change of the economic development mode, there have been many positive changes in China's economic structure. Judging from 1Q13 economic data, GDP grew 7.7% in 1Q13, higher than the expected full-year target of 7.5%; CPI rose 2.4% QoQ, down 1.4 ppt YoY. Judging from structure, the contribution to GDP from consumption was 55.5%, while those from investment and from import and export were 30.3% and 14.2% respectively; and the proportion of tertiary industry in the overall economy reached 47.8%, exceeding that of the secondary industry (45.9%) for the first time. Judging from investment, investment grew 24.1% in central China and 24.2% in western China, both higher than the 19.4% in eastern China; private investment grew 24.1%, higher than the 18.7% in state-owned investment. It is not hard to see from these figures that China's economic restructuring has had a significant effect. However, the foundation for economic recovery is still not solid and production overcapacity in some areas is still quite serious. Economic restructuring should not be just simple shifts; rather, it should be development more balanced between different structures, and that requires further deepening reform, adjusting structure, and speeding up the transformation of the development mode.

The success or failure of China's economic transformation will have an impact not only on the long-term development of China but also on the global economic recovery and growth. We know that the formation of a country's economic structure and the development mode is subject not only to historical development but also to influence of political, social, geographic, cultural, legal and other factors. As the second largest economy in the world and in today's era of in-depth globalized development, China's economic transformation is bound to have a major impact on international trade and investment, the RMB exchange rate, foreign exchange reserves, and international demand and pricing of commodities. Therefore, China's economic transformation is not only China's own issue; it also needs the understanding and support of the international community. In the process of economic transformation, China should not only rely on its own efforts and continually expand the domestic market to drive internal demand but also strengthen coordination and cooperation with the global economy. China's economic restructuring can only be a long, gradual process and cannot be achieved overnight, so it should not be rushed. This progressive way will bring the minimum possible risks and shocks to the world economy and is therefore conducive to the recovery and stability of the global economy and to the formation and establishment of a new international economic system.

Promoting new urbanization is an important means for China's economic transformation

At present, China has entered a critical period in which sustainable development can only be achieved through speeding up the transformation of the economic development mode. The central leadership has put forward that we must adapt to new changes in the economic situation at home and abroad, speed up the formation of a new economic development mode, adhere to the road of new industrialization, informatization, urbanization, and agricultural modernization with Chinese characteristics, and push forward the synchronized development of the "four modernizations". Among these, new urbanization is a historic task for China's modernization construction and plays an important driving role for promoting the synchronized development of the "four modernizations" and achieving the Chinese Dream of the great rejuvenation of the Chinese nation.

First, new urbanization is a focal point of China's transformation development and can enhance the balance, coordination and sustainability of development. China's urban and rural coordination, regional development, the promotion of industrial restructuring and upgrading and economic restructuring, the promotion of improvement of people's livelihood and social justice, and the achievement of low-carbon sustainable development all depend on urbanization as a platform for coordinated solutions.

Second, new urbanization represents the greatest potential and lasting impetus for expanding domestic demand and promoting growth, and is also a basic standpoint and long-term strategic guiding principle of China's economic development. In the next 20 years, China's urbanization rate will increase by 20% to 30% to achieve urbanization of 300-400 million people with one billion people living in cities, more than the total population of industrialized countries. Urbanization on such a huge scale will bring improvement in labor productivity and urban agglomeration benefits, expansion of urban infrastructure and public service investment, and increase in residents' income and consumption, thereby continuing to release huge potential of domestic demand and pushing forward China's economic transformation.

Third, China's new urbanization is conducive to the rebalancing of the global economy. China's new urbanization will lead international resources and energy, high-tech and intermediate goods trade, promote foreign investment in China, and share the huge Chinese market, thereby effectively driving global economic growth. It can be said that China's new urbanization is both an important means of China's economic transformation and an historical opportunity for the world's economic development.

Promoting urbanization needs to give play to the advantages of development financing

Urbanization has an impact on the overall situation of China's modernization and is a complex systematic project with a huge demand for longer-term investment and financing. Based on the goal of achieving 60% urbanization by 2020 and the need to urbanize nearly 200 million "semi-urbanized" people, there is a requirement for over 50 trillion yuan in new investment, so the funding gap (especially the share capital funding gap) is huge, and there is an urgent need for special funding support. However, the current level of fiscal resources of local governments is far from being able to meet the needs, and urban construction projects lack suitable investment entities, investment products and financing conditions.

This problem is especially serious in central and western China and other underdeveloped regions with low financing efficiency. At the same time, the role of commercial financing is restricted by its own need for profitability and the problem of fund maturity mismatching. To solve this financing problem requires stepping up innovation, pushing forward the establishment of a diversified support system for longer-term funding, improving financing efficiency, and meeting the needs of new urbanization building.

First, thinking and understanding innovation. We must have the courage to break through the old frame of mind, draw on international experience, make bold attempts to explore, expedite the improvement of a longer-term investment and financing system and mechanisms compatible with China's national conditions, and explore in the building of a market-based financing entities, funds conversion and utilization, financial regulation and risk control, while at the same time seizing the opportunity to push forward local finance, land and other supporting reform, establish a management and supervision mechanism for local liabilities, and stimulate urbanization as the greatest potential for economic growth with the spirit of innovation.

Second, product and model innovation. We should consider setting up special urbanization funding support to solve the issue of urbanization building capital and auxiliary funding gap. We should encourage financial institutions to expand the financing channels for urbanization building through combined loans, syndicated loans, urban development funds, municipal bonds, asset securitization, and financing leasing. We should innovate model, support financial institutions in designing sound credit structure for risk control, and encourage market entities to take part in infrastructure building through BT, BOT, PPP and other means to strengthen sustainable financing ability.

Third, financial market innovation. We must enhance financial markets, build money markets, capital markets, credit markets, bond markets and other mutually coordinating and complementary financial market funding supply system, and form a development pattern where government funds and social funds, equity financing and debt financing, and development financing and commercial financing integrate organically to jointly support new urbanization building.

New urbanization building requires development financing to play its unique role in providing longer-term funding and guiding resource allocation so as to provide large-amount, stable, long-term, and sustainable low-cost funding support for new urbanization building. As a development financing institution and a major bank for longer-term investment and financing, China Development Bank (CDB) has for many years continually stepped up its support for urbanization, supported urban infrastructure and development in "three rural", welfare housing, medium, small and micro enterprises, people's livelihood, social building and other areas, and enhanced the overall carrying capacity and development quality of urbanization. As of the end of 2012, CDB's urbanization lending balance stood at 3.4 trillion yuan, accounting for 71% of total RMB lending for the same period; and cumulative loans amounted to 6 trillion yuan, accounting for 61% of total cumulative RMB loans. At the same time, CDB has done well in controlling credit risks with an NPL rate of 0.3% for the eighth consecutive year in which the ratio is kept within 1%. The funding support from CDB has sped up the development process of China's urbanization and urbanization building has become an important driving force for the sustainable healthy development of the economy, contributing an average of 0.4 ppt to China's annual GDP growth and leading to increases in local fiscal revenues.

Faced with the arduous task of new urbanization and its huge capital requirements, CDB will continue to give play to its pioneering leading role in longer-term investment and financing and bring social funds into the field of urban construction. CDB will attach more importance to planning ahead, give coordinated consideration to the synchronized development of urbanization, industrialization and agricultural modernization, and give coordinated consideration to the development level, environment, and resource carrying capacity in eastern, central and western China in order to promote the sustainable development of urbanization. CDB will attach more importance to bank-government cooperation and step up its financing support with a focus on the government's adjustment of economic structure, expansion of employment, improvement of social security, and protection of ecological environment. CDB will attach more importance to financial innovation, meet the diversified needs of urbanization development with comprehensive financial services, and improve its ability to support urbanization development in an all-round manner. CDB will attach more importance to risk control and achieve integration between supporting construction and controlling risks. Through these practical and effective work tasks, CDB will promote the sustainable healthy development of China's new urbanization and make new and greater contributions to upgrading China's economy and realizing the Chinese Dream of the great rejuvenation of the Chinese nation!